CEREAL EXPORT markets have traditionally been seen as something of a dumping ground for poorer quality grain, but exports are vital to the UK market and must be treated as such.
Almost every year the UK will produce a supply of wheat or barley which will be exported to European countries like Spain, Italy and Portugal, as well as North Africa, says Alastair Dickie of the Home-Grown Cereals Authority. But these markets are not exclusive to the UK, which must compete against the likes of France and Ukraine for business.
The two main markets are for feed grains, including maize, and milling wheat, including soft biscuit-making varieties, says Mr Dickie. The UK must be able to supply a good quality and quantity at a competitive price to attract export demand for either of these groups. The quality of the domestic crop will determine whether the UK will be competing in the feed sector or the milling sector, which will obviously have an impact on price.
British farmers should also be aware of the quality, quantity and price of their foreign competitors” grain, as this will affect supply and demand in each sector as well as the level at which UK grain must be priced to attract buyers.
Currency also has an important influence on grain values, says Mr Dickie. “A weak pound against the euro will encourage exports and vice versa.” The pound/euro relationship is most important when Brussels is paying an export restitution to aid exports, as the EU will be insulated from world market movements. “But, when there is no restitution, markets are more sensitive to the pound/dollar relationship.”
This year, the UK has an exportable wheat surplus of about 3.1m tonnes. But traditional European destinations will only take about 2.5m tonnes of that, says Mr Dickie. UK values will, therefore, either have to become more competitive at some point – whether through lower prices or a weaker pound – or exporters will have to find new third country buyers.
Traditionally, these non-EU markets take lower-priced feed grains and the UK could have to compete against US maize or Australian barley.
Last year’s poor French maize crop resulted in a European shortage of feed grains and consumers bought feed wheat in its place, says Mr Dickie. This bolstered British wheat exports right up to this autumn, aided by supply problems in the Black Sea. “But the new maize crop will very soon be available and we could see some of this demand drop off.”
Finding and supplying new destinations with the grain quality they require is, therefore, an ongoing and essential aspect of the British grain market.
Gaining from Grain is a monthly series on business strategies produced by farmers weekly in association with the HGCA.