Emerging demand crucial for Scots growers

Profitable grain and oilseed production in Scotland over the next few years will depend largely on demand from the world’s emerging economies, particularly China, growers were told yesterday.

These economies are in the driving seat as they increase their industrial production, living standards and buying power, said Julian Bell, rural business consultant with the SAC.

In the past few months that beneficial influence helped prices for grain and oilseed from Scotland’s 2011 harvest, and Britain as a whole, reach record levels of £200 and more and over £400 per tonne respectively.

Bell told a workshop session organised by SAC and the Home-Grown Cereals Authority at Carfraemill, Lauder, that he believed the outlook for the next ten years will usually produce the good returns necessary as growers face increased costs for fertilisers and chemicals.

But that cheerful outlook came with his proviso that no forecast can be foolproof and all markets can be volatile. Growers must take full advantage of the good years to invest and/or lock in profits.

For specific crops he pointed out that demand for wheat as a biomass crop to produce ethanol fuel had slumped; that was mainly due to the UK not yet being signed up to a European Union agreement, a failure which allowed in cheap biomass imports and restricted exports. Signing the agreement is imminent and could change demand and prices quickly.

But demand from China for wheat for human and livestock use had at present taken up the slack. There had also been big demand, possibly temporary, for world market wheat from Russia and Ukraine because of poor harvests there.

Demand for spring malting barley, a crop more important to growers in Scotland than anywhere else in the UK and still to be sown in the next two or three months, had been good from the 2011 harvest – helped by poor growing conditions and crops elsewhere in the other main growing areas of the world – and demand and prices should remain good in 2012.

Scotch whisky exports were up 23 per cent in the first nine months of last year, he said, adding: “Maltsters and distillers need your barley, and they’re nervous about supplies… I can be confident about the future for malting barley.”

But that again came with a proviso. Prices had dropped back from harvest peaks of about £210 per tonne at the same time as fertiliser prices for this year’s crop had increased. Farmers must have motivation to grow malting barley and that meant returns of at least £170 per tonne.

Generally poor oilseed crops in much of Europe in 2011, a record total crop in the UK, and rising living standards in emerging countries were the main reasons for record average prices of £400 a tonne for oilseed rape.

Wealthier countries fry more, he suggested, or at least use more oil in cooking.

Demand for oilseed was definitely related to increasing living standards with the result that world demand for oilseed is increasing at double the rate for grain.