A successful global harvest has led to prices most people did not expect to see again, and the slump is largely due to the increasing dominance of the maize crop.
That was the view expressed yesterday at a Home Grown Cereals Authority conference in London by market analyst Jack Watts.
“Maize is proving itself as the most efficient feed grain in many regions including Europe and South America, but it is important to remember that we are only ever one weather event away from a completely different market.”
In the meantime, however, grain stocks were being rebuilt and, unless the weather does intervene, the global maize market could top one billion tonnes by 2016.
“On top of that the wheat market has gone from one extreme to another with a couple of poor harvests leading to a huge, but not record, crop in 2014.
“Wheat will of course try to compete with maize and in Scottish terms it is key that wheat is able to steal back the share of the distilling market which has been lost to maize recently,” said Mr Watts.
This of course implies price pressure on wheat in the short term.
The position with barley was “very interesting”, according to Mr Watts. The price had dropped in line with wheat, but barley had become almost a niche crop in global terms.
Production levels had dropped sharply, especially in Canada, with maize and oilseed crops offering better returns.
The UK could capitalise on this thanks to its well recognised efficiency and competitiveness as a barley exporter, especially to destinations such as Africa and Saudi Arabia.
“The UK has produced its second consecutive barley crop of over seven million tonnes, but we do seem to have found export markets.
“The difficulty in the short term will be to persuade feed compounders not to shift from barley to wheat,” he said.
The malting barley market would be interesting in the coming year, with Mr Watts pointing particularly to the EU imposed ‘three-crop rule’. This could see Scottish growers forced into growing oats, which was a risky proposition without a contract.
It seemed ridiculous to be moving away from growing barley for the distilling market when the demand from it was so strong.
Mr Watts had already noted that increasing tonnages of spring barley were already heading north from Yorkshire as maltsters cast the net wider.
Mr Watts did not, however, believe that English growers on tight wheat and oilseed rape rotations would move to spring malting barley as their third crop. Except in cases where a spring crop would help as part of a blackgrass control strategy, the third crop was more likely to be high-yielding winter barley for feed.
Moving on to the oilseeds market, Mr Watts noted that this was being increasingly linked to crude oil prices.
“The problem is crude oil is in decline,” he said.
The link was purely due to the amount of oilseeds now heading for the biodiesel market.
Volatility would be a feature, with the increase in fracking adding pressure to mineral oil prices.
“But on the positive side there are some thoughts that Brazilian farmers are stopping growing soya in the more remote regions. The cost of transport over vast distances to the ports is making the crop too marginal,” Mr Watts concluded.