5 April 1996

BSE – good and bad for grain trade

AS details of a BSE control policy emerge from Brussels, the grain trade has been trying to assess the likely impact on its markets.

The general consensus is that it will be good for wheat and bad for barley.

Figures from the Home-Grown Cereals Authority this week show that while pig rations typically contain about 33% wheat and poultry feed about 50%, cattle compounds only have about 7%. Beef producers are also much heavier users of barley, feeding about 2m tonnes a year on farm.

Any downturn in cattle numbers, either through a slaughter policy or diminished demand, might, therefore, be expected to lead to a bigger barley surplus. And if the slack in the beef market is taken up by pig and poultry expansion demand for wheat should grow.

North-east co-op Grainco has attempted to quantify the change. Assuming a 20% drop in cattle numbers and a 10% increase in pig and poultry consumption, it estimates there could be a 290,000t rise in wheat demand but a 460,000t drop in barley usage.

Drop in barley use

It says the 5% rise in wheat consumption is "modest", and could easily be met if farmers quitting beef move back into cereal production. But it is concerned that there may be a sharp 25% drop in barley usage, increasing the exportable surplus by about 0.5m tonnes.

New crop markets have already reflected these sentiments, says GrainCos managing director, Tim Pollock, with the wheat/barley differential widening from £3 to £5t.

But the HGCA suggests any expansion of pig and poultry production will not happen quickly, especially in view of the UKs unilateral ban on sow stalls. "Increased demand for cereals from these two sectors could also be dampened by higher meat prices, reduced exports and imports of pig and poultry meat," it says in its Weekly Digest.

Head of economics Stephen Thornhill also explains that if the slaughter policy is restricted to dairy and suckler cows at the end of their working lives the impact on feed demand will be marginal.

"The important element is the consumption factor. How much will consumers switch to other meats and how long will it last?" &#42