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British wheat prices may not cover costs

Wheat prices in Britain may no longer be high enough to cover even variable costs, particularly on lower-yielding land, Julian Bell, senior rural consultant at the Scottish Agricultural College said Oct. 16.

Bell estimated the average variable costs for wheat production in Britain had risen to 90 pounds ($154.9) a tonne for the 2009 harvest, up from 54 pounds a year earlier, due mainly to a sharp rise in fertilizer costs.

Variable costs include fuel, sprays, fertilizers and seeds.

Feed wheat futures in London fell to a two-year low of 88 pounds a tonne Oct. 16 on the November 2008 contract while forward prices for November 2009 wheat were trading about 108.50 pounds a tonne.

“Based on current costs of production and current forward prices for an average producer, it is looking very tight,” he told a conference organized by the Home-Grown Cereals Authority.

The costs are based on an average yield in Britain of eight tonnes per hectare.

“It is quite clear that for lower-yielding land there is a big question mark at these current prices whether you should go ahead (and plant),” he said.

French analyst Strategie Grains forecast that European farmers would sow fewer grains and oilseeds ahead of the 2009 harvest and leave more land fallow or plant sugar beet instead.

Bell estimated fertilizer costs had risen to 52 pounds per tonne of wheat, up from 18 pounds a year earlier. Fuel costs were seen slightly down at 14 pounds versus 16 pounds.

He added, however, that stocks remained comparatively low so price could rise if any crop problems arose.



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