Wheat millers must hedge their bets

Britain's millers will increasingly make use of 'hedging' to gain competitive advantage as price volatility in grain markets becomes more evident.

Wheat prices are at record highs because of global world supply and stock shortages and adverse weather conditions. And most experts expect the problems to be exacerbated as demand for bio-fuels rises over the next few years.

However, Alastair Dickie, grain specialist with the Home Grown Cereals Authority, believes more land will be ploughed up to grow wheat as prices rise, which will help to rebalance supply shortfalls. Dickie points to "chunks of Russia" being sown this year on which wheat has not been grown for the past 10 years.

"The major challenge is going to be our raw materials market," says Guy Bowman (pictured), md of independent miller Bowmans. "We may have to look differently at grain purchasing in the future in terms of the length of cover we take and how we contract grow."

As well as a full range of traditional flours, Bowman specialises in 'heat treated' flours used in the food processing sector. These flours are treated with steam, which denatures the gluten in the wheat, so that it cannot be made into dough. Heat treated flours behave more like starch and are used to make soups, sauces and batters.

Next year Bowman will be launching a new heat treated variety.