Are food prices set to soar as the UK runs out of wheat?

As someone who lives in a very rural village, surrounded by countryside and fields within a minute of walking distance from my home, the plight of British farmers over the last 12 months has been disastrously obvious.

Fields have been either water-logged for months on end, or they have had snow covering them for the last couple of weeks. And where at this time of year, we are used to hearing the tractors late at night, and early in the morning, ploughing and preparing for the crops of the autumn, the silence is saddening.

wheat farm

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I spoke to two farmers last week, who said they had just two weeks left for the weather to clear up, and that was the very latest that they could start to sow for wheat and barley this year. As I walk my dog everyday around their land, they are often to be spotted looking at the earth, and then driving away. So it comes as no surprise to me to learn that this year, the UK will face major food price hikes, due to the lack of wheat production in this country.

What I did not know was that the UK are a major exporter of wheat, but thanks to the last 12 month cycle of poor weather, we will now have to import wheat for the first time in a decade. And it is not just wheat that is affected, potato crops are at an all time low, with just 4,000 hectares planted at the end of March, compare this to the 30,000 hectare area that had been planted this time last year, and suggesting that we may also be importing potatoes.

The farming industry is also suffering with livestock killed off by the unseasonal cold weather, and of course many animals have had to be housed indoors with extra food to supplement the freezing conditions outside, which has also raised costs where normally they would be grazing outdoors in warmer weather.

Mike Thomas, of the National Farmers Union (NFU) said: “The last 12 months have been unreal for farmers. Last April we had a drought and talk of a hosepipe ban, then we had to contend with heavy rains and flooding and then the wintery weather, frozen land and snow.”

However, NFU chief economist Phil Bicknell doesn’t think that British customers will be affected by much: “Wheat only represents about a tenth of the cost of a loaf and energy costs and packaging probably have as large an impact on price,” he added . “But the wheat price is determined by global supply, rather than UK supply, and the price has actually dipped in the last few days.”

Where there are shortages and price fluctuations there are opportunities for profit, and one such company, Geneva-based Vitol, the world’s largest oil trading house, has recently announced plans that it is now moving into the industry of food trading. And it is not alone, two other major energy traders have also added food to their portfolios recently, and they join an exclusive group of just five dominant food traders who now between them, collectively control 90 per cent of the global market for grain.

Vitol is run by one of Scotland’s most wealthiest men – Ian Taylor, who has amassed an estimated personal fortune of around £155m, and who has donated more than £500,000 to the Conservative Party. He was invited to attend a dinner at 10 Downing Street in 2011 for people who had donated large sums of money to the Tory party.

Christine Haigh, food and finance campaigner at the World Development Movement anti-poverty group, said: “Like the banks, the big traders also play the market as speculators. While they might not like to admit it, it’s widely acknowledged that these players trade many more futures contracts than necessary to protect themselves from losses due to price fluctuations.”

With the U.S. Mid West suffering from droughts last year, and most of Europe experiencing their coldest weather for decades, we should all brace ourselves for higher food prices in the supermarkets.

Source: The Independent

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