Grain drain to last into 2011 before stocks are used up and prices rise

Demand for all grain was still rising on the world market and this was positive news but the tonnage of cereals available meant the price was still depressed.

That was the message given out this week by Scottish Agricultural College business adviser Julian Bell, who did however, point to one or two positive features for the 2010 harvest.

He told producers at a meeting at Carfraemill, that the whisky industry seems to be coming through the recession with no great cut back on demand. Even if it is still running with high stocks of spirit and malt, its grain buyers have now come out with contracts offering to pay 30 per tonne above the November 2010 intervention price.

Early indications are that barley sowings will be back by between 10 and 15 per cent this year and that should also help redress the imbalance between supply and demand. However, adding to the negativity is the fact that there will be no set aside this year and the big question mark hangs over what farmers will or will not do in the next three months with the 50,000 hectares of land previously taken out of production.

Bell wanted to see more long-term contracts between growers and the drinks industry with greater openness in trading as both needed each other.

While the forward contract gives a set price on which growers can base their calculations, it does not take into account the possibility that the crop may not meet malting specification.

Last year, one supplier found 40 per cent of his tonnage failed to hit the target resulting in the crop being devalued to feed price. As Bell pointed out, this season, there will no automatic intervention buying by the EU.

This has provided a base price level for the past 30 years for grain growers. He also highlighted the importance for producers in getting good yields of barley.

Even if a contract was obtained, if the tonnage did not appear, then the producer could well be making a loss on the whole enterprise. Basically, all growers on marginal land should question whether they continue growing barley at current price levels. Livestock producers may find it cheaper to buy in feed grain and straw, he suggested.

His prediction for wheat for the forthcoming season was only slightly brighter with most of his optimism being reserved for the following year. He thought it would take until 2011 to remove the high level of world stocks of wheat.

The arrival of additional processing capacity within the UK will help, he said as would the current weakness of the pound which has already protected growers from the worst ravages of the current collapse in cereal prices.

This growing season should also be less expensive than the last one and that would help in getting producers over into profit in their wheat growing.