Russia, the world’s third-largest wheat exporter, announced a ban on exports of grain for the rest of the year because of wildfires that started last month and continue to lay waste to farmland. The wheat embargo had an immediate impact on the Chicago Mercantile Exchange, the hub of wheat futures, and sent the price soaring on indexes across the world.
Wheat prices have fluctuated significantly over the last 10 years. In 2000 the price was around £60 per tonne, it spiked in 2004 to £115 per tonne and feel back to around £60. In 2007 it rocketed to nearly £200 per tonne and then dipped to around the £100 per tonne. The Russian embargo has created another spike to £150 per tonne.
These price rises are obviously great news for UK farmers if they are able to take advantage. The overall price fluctuations however, make for very difficult business planning from year to year. These are the ups and downs of being tied to global commodity prices.
The US Department of Agriculture estimates that Russia will produce 25%-30% less wheat this year than in 2009. But does this mean that the price of bread has to go up?
If a loaf of bread costs £1, probably 10p-15p of that is actually wheat. The majority of the cost goes into packaging, the marketing and the distribution costs. The biggest cost is the profit margin the supermarkets make. As you can imagine, when the supermarkets put their prices up under the auspices of raw material rises, these prices never go back down when the raw material does.
In 2007, the supermarkets hiked up the price of a loaf when wheat went up to £200 a tonne. Funnily enough, the price of bread never came down in 2008 when the wheat price fell back to £100!
BBC - Russia ban on grain export begins
BBC - No export limit for Ukraine grain
Is this another nail in the coffin for UK farmers from our dearly beloved supermarkets? Supermarkets continually report increased profits, no doubt as a result of squeezing suppliers at every stage. Will supermarkets be the death of the traditional UK farmer?
Asda has dropped 200 of the 500 dairy farmers who supply it with milk which will cut their income by thousands a year, illegibly because of oversupply. The supermarket buys its milk from food company Arla and the farmers specifically get an extra 1p per litre bonus.
Asda told BBC Radio 4’s Farming Today programme that it had had to reduce the number of dedicated farmers because it had more milk than it needed. The changes would provide more opportunities for the remaining farmers, it added.
David Brown, a dairy farmer based near Harrogate in North Yorkshire, said: “We got a letter saying Asda have been looking at the dedicated farmer pool and they have reduced it and unfortunately we will no longer be supplying milk to Asda. It means I am going to lose somewhere in the region of £5,000 a year, which basically means there will be no future investment at this farm - that will be it.”
Mark Smith, a dairy farmer in Nidderdale, North Yorkshire, said the news that he was being dropped from the Asda pool was “gut-wrenching”. The loss of the bonus would take his profits below the cost of production, he said.
Farmers Guardian article
Within the last week a planning application has been submitted by Nocton Dairies for an 8,000 strong dairy herd in Lincolnshire.
The proposal would facilitate 24 hour milking producing 430,000 pints of milk every day but the cows would see little or no green fields. The cows would be fed a special diet and milked three times a day.
The slurry from the cows will be used to generate power and could be sold to the national grid. An anaerobic digester will produce a biogas from the slurry which will generate enough electricity for the dairy and more than 2,000 homes.
Justin Kerswell, of animal rights group Viva, said: ‘This is factory farming and blows out of the water the pastoral image the dairy industry likes to portray.’
Farming is becoming ever more commercialised as it has to compete in a global market. Perhaps animal rights supporters should spend more time questioning why farmers are having to explore these measures. The paying public consistently wants cheaper products which the supermarkets are always happy to oblige. Sadly the original producer is usually forgotten.
Questions should be asked why so many dairy farmers are going out of business? If the general public would like the ‘anchor butter’ image of dairy farming to continue then they will need to pay a little more for a pint. The situation could be helped by supermarkets not using milk as a ‘loss leader’ which will no doubt have an impact of the price they are prepared to pay for it.
Daily Mail article
Meat Trade News Daily article
Farmers Guardian article
Does the Red Tractor symbol actually mean the food was produced in the UK? Is there any particular reason you need a magnifying glass to see the logo?
These may seem rather silly questions but every time I see ‘Danish’ bacon in the supermarket, I wonder how they manage to get their brand name / logo to fill half the packaging. When you do eventually find a pack of British bacon, probably equating to about 5% of the shelf space, the logo seems laughable in comparison.
Since its launch in 2000 by the then Prime Minister, the concept seems to have been well adopted. Is it then just the typical ‘British thing’ of not wanting to shout about our fantastic produce and let then competition muscle in? Our animal welfare standards and crop husbandry are world class in comparison to many countries we import from (naming no names…), so why aren’t we shouting louder.
I would very much like to hear any ones views about this topic and all the other various British food logos we seem to use.
Could the future of crop production be heading indoors and upwards?
A novel concept currently being trialled at Paignton zoo in Devon grows plants in trays of water moving on a conveyor belt. The method claims to use less land and only 5% of the water usually needed.
The company behind the system, Valcent (www.valcent.net) say it is a sustainable solution to the world’s diminishing resources. The hydroponic system rotates the plants on a conveyor belt via a “feeding station” to create airflow and stimulate growth.
According to Chris Bradford, MD of Valcent, a 100sq metre machine, like the one installed at Paignton Zoo, can grow up to 11,200 plants, which, he says, is 20 times more than could be grown conventionally in a field covering the same area. The system is designed to be “eco-friendly” using solar power or wind energy, with the water used to grow the plants being recycled.
This could be a useful way of re-using redundant urban buildings or brown field sites, rather than further industrial expansion into the countryside or the green belt.
According to veteran investor Jim Rogers, agriculture is the investment of the next three years, as the world comes to grips with a growing population and food shortages.
This is good news for UK farmers and landowners as the value of UK farmland has grown 176% in the past decade and 7% in the past yearowing to a shortage of supply. There is speculation that values could may well double before the ned of the decade.
Good quality arable land in East Anglia is between £4,000 - £7,000 per acre which is 50% more expensive than equivalent land in Eastern Europe and France. Land in Ireland and Denmark on the otherhand is 50% more expensive.
High net work individuals are showing significant interest in land due to the various tax reliefs which are available that may enable them to shelter from the imminent tax rises. The three big taxes are income tax, inheritance tax (IHT) and capital gains tax (CGT).