February 21, 2008

UK wheat producers warned against complacency
 

UK wheat producers are benefiting from skyrocketing grain prices across the world at the expense of the livestock sector, but a report released by HSBC has warned the grain farmers against complacency.

Arable farmers could suffer once wheat stock levels are restored, which would cause prices to decrease sharply, said the report.

The report said the present global wheat shortage is due to reduced sowing after years of poor prices.

If global sowing increases by 3 percent, at least two years would be required to restore world stocks, the report said, which would give UK's arable farmers at least another year of high wheat prices.

Senior HSBC economist Mike Beresford-Smith said nothing would be able to stop prices from falling once stocks are restored.

Smith said demand for wheat is not having a significant increase, as the grain is not widely used for biofuels and as animal feed, which points at the short-term condition of the current wheat market price.

Although UK agriculture is performing better because of the grain price increase, but the livestock sectors have been hit very hard, Smith said.

The farmers must understand their production costs; they should waste no time in being complacent, Smith added.