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Grain Prices Feel Heat From International Competition FARMING

Posted on: Tuesday, 23 August 2005, 06:00 CDT

RECENT fine weather has helped the gathering of cereal, and farmers who have crops in store can console themselves with the fact that no drying has yet been necessary.

However, if the weather forecasters are correct then the scenario could change quickly. With the price of diesel now more than 30-per cent higher than 12 months ago, any grain which requires drying is likely to lose money.

The first of the Scottish wheat crop was combined amid mixed reports. However, the overall UK situation is that up to 60-per cent of wheat has been harvested and that prices are coming under pressure. Spot values are in the region of GBP60 per tonne for feed quality, while milling samples may be worth as much as GBP84 per tonne delivered.

The reality is that UK grain prices are increasingly subject to international competition. Feed wheat from Hungary is being traded at just GBP50 per tonne, with Spanish buyers being active, according to the Home Grown Cereals Authority.

Transport costs are a factor in these discounted values, but the great imponderable remains the overall level of the European Union harvest.

Paris-based Strategie Grains reports that yields in Germany will be lower than anticipated, while in France the drought conditions have had a less severe impact than has been forecast in recent weeks.

The total EU wheat harvest is set to fall by at least three million tonnes on last year's total, to 115.8 million tonnes.

That could be good news for the UK, provided sterling does not appreciate further against the euro.

The Chicago futures market is also showing volatility, but the underlying trend suggests that world supplies of grain are shorter than for some years.

China, now a major importer of both wheat and barley, has yet to show its hand.

Malting barley is the most important cereal crop in Scotland. Prices have been unrewarding in recent years, but Josh Dadd, of HGCA, is optimistic regarding this year's harvest. He said: "There is some concern over the quality of the German and French malting barley crop. This has pushed prices higher, with French barley now trading at euros-126 (GBP86) per tonne.

"There is anticipation within the trade that a proportion of French malting barley will be downgraded to feed quality. UK, Swedish and Danish malting barley appears to be of good quality, with Germany already purchasing some English grain."

Source: Herald, The; Glasgow (UK)

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