April 11, 2008
 

Cargill opens UK wheat processing plant despite high prices

 

 

Cargill opened on Thursday the UK's largest wheat processing plant in Manchester in northwest England, pushing on with the GBP 75 million (US$148.2 million) project despite this season's surge to record-high wheat prices.

 

The plant, which makes sweeteners, proteins and texturizers for the food and baking industry, will use 750,000 tonnes of wheat annually, more than double any other UK wheat processing plant.

 

"A lot has changed since the decision was made," said Frank Van Lierde, head of Cargill's European sweetener business on the project.

 

London wheat futures surged to a record high of GBP 200 (US$395.3) per tonne following weather problems throughout the globe this season, about double the previous season's price.

 

Supply-driven price rises have been seen before, but "wheat may never be as cheap as it has been in the past," said Van Lierde, who also pointed to price support from Asia's rising economy and increased appetite for food.

 

Van Lierde expects some relief with much larger crops forecast to be harvested this summer in the UK as well as the EU.

 

To help rebuild supplies, the EU abandoned its 10 percent mandatory arable land set-aside program for the 2008-09 season. UK and EU wheat crops are currently in favorable condition, adding to the increased acreage.

 

Cargill plans to source the wheat locally. This will reduce the UK's annual export surplus, which in recent years has been about 2 million-3 million tonnes. This surplus is likely to be further drawn down once production of UK ethanol from wheat is realized.

 

Cargill¡¯s pull from the UK's grain supply will be partially offset as the wheat processing process will also produce 320,000 tonnes of moist feed product.

 

"It's particularly good for dairy," said Bram Clison, head of Cargill Food Ingredients on the feed product.

 

Previously Cargill has made its sweetener from corn imported from France. "Wheat is the most widely grown crop in the UK." said Van Lierde on the decision to switch feedstocks.

 

While sugar prices are set to decrease with the EU's new sugar regime, Van Lierde and Clison said the effect will be limited as prices will need to remain high enough for sugar beets to remain competitive with wheat in the battle to attract acreage.

 

About 90-100 trucks unload wheat during a delivery day, and by tracking them with a bar code, each can be tested for quality and unloaded in 12 minutes, to adhere to food safety standards, Clison said.