Spot price battle puts life into wheat market

The need for spot supplies to cover sales has put a slightly firmer tone into domestic wheat prices.

Growers have mostly had their area payments, Stuart Attridge, trader at Harlow Agricultural Merchants, explained to Agritrade News, but there have been some who have sold for cash flow reasons. “I think it’s the bigger guys who are being left out by the sound of it,” he said. “There has been a little bit of a cash issue recently, but there are a lot of farmers who have done a little bit of trading in the last three or four weeks.”

There has been some export activity. “Currency and certainly freight rates have allowed some quite sizeable vessels to leave the deep-water facilities of Southampton, Ipswich, Tilbury and Immingham,” Mr Attridge said. “We have had some real biggies going to Spain and North Africa.

“With those on the horizon, the shippers are probably just being caught a little bit short on having enough supply,” he continued. “They have pre-sold it before the growers have actually supplied the wheat.

“That has been the major issue out there,” Mr Attridge observed. “They’ve made the sale and thought, on the basis of the balance sheet, ‘OK we’ve got plenty of cereals around us to go.’ But, if the grower doesn’t want to supply it when you have got the sale on the books you end up in a little bit of a war and have to pay a penny or two more.  That’s what has happened.”

Another issue which has affected trade was the rejection by Egypt of a cargo supplied by Bunge from France which was rejected for having ergot admixture. The parties were renegotiating and it looked as though Egypt might make French exports possible again by agreeing to accept a 0.05% ergot level.

AHDB Cereals & Oilseeds also commented on the situation. “Uncertainty over Egyptian wheat imports is now into a third week,” it noted in a report published on Monday, “After buying 60,000 tonnes of Romanian wheat on Friday (its first since the quality dispute began); state buyer GASC then cancelled another tender over the weekend.”

Mr Attridge noted that, in the meantime, the UK has had an opportunity to get in and do business that might normally have gone to France. “That has helped things a little bit,” he noted. “Growers are keeping the market tight, but will need to shift grain. The long holders are potentially the storekeepers and other difficult sellers.  They have generated enough cash and the market is oversold on the spot positions.”

It has spurred reaction from consumers, who had been buying on a purely hand to mouth basis. “The flour millers and the others have suddenly thought ‘we wouldn’t mind a little but of this spot as well’,” Mr Attridge concluded. “So they’ve got caught in a little bit of this war.”

Posted on February 19, 2016 .