Research by the Environmental Change Institute of Oxford University and reported by the American Geophysical Union has shown that whilst the 2010 Russian wheat harvest failure was not due to man-made climate change the naturally occurring climatic conditions that led to the drought and fires are 3 times more likely to happen. Previous studies had been contradictory in that some concluded that the occurrence was within the expected severity of climate for the region whilst others indicated that the cause was man-made climate change. This study concludes both views are correct. The severity of the weather is not outside the expected limits for the region but the liklihood of these conditions occurring has trebled due to man-made climate change.
Whilst the niceties of these arguments bare little relevance to the grain markets the result of the weather seen in Russia in 2010 had significant consequences with organic wheat prices rising by £100 per tonne in 6 months. This causes disruption to the market as both buyers and sellers seem uncertain how to proceed and the results of this are still seen in the market today with demand down due to high feed costs and buyer uncertainty resulting in significant spot buying rather than forward cover being bought.
However there is a more significant underlying issue that requires consideration by the whole organic sector. Germany the largest organic market in Europe and one of the largest producers has reported that in 2009 (when it had a larger than average harvest) imported approximately 15% of its cereal demand. For the UK this figure is closer to 50%. Other Northern European countries are also importers of cereals as their markets continue to grow.
This demand has largely been satisfied by imports from Central and Eastern European states particularly Ukraine, Russia, Romania and Khazakstan. All of these are likely to be effected by the conditions seen in Russia in 2010 which will impact upon their production. If this production is likely to be effected 3 times more often than has previously been the case this is likely to put severe supply pressure Western and Northern European states that have a reliance upon these supplies.
There are also proposals from the EU to require that organic animal feeds have a minimum 20% sourced from the region in which they are consumed. Whilst the definition of region is unclear it will possibly be the members state which would place additional demand on UK production.
For livestock farming businesses or livestock feed companies should be seeking to secure their grain supplies going forward by developing links with cereal producers to ensure they have supply available to them. This would help to buffer them against the potential shock to their supplies of grain imported from these states were the potential for damaging weather events is reported to be increasing.
Cereal producers should be seek to link into these opportunities if and when they emerge and work with their customers. See example here.
However there is a more significant underlying issue that requires consideration by the whole organic sector. Germany the largest organic market in Europe and one of the largest producers has reported that in 2009 (when it had a larger than average harvest) imported approximately 15% of its cereal demand. For the UK this figure is closer to 50%. Other Northern European countries are also importers of cereals as their markets continue to grow.
This demand has largely been satisfied by imports from Central and Eastern European states particularly Ukraine, Russia, Romania and Khazakstan. All of these are likely to be effected by the conditions seen in Russia in 2010 which will impact upon their production. If this production is likely to be effected 3 times more often than has previously been the case this is likely to put severe supply pressure Western and Northern European states that have a reliance upon these supplies.
There are also proposals from the EU to require that organic animal feeds have a minimum 20% sourced from the region in which they are consumed. Whilst the definition of region is unclear it will possibly be the members state which would place additional demand on UK production.
For livestock farming businesses or livestock feed companies should be seeking to secure their grain supplies going forward by developing links with cereal producers to ensure they have supply available to them. This would help to buffer them against the potential shock to their supplies of grain imported from these states were the potential for damaging weather events is reported to be increasing.
Cereal producers should be seek to link into these opportunities if and when they emerge and work with their customers. See example here.
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