Grain prices won’t recover until 2011

High world grain stocks will inhibit any recovery in grain prices this year, SAC business consultant, Julian Bell, warned Scottish cereal growers at an SAC/HGCA workshop at Inverurie, Aberdeenshire.

“It is likely to be 2011 before we see any real improvement in grain prices,” he said.

The worldwide surge in production last year following the high spike in prices in 2008 had resulted in a huge increase in world grain stocks which were now at an eight-year high.

“The good news is that world demand for grain is continuing to grow but, until stocks start falling, we are unlikely to see prices recover to any great extent,” he said. “However, a relatively small fall in stocks will be enough to trigger a recovery.”

World demand for grain had increased by 166m tonnes over the past five years – half of which was due to the demand for ethanol production in the USA.

The weakness of sterling had added £30/t to the UK wheat price and exchange rates would continue to play a crucial role in determining grain prices, he added.

Demand for wheat from the two new ethanol plants in the north of England, which between them would absorb 2.5m tonnes of wheat this year, would also stimulate the market, he said.

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