BB Open Letter: Wheat prices

02 July, 2010
Page 18 

The report in British Baker (4 June) highlights concerns over the possibility of increased wheat prices, due to currency fluctuation and the increased use of wheat for biofuel production.

The possible effect of these concerns is that wheat and subsequently flour prices will rise after a new crop, even though the estimates are optimistic in terms of both volume and quality for the 2010 crop on a global scale.

The current LIFFE price for July 2010 is an unchanged figure of £97/tonne, with the level increasing to £100.85 for November 2010. Obviously, the cost of bread flour will depend on premiums for bread wheat over feed wheat and the action taken by wheat buyers to cover flour contracts.

There are other factors to be taken into account. Although there is to be an increased demand for feed wheat for biofuels, can this not be supplied from material that would previously have been exported? After all, from an average cereal crop of 15 million tonnes plus, approximately three million tonnes of milling wheat is obtained, leaving a significant surplus. Presumably, the additional demand for biofuel can also be met at least partially by using land for growing not currently used for wheat.

In addition, what action is being taken by wheat buyers to protect prices by taking 'options' on future purchases? This involves paying a premium to secure wheat at a specific price. The option system offers a degree of flexibility, presenting the buyer with a variety of strategies when covering wheat purchases.

There has been considerable publicity about the use by millers of 100% UK wheats in the manufacture of bread-making flour. This reduces the need for imported material, which, in addition to providing useful promotional opportunities, generates cost savings.

Do farmers have enough incentives to become interested in taking advantage of the development in seed technology to grow increased levels of bread-making wheat varieties? A realistic premium negotiated through the miller and merchant can be made to offer farmers a more satisfactory return for growing milling wheat, making this raw material as attractive as crops such as rape.

The craft baker continues to be under serious market pressure and every opportunity must be explored to secure consistent raw material prices. As much factual information as possible is key as this avoids unwelcome speculation as to levels of future prices.

Stephen Bartlett, Morpeth

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