28 May 1999

TIME TO EXPORT GROUP 2 WHEAT?

Continental buyers now

recognise Britain as a

supplier of Group 3 biscuit

wheats. But much larger

overseas markets exist for

wheats with some bread

baking potential.

Alan Almond of HGCA

British Cereal Exports

explains why growers

should now be targeting

export markets for Group 2

wheats, too

Continental buyers now

recognise Britain as a

supplier of Group 3 biscuit

wheats. But much larger

overseas markets exist for

wheats with some bread

baking potential.

Alan Almond of HGCA

British Cereal Exports

explains why growers

should now be targeting

export markets for Group 2

wheats, too

SINCE the mid-1990s, through the work of the trade and BCE, better overseas buyer awareness has helped establish the UK as a reliable supplier of Group 3 varieties.

Those varieties include Riband and Consort for use in biscuit and bread flour blends. But for many countries, such as Italy, biscuit manufacturing typically accounts for just 5% of total import requirements. The big market, for up to 50% of total imports for some European countries, is for wheat with bread making potential.

That need not necessarily mean the best Group 1 varieties, like Hereward. Group 2 varieties, such as Charger and Rialto, can also deliver breadmaking quality at a competitive price.

At a recent BCE export seminar, Italian buyer Aldo Berardi, explained that Italys domestic wheat production is typically about 3m tonnes a year. This is less than half of what is needed to make Italys bread, biscuits, cakes and pizzas (table 1). To make up the shortfall, Italy imports 3.8m tonnes of breadmaking wheat, compared with just 0.2m tonnes of biscuit wheat, Mr Berardi says. The UK is now ideally placed to build on its reputation for quality and exploit these export opportunities. Indeed, the opportunities are expanding.

US Department of Agriculture figures predict an increasing world population and changes in diets that will push up world demand for wheat from the current 100m tonnes to 120m by the year 2006.

Looking at the range of varieties on offer and their export potential, Charger and Rialto are proving popular with millers. With yield ratings of 102% of the established lines, farmers like them, too.

Although typically lower yielding, Soissons also has a flexibility that appeals to millers.

Last years Group 1 variety, Abbot has all the qualities millers are looking for. But strong domestic demand keeps prices up making it uncompetitive overseas.

Early signs are that the new Group 1 wheat varieties, Shamrock and Malacca, have good bread making qualities. However, once again strong domestic demand for all Group 1 wheats will keep prices high.

The important message is that the UK has varieties which can deliver the quality which overseas millers are looking for and provide the yields which making growing for export markets attractive to UK farmers. &#42

Can Group 2 wheats pay?

For farmers with suitable land, growing Group 2 wheats offers greater cropping options. But whats the impact on the bottom line?

Research undertaken by NIABs Richard Fenwick shows average gross margins for Group 2 wheats are approximately £10/ha higher than for Group 3s, and £21/ha more than Group 4 wheats (table 2).

The NIAB figures take into account typical costs for seed, fertiliser, fungicides, plant growth regulators and other sprays for each Group. Group premiums are based on a 10 year average above a basic feed wheat price of £72.50/t.

According to Mr Fenwick Group 1 wheats potentially offer the best overall margins, but they are also a higher risk. Miss the grade and your margins tumble. Group 2 premiums are lower, but so is the risk.

A key advantage of considering Group 2s is that it increases cropping and marketing options. That flexibility helps protect against the vagaries of the market, reduces disease risk and spreads harvesting operations.

For any type of enterprise, an accountant will tell you spreading business risk is key. Growing Group 2s, with export markets in mind, is one way of achieving that spread.

Traceability advantage

As well as having the right varieties for export markets, the UK also holds a lead on traceability and crop assurance. Increasingly, these are becoming important issues for foreign buyers.

Overseas buyers are becoming aware of what crop assurance means – and they like what they see.

The ability to track back to the farm of origin provides reassurance about cropping history and handling. Meanwhile, varietal segregation has helped improve the consistency of shipments, historically a major barrier to buying British.

As more and more grain is grown to crop assurance specifications, overseas buyers increasingly have the confidence to buy British.

Although other countries such as France and Holland are developing crop assurance schemes, the UK currently leads the pack. We really need to make the most of this marketing advantage.

Italian wheat

imports by type

End use Million % of

tonnes imports

Animal feed 0.8 17

Biscuit wheat 0.2 4

Bread wheat (blending

and standard) 2.8 58

Strong bread flour 1.0 21

Winter wheat: Gross

margin analysis

Group Ave Range Premium

gross within over feed

margin each wheat

(£/ha) group price

(£/ha) (£/t)

Group 1 696 676-719 10.75

Group 2 660 632-685 6.00

Group 3 650 628-665 1.50

Group 4 639 605-671 0.00