Leading farmer-owned agribusiness Grainfarmers has reported a pre-tax loss of £4m for its grain trading arm in the last financial year.

Although parent company Grainfarmers Group partly offset the loss with some profitable property deals, it was still left with an overall £3.5m deficit for the 13 months to July 31, 2005.

That compares with a profit of just over £1m in the previous 12 months.

The loss was largely caused by the 2004 harvest.

Managing director Tim Davies described it as the worst for 20 years.

It also hit sales, which fell £30m on the year to £325m.

Wheat quality was badly affected, with many milling samples failing to meet specification.

Grainfarmers had sold about 100,000t of wheat ahead of harvest to key milling customers, and had to buy on the open market to cover its contracts.

But milling premiums soared, and the policy cost the company £2m.

“We took the decision not to enforce contracts with growers who were unable to supply wheat to milling specifications,” Mr Davies said.

However, that was a one-off decision, he added.

“This year, we’ve made it clear that anyone who has a contract knows if they don’t come up with the specification we’re likely to default them.”

The extra cost of hauling good quality grain from the south of England to northern mills grain added £1.5-2m to Grainfarmers’ transport bill.

Moving the accounting year to reflect better the grain trading season added the low trading month of July into the accounts, increasing reported losses by £700,000.

Better volumes and margins in the oilseeds and pulses divisions clawed back some of the deficit.

Malting barley also produced good results.

The Grainfarmers UAP seeds and fertiliser business recorded a £200,000 profit on sales, which rose over 60% to £41m.