Agro Perspectiva

UK. Farmers set to cash in on grain shortage

12.08.2010 11:19 "Agro Perspectiva" (Kyiv) — UK grain farmers are expecting to rake in bumper prices for this year’s harvest on the back of strong rises in the price of wheat and barley in the past few weeks, buoying the arable farming sector after last year’s difficult season. However, many will miss out on a significant portion of the possible gains, having forward sold their crops in a hedge against weak prices. Livestock farmers are also looking on with dismay as they see the price of a key input rising sharply at a time when their finances are on a knife-edge, after weaker consumer demand in the recession. Guy Gagen, chief arable adviser at the National Farmers’ Union, said the signs for this year’s harvest were promising. «We are not expecting record yields but the outlook is good despite some adverse conditions earlier in the season,» he said. Across the south, the east and Midlands, farmers are well into their wheat harvest. But many in the south-east, East Anglia and Midlands had to stop work yesterday as rain lashed their fields. The weather earlier this year was also a problem for some, as an unusually dry spring meant crops were in danger of becoming stunted or failing. However, the previous wet winter had saved many farmers, Mr Gagen said, as soils retained the moisture absorbed then, making it available to the spring crops as they grew. But in the globalised agriculture market, the weather in Russia may play a greater role in determining British farmers’ fate than that in England. A record drought and disastrous wildfires have destroyed much of the harvest in one of the world’s most important exporting regions, sending wheat prices rocketing and prompting a ban on exports. Prices have soared by about 50 per cent since mid-June, and prices for barley have doubled, reaching ?210 (£175) a tonne from ?90 a tonne in mid-June. Mr Gagen said most UK farmers had now finished their winter barley and oilseed rape harvests, and were moving on to wheat. Rapidly rising prices will leave some farmers cursing their luck, however. Many forward sell much of their anticipated harvests on contracts in order to hedge against possible price falls. George Dunn, chief executive of the Tenant Farmers’ Association, said many of his members had forward sold their wheat crop at about £95-£100 a tonne. They had done so after being stung last year when prices dropped to less than £90 a tonne. For many, this was below the cost of production, when factors such as rising input prices, particularly for fertiliser, were taken into account. Farmers selling today are receiving more than £150 a tonne for their wheat crop. However, Mr Gagen added that if farmers had lost out this year, they could try to forward sell next year’s crop at today’s higher prices. «They could try to lock in those gains for the crop they will plant in September,» he advised. The current crop was also looking good in terms of quality, according to Mr Gagen. Much will depend on the weather for the rest of the month. Wet weather could cause the ears to swell and sprout while still in the field, producing an unattractive flour when milled, so it is often sold instead for lower-quality animal feed. Wet weather can also leave wheat vulnerable to disease. While arable farmers may be rejoicing, livestock farmers face a grimmer outlook. For farmers raising pigs, poultry and cattle, grain is a big input cost and any higher bills can mean the difference between profit and loss. Kim Haywood, director of the UK’s National Beef Association, said the higher prices could be the final straw for many farmers who were already selling beef below their cost of production. Farmers had been getting about £2.50-£2.75 a kilogramme for animals that cost about £2.90-£3.20 a kilo to raise, she said. As a result, more farmers were reliant on government subsidies. «They are being paid to look after the countryside,» she said. She blamed the price fall on two factors: foreign buyers were less willing to buy British-raised calves because of fears over bovine tuberculosis; and recession-hit consumers were less willing to splash out on the more expensive cuts of meat. «There’s more of a market in mince these days, which is very low value for us,» she said.