Weak pound strengthens outlook for grain growers

Published on Wednesday 7 January 2009 20:57

GROWING crops is a relatively straightforward business, given equitable climatic conditions.

The real problem in these days of increasing economic uncertainty is how and when to market crops. Prices in the cereals sector have moved upwards and downwards by as much as 100 per tonne over the past two years.

The omens for UK cereal farmers are slightly more encouraging than three months ago, following the rapid depreciation of sterling against the euro and the dollar. Just six weeks ago feed wheat was trading at about 95 per tonne – a valuation that left virtually no margin. Now the spot trade is hovering close to 110 per tonne.

The latest from the London futures exchange is also more positive, with wheat for November rated at 123.85 per tonne. European futures have seen wheat for the same month fall by 2.75 to 159.50 per tonne.

Some commentators reckon that, with sterling and the euro close to parity, and likely to remain at that ratio, UK prices should rise. As ever, Chicago remains the dominant force and here wheat for September has risen by $10.10 to $252.86 per tonne.

The Paris-based Strategie Grains has just issued its initial forecast for the 2009 harvest across the EU. Last year proved to be a record, but the prediction for 2009 is more modest, with a projected total cereal yield of 292 million tonnes – down by 20 million tonnes on 2008.