UK: One third of 2007 barley crop already sold forward

Around one third of this year’s arable crop has already been sold forward as producers eye up current firm prices, Farmers Guardian published July 13.

But one marketing organisation believes it could be a mistake to commit too much at this stage, given no sign of any downside to the market.

The fundamenals which underpin global grain markets look set to provide a bullish outlook for UK cereal producers, according to Framlingham Farmers marketing manager Oliver Hitchcock.

“Since April, prices have risen dramatically and are now almost 40 per cent higher than at the same timelast year.

“This is largely due to the fact that world wheat stocks are currently at a 30-year low and because the 2007 harvest is projected at 610 million tonnes, eight million tonnes below demand, making further reductions in stocks almost inevitable,” he said.

“With global supplies tight, any threat to production caused by adverse weather in the major producing countries will have a substantial impact on market volatility.”

Agricultural commodities, he said, had become an area of opportunity for funds and speculators, adding to price volatility.

Mr Hitchcock said wheat had not been the only crop to benefit from improved values. Feed barley had followed suit and problems in the Ukraine meant that it would not be the source of ‘relatively’ cheap supplies that it had been in previous years.

“Malting barley has increased by around £40 per tonne compared with last harvest, when quality problems resulted in tight supplies of quality grain and higher malt prices.

“Oilseed rape prices have been rising due to firm American markets and very high levels of trading in vegetable oil, but with the UK oilseeds area up 18 per cent on 2006, a big crop could mean that up to 200,000 tonnes will have to be exported,” said Mr Hitchcock.

An update on market forces from Gleadell’s managing director David Sheppard says wet weather has continued to delay harvest on the continent, while a heatwave in eastern Europe is resulting in anticipated poor crops in Bulgaria, Rumania and the Ukraine.

India is tendering to buy wheat, but the EU is unlikely to supply given the maximum moisture content specification of 13.75 per cent – which, in effect, means one would have to supply 13.5 per cent. And, “what a week on oilseeds” says the company’s Jonathan Lane.

“The Market went crazy after the last USDA report cut the US area seeded with soya beans by 4 million acres. UK rapeseed prices went up £10 in two days.’’

13 July, 2007