Grain trade set for fundamental change

A dramatic change in the way grain is traded within the UK is on the way, as internal demand switches from south to north.

“The advent of up to three wheat-based ethanol plants will create new grain demand, whilst feed compounding continues to reduce in volume, and a major starch plant is closing imminently,” according to David Sheppard, managing director of Gleadell Agriculture.

“The ethanol plants will also produce a sizeable tonnage of dry distillers grains which will present opportunities for the livestock sector, competition for other feed ingredients and a marketing challenge for those involved in trading these products.

“All of this will result in changed dynamics for the UK wheat market, with a lower exportable surplus in the north, and a larger surplus south of The Wash. We may well see a rise in grain movement within the UK by vessel, from south to north, and Scotland may look to Danish or Scandinavian wheat as much as English to meet their requirements.”

As well as these internal changes, UK grain markets will continue to be influenced by global trends, and price volatility will be a permanent feature. As such, farmers should consider putting all, or part of their crop into a merchant’s grain pool.

Results just published show that Gleadell’s harvest pool achieved an average price of just over £105/t, and a base price of £103.25/t, comfortably above the spot value of about £85/t at harvest time.

“To put our pool results in context, the run up to the 2009 harvest was similar to the period June-August 2008 when prices fell from well over £150/t to sub £100/t,” said Mr Sheppard. “We saw a similar fall this season between June and September with feed wheat below £80 in some regions.

“The reasons behind this fall are that the world has produced the second-largest wheat crop ever and has rebuilt stocks to the highest level since 2000/2001. Also European crops both inside the EU, and in eastern Europe, have exceeded expectations and there is a large carryover stock level throughout the EU – particularly in the UK – that has weighed heavily on the market.”

The fall in prices came despite the UK producing approximately 3m tonnes less than in 2008 and clearly demonstrates that the world market is the key driver for our market.

“We were well-informed as to crop performance, particularly in eastern Europe and in France and Germany, and ensured that we had sold 100% of our harvest and October/December pools as the UK harvest began.”

* For a Farmers Weekly view on the grain trade see Phil Clarke’s Business Blog


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