August 13, 2008

UK farmers' profits dwindle as wheat price falls

UK farmers who haven't sold their 2008 crop are already seeing their potential profits dwindle, said farm consultancy Andersons Tuesday (August 12).

London feed wheat futures have been steadily falling since the end of June, shaving around 20 percent off their value to trade at GBP122 a tonne, as the European harvest progresses.

With this season's costs more or less fixed, the falling grain prices mean anyone who didn't sell their grain forward could now see substantially lower profits, said Francis Mordaunt, head of business research at Andersons.

In recent weeks the cost of oil has fallen to below $120 a barrel, compared with its peak of $147 a barrel in July. But farmers are not seeing any relief to fertilizer prices and the industry's input costs remain high.

"A lot of UK farmers will be at break-even or worse," said Mordaunt.

Wet weather is delaying harvest in the UK and causing concerns over the quality of the coming crop, which is also likely to put pressure on prices.

The International Grains Council forecasts the UK wheat crop to be up 25 percent up on year at 16.4 million tonnes in 2008, but every day the wet weather continues, it diminishes the quality of the grain and discounts the ultimate price farmers will receive.