Wheat Prices Soar as Russia Bans Exports

Wheat prices have rocketed in the last month, rising by 25% this week as droughts and fires have devastated crops in Eastern Europe and led to Russia banning the export of grain, although we do not know for sure whether this will include existing export contracts. The drop in Russia’s production is almost equivalent to Russia’s total grain exports last season (approximately 8 million tonnes!).  With wheat futures going up to more than £158 a tonne and then back down to £150 (still well ahead of last year), the future values have knocked the share prices of grain reliant firms such as brewers and food companies, with shares in Danish brewer, Carlsberg, falling by 5.1% and Guinness shedding 2.2%.

Although optimistic, arable farmers are still getting their crops off the field and assessing what they have to sell and its quality – not to mention the drying costs. Some have forward sold and locked into prices which looked considerably better than last year, but, with the dramatic increases, they are likely to be down £30-40 per tonne from the current market. With farmers in this area reporting better than expected yields and quality we perhaps have less to worry about. It will be the livestock farmers who are concerned, particularly poultry and pig farmers, who are facing steep cost increases as animal feed prices rise by 20% and straw and hay also follow suit.

In any year where there have been huge variances in sales prices or input costs, early tax planning could be vital in saving the farm tax or easing cash flow pressures.  Farmers should be talking to their accountant ahead of their year end to make effective plans as soon as they think there may be an issue. 

For further information, please contact Tracey Nicholls on 01223 728222 / email tnicholls@pem.co.uk.