UK wheat growers are losing out in the currency war.
With the pound not far off an eight-year high against the euro, French and German supplies are becoming more competitive, compared with British grain. Farmers are already contending with a glut after two consecutive bumper harvests left the UK with 26 per cent more wheat than last year to export or keep in storage, government data shows.
Even with abundant supplies, the nation has remained a net importer so far this season, buying high-quality grain at cheap prices from continental Europe. The excess supplies may send British prices, already near a two-month low, down further by year end, said Benjamin Bodart, a director at CRM Agri-Commodities, a farm adviser based in Newmarket, England.
“The UK is going to struggle to find room for its wheat,” Bodart said. The pound’s strength is “adding pressure to UK prices and limiting UK exports”.
Exports in August and September totalled 237,300 tonnes, down 14 per cent from a year earlier, customs data shows. The nation has imported a net 118,000 tonnes in the first three months of the marketing year, which began July. The country, which was a net exporter last year, usually brings in types of milling wheat and ships out varieties of feed grains.
Feed-wheat futures for May delivery, the most active contract on the ICE Futures Europe exchange in London, fell to £17.55 a metric tonne on Thursday, the lowest since 21 September. The contract, which rose 0.2 per cent on Friday, is down 19 per cent this year.
The UK wheat harvest topped 16 million tonnes for a second straight season, the first time that’s ever happened, according to the Department for Environment, Food & Rural Affairs. Global grain stockpiles will probably reach a 29-year high this season, after farmers harvested large wheat and corn crops in the European Union, US and Black Sea region, the London-based International Grains Council estimates.
European supplies have also had a tough time finding demand, with plenty of cheaper Russian grain available to importers earlier this season. France, the largest EU grower, produced a record crop this year, forcing some storage facilities to stop taking in grain after silos filled up and export demand slowed.
UK wheat may trade at about £115 through year end before being supported in 2016, especially if dry weather intensifies in parts of the former Soviet Union, Bodart said.
News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.
