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Threats and opportunities for UK in risky grain market

The UK grain market remains heavily influenced by what is happening globally and it is important the industry avoids becoming too inward looking.



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That is the view of Jack Watts, AHDB lead analyst. Speaking at the AHDB Grain Market Outlook Conference, he said: “All looks calm on the surface but there are key risks to be aware of. The global grain market has issues not dissimilar to the banking sector pre-2007.”

 

While the global wheat crop had been smaller in recent years, it was growing, as was the proportion of global production exported. “Twenty-five per cent of global wheat production has to be globally traded and any threat to globalisation can affect the function of the global market.”

 


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Russian exports

 

Russia is also becoming an increasing force in wheat exports, projected to overtake the EU and US in 2017/18, said Mr Watts. “Russia is steaming ahead. There has been a consistent improvement over the last five years in the size of the Russian wheat crop.”

 

Focusing on the UK market, Mr Watts said supply and demand were becoming increasingly important to domestic price formation. “The UK wheat area has fallen 10 per cent in the last 10 years. In the last two years, feed wheat futures have risen by 25 per cent. They have moved from the cheapest in the world to the most expensive.”

 

The switch to spring cropping in an attempt to combat grass weeds had contributed to the fall in wheat area but area of spring barley may have reached an economic plateau, suggested Mr Watts. “In feed barley compared with wheat there are big discounts. There is increasing demand from the animal feed industry and barley may displace some of the feed demand for wheat.”

 

Post-Brexit scenario

 

Looking ahead to a post-Brexit scenario, Mr Watts suggested opportunities might include import substitution of grain if milling specs could be hit, livestock product import substitution supporting feed demand, value added exports and the opportunity to redefine farming systems to drive productivity.

 

Considering threats, he said large surpluses of feed barley could become more costly to shift, UK grain demand could become a target for global exporters, tariffs and risk of more trade friction at borders would increase the cost of doing business and that farmers’ and supply chains’ sources of resilience are at risk, with the need to build self-reliance.

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