After six or seven years of turbulence and volatility in pricing, the grain market looks to be heading back into calmer waters, according to Jack Watts, senior marketing analyst with the Home Grown Cereals Authority.
Speaking in London, Watts admitted this return to normality was coming at a price and that was bad news for UK farmers who were now facing downward price pressure for their grain.
He described the reduced value of cereals following a difficult growing season this past year as really testing the industry’s resilience.
Apart from price, there were still major adjustments the grain trade had to undertake before normality took over.
Because of poor sowing conditions in autumn last year, more growers planted oats in the spring with the result, Watts said, the 2013 UK oat crop might hit one million tonnes.
“This could potentially be the largest crop this country has produced for 40 years and the problem it has created is that it is well above normal demand,” he said.
“Home demand might be stimulated and the export market might be another option but the oat export market is difficult and is dominated by the Scandinavian countries.
“I expect most of the extra oats to be used as animal feed.”
The reduced acreage of wheat grown for the 2013 harvest has also produced a short crop of just over 12 million tonnes and imports will again be needed to fill the gap.
Last year, an equally poor harvest had resulted in thousands of tonnes of milling quality wheat being imported but this year with the home crop being of reasonable quality according to Watts, the wheat shortage will show up in the poorer or animal feed end of the market.
The gap here could either be filled with imported maize or with some of the surplus barley that is now on the market but using this is not universally accepted in the compounding trade.
A potentially strong demand for malting barley was being undermined by a weak feed trade.
Looking to next year’s crop, Watts said this was where it looked as if normality was coming back into fashion.
He fully expected the acreage of wheat already in the ground to be around two million hectares compared with 12 months ago where ground conditions kept the plantings down to 1.6 million hectares.
The acreage of winter cereals in the ground will also return spring barley and oat acreages to more normal levels.
An added plus factor on the acreage already in the ground was that most of it had been sown in good condition although some areas had been too dry up until this week.