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UK officials have bowed to the bumper pace of exports and forecast that the country's wheat supplies will end next month at their tightest "in the modern era" – although some believe even this revision may not be the last.
The Home Grown Cereals Authority cut by 91,000 tonnes, to 1.51m tonnes, its estimate for wheat stocks in the European Union's third largest grower of the grain at the close of the 2010-11 crop year.
"This creates the lowest stocks-to-usage ratio since 1997-98," the HGCA said, with the data implying inventories finishing 2010-11 at the equivalent of 10.9% of domestic consumption, or less than six weeks of use.
Michael Archer, the HGCA's senior cereals and oilseeds analyst, told Agrimoney.com that given the different structure of the UK wheat market now and that 13 years ago – which had yet to see changes such as the reform of the EU's common agricultural policy and the widespread use of futures – the figure could be seen as the "lowest we have had in the modern era".
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Ensus effect
The stocks revision reflected lower expectations for imports, which were downgraded by 33,000 tonnes to 1.05m tonnes, and a higher figure for exports, hiked by 335,900 tonnes to 2.44m tonnes - a rise of one-third year on year.
UK wheat has found fresh demand, including its first shipments to Turkey, as buyers denied supplies by Russian and Ukrainian export curbs sought replacement sources, and as France bought in feed grain to replace its own wheat which, even of lower quality, has been finding export orders for food use.
This more than offset the impact of a 108,000-tonne cut to food and industrial consumption of wheat, reflecting the mothballing of the Ensus wheat bioethanol plant in northern England, which is due to shut down over the next few days because of the margin squeeze caused by high grain costs.
However, even the revised stocks estimate may not be low enough, some observers believe, given that exports have reached 2.34m tonnes with three months of the crop year left to go.
"I can see them tailing off, but not that quickly," one trader told Agrimoney.com.
"I can see stocks ending tighter yet."
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Stacking up the data
Mr Archer said that the export estimate indeed reflected an assessment that shipments would tail off sharply.
"If they are stronger, it makes the figures difficult to add up," he said.
"It implies higher imports, which we do not expect, or weaker domestic use, which we do not expect, or even lower stocks, which it is difficult to see realistically occurring."
London's old crop July wheat contract stood 1.0% higher at £194.00 a tonne in late deals on an upbeat day for world grains, with Chicago wheat gaining more than 2%, and Minneapolis spring wheat jumping 3%.
London's beter-traded November contract stood 1.1% higher at £193.50 a tonne.
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Source: Agrimoney.com