UK cereal and oilseed output this year recovered from the weather reduced levels of last year. For wheat, better drilling conditions last autumn followed by generally favourable weather for crop development has resulted in both a larger area and higher yields. The harvest is preliminary estimated at over 16M tonnes. This means, after allowance for domestic use, that as much as 5M tonnes is available for export and prices will have to remain competitive in an international context.

EU wheat production is also forecasted to have increased as a result of generally favourable weather conditions. Global production prospects, however, declined dramatically during the summer months due to drought condition in North America and more recently in Australia.

As a result of a substantial tightening of supplies, prices of better quality wheat have improved materially. This, however, has not been reflected in lower quality wheat markets and ex farm UK feed wheat prices, because of abundant supplies of competitively priced feed wheat out of Black Sea ports. These prices are only likely to improve if either US maize crop prices deteriorate further or supplies from Black Sea ports dry up.

For barley, as with wheat, the higher quality end of the market has benefited from small crops elsewhere. With very limited supplies of malting barley from Canada and Australia, demand for European malt and malting barley has improved substantially in recent weeks.

Global rapeseed production has also declined, leaving rapeseed prices more insulated from general oilseeds price direction. However, uncertain prospects for soya and palm oil markets will still heavily influence price direction.

Major cereal regime recommendations in the European Commission's Mid Term Review of Agenda 2000 include a further five percent reduction in intervention prices and elimination of monthly increments, with a 50 percent compensation in terms of acreage payments, the elimination of intervention for rye and increased emphasis on environmental issues. The Commission plans to have its review available for the European Council's consideration in mid December.

The Commission's planned agenda for the current round of WTO negotiations include, in addition to general reduction of agricultural support and protection, the widening of the definition of export support, provisions for the expansion of the EU and the inclusion of non-trade concerns such as the environment and animal welfare. After a rather slow start the pace of negotiation is quickening with the process scheduled to be completed by 2005.

The commission has proposed to the WTO that EU import tariffs for cereals be based on trade and tariff history between 98/99 and 00/01. The purpose is to afford better protection from very competitively priced Black Sea port grain. He noted that the EC was currently consulting current trade partners and would then need agreement at an EU level before implementing any new regime.

The Commission plans to have details on accession terms for Eastern European countries available for European Council's consideration in mid-December. It recognizes the challenge of accommodating new member states within the CAP. Terms for progressive alignment will be negotiated on a bilateral basis with perspective members states.

The recently passed US Farm Security and Rural Investment Act sets US farm policy for the next five years. The inclusion of soybeans, the option to update base acres calculations and the return to deficiency payments will tend to limit shifts amongst crop and it is, therefore, seen as something of a retreat from the previous Act's market oriented philosophy. Greater stress is placed on conservation through increased funding for land retirement and programs for land in production.

While actual costs to government of the Act will depend on weather and market price determined emergency payments, agriculture program costs are expected to rise. Because the US federal budget has moved into deficit, approval for emergency funding for agriculture may be more difficult. It is also evident that provisions of the Act relating to trade promotion and country of origin labelling could result in WTO challenges.

In not much more than 50 years the proportion of total UK consumers' expenditure on food has fallen from almost 40 to 12 percent. And society's expectations of farmers has switched from providing a secure source of food to the conservation of the countryside and environment.

In addition to their traditional role as food producers, farmers are now expected by society to act as countryside stewards. The challenge of meeting these expectations which sometimes conflict with each other is further complicated by the agenda being set by NGO focus groups which may themselves have conflicting go als. On the positive side, however, the greater wealth of society means more resources are potentially available to do the job.

The importance of recognizing that markets are driven by the demands of consumers rather than the supplies of producers was emphasized. An understanding of, and empathy with, consumers is, therefore, critical.

People buy on the basis of value rather than price, the difference being the dimension of attributes. This provides significant opportunities for those who understand consumer's needs to add value.

The top three characteristics of food for consumers are taste, appearance and freshness.  The ultimate success of the British Farm Standard logo and assurance schemes will depend on their association in the minds of consumers with these three characteristics, rather than any call on patriotism.

New food product successes have been highly innovative, tapped into changing lifestyles, driven consumers upmarket and generated profits.

David Walker
phone: 01603 705153