Farming: grain growers set to reap rewards of rising prices

But it does not bode well for livestock producers, particularly those in the pig and poultry sectors, who are already struggling to cope with higher animal feed prices.

Feed wheat traded on the futures market yesterday at 200 a tonne on the January contract and closed last night at 199.35. The more heavily traded May contract closed at 204 - up 3 since just before Christmas and 15 higher than at the start of the month.

Ex-farm rapeseed prices soared through the 400 a tonne barrier in mid-December and are now 165 up on this time last year. Rapeseed has been described at the "star performer" in commodities markets, with prices on the barometer Paris futures market up €17.50 on the week, representing a rise of €55 since the beginning of December.

Prices are expected to remain firm in the new year as adverse weather - dry conditions in Argentina and the US and heavy rains in eastern Australia - continues to affect world markets. World wheat futures prices have rocketed to record levels and supplies of maize, wheat and soybeans are reported to be tight in Russia, Australia, North and South America, China and the European Union. It is estimated that only 10-15 per cent of the 2010 wheat crop has still to be sold.

"For 2011, prices are very attractive for farmers and no-one can be called anything other than sensible by selling some tonnage forward," said David Sheppard, managing director of international commodity traders Gleadell. "Prices on the 2012 futures market are also worth looking at for all commodities."

Government estimates of the UK wheat crop have been increased to 15 million tonnes, which Sheppard views as an over-estimate.

"It certainly doesn't feel like a 15 million tonne crop," he said.

UK wheat exports up to the end of October were the highest for four years at 1.19 million tonnes, representing 91 per cent of the government forecast for the whole season. The market has also been boosted by demand for the fledgling ethanol market.

"The future looks fairly rosy and we welcome the growing bioethanol sector as it becomes a significant part of the UK market," said Sheppard. "But we remain convinced that the export market will continue to play a significant role in the market in the future.Farmers tempted to commit grain solely to the bioethanol market would be well advised to keep all their options open."

Gleadell has exported 550,000 tonnes of cereals, rapeseed and pulses since July as well as trading a record tonnage in the UK domestic market.

The company's trading manager, Jonathan Lane, said the rapeseed market was being driven by demand from European crushers who were currently enjoying high margins.

"High prices have been aided by the rally in other markets but the fundamental tightness of the supply situation in Europe is the key driver," he said.

UK farmers have produced a record oilseed rape crop this year of 2.23 million tonnes on a combination of a record yield averaging 3.5 tonnes per hectare and a 13 per cent increase in area compared to 2009.