Boosting British Grain Exports

by Teresa Acklin
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Nearly 10 years of effort pays off as British Cereal Exports builds markets and raises the quality image of U.K. grain.

   By Diane Montague, European correspondent

   As British Cereal Exports approaches its 10th anniversary next year, B.C.E. officials have reason to be encouraged by progress so far and optimistic about the future.

   The organization, which was set up to improve the marketing of British grain overseas, has just seen its budget increased to U.S.$930,000 from U.S.$750,000. It has also been awarded U.S.$77,500 by the U.K. Department of Trade and Industry under its Export Challenge Scheme for a three-year program to promote exports of malting barley. Although not large in itself, the grant brings with it access to the Department's export specialists and contacts in overseas markets.

   Following a decision by U.K. grain traders two years ago to withdraw from a joint funding arrangement with growers, B.C.E. is now financed entirely by a levy on cereal producers, which has given the organization its increased income and greater flexibility.

   Although B.C.E. itself was not formally launched until 1987, the embryo organization began to operate as the Cereals Export Development Advisory Committee of the Home-Grown Cereals Authority at the end of 1986. B.C.E. continues to operate as a separate division within the H.G.C.A., a semi-official organization responsible for providing market information and funding research and development for U.K. cereals and oilseeds crops. B.C.E. promotes the export of unprocessed cereals, while the H.G.C.A. also partially funds the promotion of exports of cereal products such as whiskey, shortbread and breakfast cereals.

   B.C.E. has had only two chairmen — both of them farmers. The first was Rowan Cherrington, who farms in southern England and did much to persuade farmers and traders to get together to think more positively about exports.

   B.C.E.'s current chairman, Barclay Forrest, has been involved with the organization since its early days and became chairman two years ago. He farms 160 hectares near Berwick on the Scottish border and produces malting barley, milling wheat and milling oats.

   Twenty years ago, British grain exports amounted to less than 320,000 tonnes a year. In the next 10 years, as grain production increased under the twin stimuli of improving technology and the European Common Agricultural Policy, exports rose steadily. By 1986, they reached a peak of 8 million tonnes in the aftermath of the U.K.'s biggest ever cereal crop of 26 million tonnes in 1984-85.

   Since then, as cereal output has settled at around 21 million tonnes, Britain has maintained a steady export trade accounting for between 20% and 25% of its total cereal production. Exports this year are expected to top 5 million tonnes.

   Currently, more than 75% of the export tonnage goes to other countries within the European Union. Outside Europe, the main markets are Saudi Arabia, North Africa, Bangladesh and, increasingly, China — in all, more than 40 countries.

   These sales have been achieved in the face of increasing competition in the world's grain markets. But, more importantly, the nature of the sales is gradually being changed from a commodity competing solely on price to one of quality products grown and shipped for specific markets with a quality premium.

Quality Reputation Improves

   When the idea of an organization to promote British cereals overseas was first debated in the early l980s, exports were controlled by international shippers and port operators. There was no contact between producers and end users, and the quality image of British grain — with the exception of some specialist sales of malting barley — was generally poor.

   B.C.E. has reversed the perception of the U.K. wheat crop. Five years ago, the crop was widely described as 20% suitable for milling and 80% for feed. B.C.E. has now established that 80% is suitable for milling overseas.

   When World Grain interviewed Mr. Forrest, B.C.E.'s chairman, in London in August he had just returned from his first meeting with leading international grain traders in Geneva, Switzerland. The purpose of the talks was to find out how the traders compared U.K. grain with that of other countries.

   Their reaction, said Mr. Forrest, was very encouraging. Their view was that although it was slightly more expensive to ship grain from U.K. ports than from some of the main ports on mainland Europe, quality and selling methods now compared well with other more established suppliers.

   This meeting marked an important step in the organization's strategy of changing the image of British cereals and finding ways of channeling the grain into niche markets.

   "In continental Europe," says Mr. Forrest, "British wheat used to be traded at a discount of U.S.$20 a tonne to equivalent French wheat. Now U.K. wheat is traded at between a U.S.$4 discount and U.S.$2 premium to French."

   Much of the progress has been brought about by improvements in handling and storage and changes in marketing. At the same time, the U.K. grain trade has rationalized dramatically, becoming much less fragmented. Many smaller companies have been taken over, merged or simply gone out of business, leaving some 30 large-scale businesses handling the vast proportion of the crop.

   The idea that export markets are simply a way of disposing of surplus grain is gradually changing. For many growers and grain traders, this change has meant a dramatic switch in thinking in terms of grain production and handling, a switch that moves back down the line to plant breeders and seed producers. Varieties are increasingly grown with export markets in mind, and an increasing number of transactions are based on direct contracts between first buyers and end-users.

