Farming: Low grain carry over leaves global prices in a state of flux

With the world having low carry over stocks of grain, any major drought or flood in the major grain growing parts of the world will have significant knock on effects on the value of this year's cereal harvest.

That was the view of Home Grown Cereals Authority policy expert Jack Watts when he spoke in Aberdeen this week.

Any catastrophe affecting the growing crop will have a massive impact on prices as there is not a large buffer stock of grain to help stabilise prices. "We will be very sensitive to the weather," he said, referring to possible hikes or dips in prices on the world's grain markets.

Although early messages from both the United States and Europe are showing that autumn-sown crops have come through the winter well with little frost kill, there is still a long way to go before harvest.

"There are reports that some parts of the States are too dry," said Watts, "but all the main grain growing areas seem to have survived the cold winter with crops protected under a cover of snow."

In Europe, despite many reckoning there would be damage to autumn-sown crops with the severe winter, this has not proven to be the case.

He told producers at the meeting that the world grain price was largely set by the maize crop which accounts for almost 70 per cent of traded grain.

There are currently historically low stocks of maize and, in his estimates, there would require to be "two bumper" years of maize production to get carry over levels back to normal.

While there was not the same pressure on either the wheat and barley crops, there were also very low carry over tonnages of both crops in this country. A late harvest might see big shifts in the trade in the summer he suggested.

The massive increase in values of wheat had come too late last autumn to make any big increase in planted acreage possible but Watts said it might be a different story in 2012 with growers having the option of selling forward at much better prices.

Commenting on the malting barley market, Watts said it was significant that buyers were now offering contracts related to the value of wheat and not as previously when they were linked to so much above the price of feeding barley.

He pointed out there was now no overhang of malt available and this was sharpening up the price of this year's crop.

Whatever crop was involved, he wanted growers to have a pricing strategy so that they could ride out the volatility that will undoubtedly dominate the market until such time as there are larger world stocks of grain.