A year ago we were just coming to the end of a short period during which feed wheat prices had peaked at over £200/t and had held relatively steady for several months at more than £180/t. There was a perceived shortage of grain throughout the world and UK prices had followed the global trend.
It was just as well they did because drought-affected domestic yields were pretty poor for the second and in some cases third year running. The unaccustomed high values at least allowed grain growers to come closer to matching production costs and some even made a profit.
As we gathered the last of the 2013 harvest, like many others we tried to foresee the future and calculated a budget for the coming year. It was already clear that the prices we had recently enjoyed would not last. Every wheat grower in the world was expected to plant bigger acreages on the back of higher values and it seemed almost inevitable that production would increase and the laws of supply and demand would drag down prices for 2014. Our budget, dated September 2013, was based on an ex-farm harvest price for this year of £150/t at harvest, with November £155/t and so on through the year.
“My grain merchant tried to cheer me up by suggesting that there had been bad weather in France”
Now, here we are at the beginning of August with wheat almost ready to combine a couple of weeks earlier than usual. As I write, we haven’t cut any yet, although all our rape and winter barley are done. I picked up the phone just now and rang my friendly grain merchant. “What’s feed wheat worth ex-farm off the combine?” I asked. We could offer £110/t or possibly £112 for exceptional quality, he replied, £114 for September collection with November at £117.
He went on to tell me that the small number of wheat samples he’d had in were of good quality and had yielded well. He hoped ours would do the same. But he left me contemplating what had happened to prices in a little over 12 months.
You can do the sums yourself, but in simple terms, if you had sold wheat forward for last harvest at £190/t ex-farm, even at last year’s reduced yields of say 8t/ha, the gross income per hectare would have been £1,520/ha (£608/acre). This year, assuming you were a little more cautious about selling too much forward in case yields disappointed again and you found you had oversold, you might be looking at selling a quantity spot off the combine to pacify the bank manager. At current prices, a bigger 9t/ha crop sold at £110/t would gross £990/ha (£396/acre) and a 10t/ha crop only £1,100. In other words, a reduction in gross income since last year of £530/ha (£212/acre) or £420/ha (£168/acre), respectively.
My grain merchant tried to cheer me up by suggesting that there had been bad weather in France that had affected the quality of their crop and that this could bring about a rise in UK values. Let’s hope so, but I doubt if it will be more than few £s per tonne. He then spoiled it by saying feed barley was now worth only £96/t and it could take weeks to move it. The trouble is, he said, today’s combines are too big and cut crops quicker than merchants can take them in and when the grain is dry and fit to deliver straight from the field a bottleneck is created. It’s not easy, he added.
It’s not much fun for growers either.
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David Richardson farms about 400ha of arable land near Norwich, Norfolk, in partnership with his wife Lorna and his son Rob