   A big proportion of U.K. storage capacity is in modern facilities on farm where varieties are stored separately. Farmer-owned central stores and trader or commercial warehouses are also geared to the increasing demand from domestic and export markets for specific named varieties or blends meeting tight quality criteria. The U.K. cereal sector believes its storage structure gives it the edge in servicing customer needs over continental competitors like France, who are often supplying from huge co-operative stores.

Missions Create Markets

   The change in British export capability has been brought about by an ongoing program of fact finding missions — both inward and outward — organized by B.C.E. to find out what buyers wanted and how U.K. growers could provide it.

   Starting with Italy, B.C.E.'s meetings highlighted the importance to millers in southern Europe of the Chopin Alveograph test as an indication of protein quality and underscored the opportunity in these countries for biscuit-making wheats. Chopin Alveograph testing was introduced to the U.K. by B.C.E. six years ago, and now, samples from all the widely grown varieties as well as new introductions are tested after each harvest and the results distributed to both customers and the entire British supply chain.

   These developments, coupled with changes in grain handling at the Italian ports, gave B.C.E. its first big breakthrough into the quality wheat market in mainland Europe. Sales of milling wheat to Italy are now running at nearly 500,000 tonnes a year. Similar markets have opened up in Spain and Portugal, which could develop to a comparable level.

   Scandinavia and the Baltic states feature high on B.C.E.'s list of target markets. The Scandinavian countries have been impressed with the system of testing and traceability, developed initially for Scottish malting barley, that allows for every load of grain to be traced not only to the farm and field but also the seed from which it was grown. This must become the norm, according to Mr. Forrest.

   "The quicker we have quality assurance throughout the cereal sector, the more it will help our export markets — especially malting barley," he says.

   Finland is emerging as an important contact point with the Baltic States, which previously sourced their grain from the former Soviet Union. Now, these countries are looking for alternative suppliers, and B.C.E. believes they will provide an opportunity for smaller U.K. merchants to supply shipments of milling quality wheat directly. Further afield, China is beginning to buy U.K. wheat for manufacturing noodles and dim sum.

   Although much of the emphasis so far has been on wheats for milling, malting barley markets are also being addressed. British malting barley has been exported for many years, mainly to northern Europe. Now B.C.E. believes there are good opportunities in China, where beer consumption is rising at the rate of 15% a year and demand for malting barley is booming.

   As with milling wheat, B.C.E. is trying to overcome the perception that British barley is low grade and not suitable for malting — a perception arising from some poor quality shipments some years ago. But a B.C.E.-sponsored visit by Chinese brewers and government officials to U.K. barley growers and traders in 1995 has helped to change this impression.

   Follow-up visits by Mr. Forrest and B.C.E.'s director, Alan Almond, are helping to strengthen contacts between the two countries. The grant from the Department of Trade and Industry will provide welcome extra resources to build on this. New winter barley varieties now coming up to commercialization that combine high yields with malting quality are expected to make U.K. barley more competitive as well as financially attractive to U.K. growers.

   Although B.C.E. has been making steady progress over the past 10 years, officials are aware that the situation is constantly changing and that B.C.E. must work hard to maintain the progress it has made, let alone expand further.

   Reform of the CAP has not helped. Mr. Forrest says B.C.E.'s biggest concern at the moment is the swing back to feed wheat production in the U.K. because, short term, it looks more profitable.

   "It doesn't make sense to be heading towards more feed when most of the export market is for varieties suitable for milling," he says. "We lose this market at our peril."

   He is pinning his hopes on plant breeders developing improved varieties that combine quality and yield. The breeders now have much closer links with end users and exporters and, as a result, have recently brought in Chopin Alveograph testing at an early stage of variety evaluation to give them an indication of export potential. Less of a threat is the effect of the changes to international trade expected from the next round of reforms by the World Trade Organization.

   "The world market is changing," says Mr. Forrest. "It is moving towards a quality trade, which allows B.C.E. to be more active. I am convinced that if you want to gain an advantage in world trade, you must concentrate on quality. At the same time, trading opportunities are opening up as countries move away from centralized buying. This means there is room for smaller traders to find specialist markets rather than leaving it to the big shippers, whose main interest is often in bulk commodity trading."

   In July 1995, a Chinese brewing delegation visited the U.K. during British Malting Week, organized by B.C.E., to learn about malting barley varieties and the malt sector.

   Alan Almond of B.C.E. examines imported wheat with Chinese officials at Shanghai's Xing Hu Flour Mill.

   B.C.E.'s chairman, Bar-clay Forrest, has been involved with the organ-ization since its early days.

   Portuguese millers hear the plant breeder's perspective during a visit to the U.K. organized by B.C.E.