Wheat growers face a 4.8Mt UK surplus next year

By Rick Pendrous contact

- Last updated on GMT

Farmers and processors need to manage price risk volatity in cereals
Farmers and processors need to manage price risk volatity in cereals

Related tags: Wheat

Increased volatility in grain prices as a result of weather and societal upheaval across the globe, while often causing farmers considerable pain, could provide a “huge opportunity” for the UK’s arable sector in the long term with effective price risk management, a leading cereals expert has suggested.

But in the short  term – and with a second year of global grain surpluses –  life could be difficult, said Jack Watts, lead analyst for cereals and oilseeds at the Home Grown Cereals Authority (HGCA), which is part of the Agriculture and Horticulture Development Board.

Wet summer

The last wet summer had helped boost feed grain yields, although wheat quality had been variable, said Watts. He predicted non-EU exports would be a higher priority for EU producer exporters for the coming season.

Watts forecast a surplus of global wheat supply over demand for 2014/15 but noted the major segmentation between price for different qualities, such as feed and milling wheat of different protein content, would remain a problem.

“This is a really dangerous year to be jumping on general trends in prices,” said Watts, speaking at the HGCA grain market outlook conference in London earlier this month. “We are having a very segmented wheat market.”

For the UK, it would be all about driving exports in future, he claimed. Watts said the UK had witnessed “the largest upswing in wheat production that we have ever seen – we have to get the wheat into export markets”. For 2014/15 he predicted a surplus of supply over demand of 4.8Mt for the UK. Poor protein levels remained the biggest challenge, he added.

Increased volatility

Watts explained how increased volatility was making life increasingly complex. He noted that the difference between the November 2014 wheat futures price and that when the crop was planted was now £27/t lower. However, May 2013 prices, showed a post-harvest premium for growers of £23/t.

Watts also reported on the growing dominance of maize from the US, Brazil and Ukraine on international markets, which could pass 1bnt by 2016. He predicted this would have a downward effect on prices generally.

While China had been a key wheat importer, he didn’t expect to see it in the wheat market over the coming year.

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