4 December 1998

Arable income at 30-year low

ARABLE incomes have slumped to a 30-year low, and a quarter of growers operate at or below break-even point.

More effective selling of grain is vital to boost profits, Peter King of the Home-Grown Cereals Authority told a farmers weekly Arable Profitability semina.

Although most people blamed the strong £ for falling incomes, Mr King said supply and demand and farm policy also played a big part. "Cereal prices are £50/t lower than they were in 1992, yet the £:deutschmark rate is the same, at 2.8."

World demand was expected to rise, he said. But UK grain is uncompetitive on world markets at current prices. "Export refunds of £18/t cannot continue. Unless this changes before the next WTO round, UK farmers will lose market share. CAP reform is essential," he said.

Revenues would remain under pressure, and farmers should minimise risk, Mr King stressed. Growers should spread tonnage across different contract types.

"We suggest farmers lock 40% of their grain into a forward fixed price contract. A further 40% should also be sold forward in a way that can take advantage of price rises; for example, by using options. The rest can be sold spot.

Some farmers had already locked into £90/t feed wheat prices for next November, said Mr King. This season had already shown marked volatility; since harvest wheat prices have already risen by £10/t which is worth £35/acre, he added.