Manufacturers of wheat-based products may face shortages and higher prices unless they buy up to three years ahead.
Alistair Dickie, director of crop marketing at the Home Grown Cereals Authority, said supplies of milling wheat used in food manufacture could decline as farmers take advantage of a 30% rise in feed wheat prices and swap to growing lower quality grain for the livestock industry.
Worldwide, feed wheat prices have been driven up by extra demand for biofuel crops, particularly in the US. As a result, the milling wheat premium has been eroded. The UK feed base price in February stood at £90.50 and milling wheat at £96.80. Futures prices for next year's wheat harvest are already hovering at around £90/t.
Dickie warned food processors: "If you want a particular crop grown, you need to pay for it [in advance]. It's a high risk strategy to assume that the wheat you need will be grown - there's a need for risk assessment of procurement of materials."
The global wheat market was fragile, said Dickie, noting that Australian wheat production, hit by drought last year, was expected to fall by another 6.5Mt to 11.5Mt this year. Although Canadian yields were again anticipated to be above average quality at 26Mt, much was riding on a successful harvest in the northern hemisphere, he said.
"If we get the same yield we had in 2003, we could have a shortfall of significant concern.
"It would be catastrophic not to get 12bn bushels of corn."
Dickie claimed manufacturers should be looking up to three years ahead at the base price of crops and advised them to keep an eye on the French market.
"The UK market tracks the French market - if the Matif (financial futures exchange) price goes up, so will ours." At the moment, he said, only the primary food processors were taking the message on board. "But if you are a baker, then the movement of raw material affects your business, too."