Bitter-sweet harvest as higher cereal price raises warnings for animal feed

Although it has been called a "price spike", it now seems as if the cereal trade is running along a much higher plateau than it was only a month ago. Yesterday afternoon, wheat futures for November were hanging tenaciously close to the £150-a-tonne mark.

The price prompted NFU Scotland to issue advice to growers on selling and also, on behalf of its poultry and pig keeping members, a warning about an increase in animal feed prices.

Helping the trade to stick at the higher level were reports of the UK crop being lighter than average. With an estimated 25% of the UK wheat crop taken - although very little of the Scottish acreage has been harvested - the Home Grown Cereals Authority was saying that yields were below the five-year average, at 7.9 tonnes per hectare.

Defra, the main statistical-gathering organisation in the country, also issued revised downward estimates for tonnes of wheat in store.

In Scotland, the main harvest activity has been in the spring barley fields, where again the reports are of lighter-than-average crops. Union president Jim McLaren reported from his farm at Crieff: "A field where I would expect to need the trailer beside the combine every second round is only requiring it every fifth or sixth stroke."

A Fife-based grain trader said that yield reports were variable but wherever the land was slightly lighter, then yields were back. What is positive this year has been the quality of the spring barley samples. Most are categorised as good, with very good low nitrogen levels.

Whether the quality tempts the maltsters is another matter. There is a current overhang in the market, with several in the grain trade reckoning that malting businesses do not need to buy much at all this year. McLaren points out in his blog: "The malting trade is sitting back and waiting while the combines roll and the sheds fill."

His union colleague, John Picken, who chairs the NFUS combinable crops committee, said: "Now is the time for some long-term agreements in our pricing relationship with the maltsters and distillers. A price for malting barley or distilling wheat that covers the costs of production now would be welcome."

Rising grain prices are also a threat to the profitability of the livestock sector, with pigs and poultry particularly vulnerable because of the amount of grain they consume.

NFU Scotland yesterday called on buyers of pigs, poultrymeat and eggs to improve the prices they pay to farmers for their produce. The union claims the hike in grain prices has slashed margins for producers in these sectors.

Philip Sleigh, who represents the pig and poultry sectors on the NFUS board, said the intensive sector was being damaged by the sudden surge in costs. "The rise in feed costs has been so rapid that many producers have not been able to protect themselves by forward-buying their feed requirements. They are therefore taking much higher production costs on the chin without a corresponding increase in what they are paid for their pigs, broilers and eggs. Some eggs buyers have have been forcing prices down just when the opposite is needed."