Lie of the land unyielding for arable farmers across Scotland

Published on Friday 10 October 2008 22:09

DESPITE the ongoing problems with harvesting this year's wet barley and wheat crops, the thoughts of most arable farmers are already focused on the harvest of 2009. But even at this early stage it is clear the cropping pattern will change.

Oilseed rape was first grown in the UK just short of 40 years ago. It can be highly profitable, but it seems a racing certainty that the UK area for next year's harvest will be much reduced. Oilseed rape needs to be in the ground, usually following a crop of winter barley, by the end of September or early October.

This time around farmers have found it increasingly difficult to get on the land and a lot of costly rapeseed will remain in store until next autumn.

However, the real problem for farmers remains that of how much they will be paid for their labours. Equity markets have taken a real hit recently, and the same holds true for most agricultural commodities.

A year ago it was confidently predicted that wheat would change hands in late 2008 for at least 150 per tonne. Wise farmers locked into futures positions and should be paid according to their contracts.

Those who chose the speculative game are now feeling real pain – late yesterday, the London futures market was quoting just 92 per tonne for wheat for December and 103.50 per tonne for July 2009; at least 40 per tonne off the peak market of June 2008.

Similar trends are evident on the Chicago market, with all the pointers negative apart from maize, which has risen $4.62 to $179.43 for next March.

An increasing proportion of maize grown in the US is being converted into biofuels as Washington's concerns rise over the price of crude oil from the Middle East. US farmers, and their colleagues in Argentina, have not been slow to appreciate this recent phenomena.

"Splash and Dash" is the process in which buyers in the US purchase biofuels from Europe and Argentina and pocket a subsidy of $1 per gallon when a small amount of petroleum is added. The reconstituted fuel is then sold on to the EU, undercutting pump prices for regular fuel. US farmers are the winners.

Meanwhile, reports from Canada and the US indicate that this year's wheat harvest has seen yields close to record levels. That, essentially, explains why the UK market remains under pressure – but currency fluctuations could change that.