Food Fears: Planning need to cut market excess

But dodging the odd heavy downpour and having to spend extra money drying grain is nothing compared to the pain being suffered by Russian farmers. Drought and record-breaking heat has wrecked their growing plans. The wheat crop in Russia looks as if it will be down by a third on last year. There's a similar shortfall in neighbouring republics and from last weekend grain exports have been banned.

Here the Home Grown Cereals Authority says prices for wheat are up by about 20 per cent on last year. But it is not just wheat which is affected. Malting barley, used to make beer and whisky, has been on a roller-coaster ride. That's the description of Paul Rhodes, the regional manager for English Farming and Food Partnerships in Yorkshire and Humber.

"In 2007, malting barley was 250 a tonne – 100 a tonne premium over and above ordinary barley," says Paul. "The following year there was a massive increase in planting, ending up with the biggest harvest ever. At the same time, demand for beer fell, as did demand for malting barley and the premium disappeared."

He says this year the barley price is being driven up again because it is linked into the price of wheat. "This is causing real pain for the maltsters. They are hurting so capacity will be lost in the sector. The farmers will say, 'I'll just grow wheat' and next year there won't be any malting barley and, consequently, the price will shoot up again."

This view is shared by Guy Newsham, general manager of one of the country's biggest maltsters, Muntons, based in Bridlington.

"We can see the writing on the wall," he says. "To actually make a difference you need all partners in the supply chain co-operating. The brewers and distillers have to recognise that you have to pay the growers sufficient to know that they've got a safe investment in growing malting barley."

He predicts possible problems next year. "If we can't get the supply chain to function properly and leave it fully to the open market – by that I mean if we can't get the brewers and the distillers to pay sufficient to ensure the growers plant sufficient malting barley – then the worry would be that there would be a shortage. There is a strong incentive for the farmers to grow feed wheat."

Fortunately for drinkers, the proportion of barley in a pint of beer is too small for any increase the farmer receives to make much difference at the bar.

In other parts of the food industry this is not the case for consumers. Here the see-saw effect can have more dramatic consequences and Yorkshire is particularly vulnerable because we are the second biggest food manufacturing and processing region in the country. Many of the large food companies are based in Yorkshire, they have huge capacity and large numbers of jobs at stake.

Paul Rhodes from EFFP adds: "The problem that the food manufacturers face is that they find it very difficult to hand on any raw material increases to their own customers." He is referring to the supermarkets. They are fiercely cost-conscious at the best of times, but in a recession and with a VAT increase to further squeeze on spending, they don't want to hit their customers with higher food prices.

Helmsley-based Thomas the Baker employs 450 people at its factory and shops. Steve Simpson, their production director, says that it's dairy products which are creating particular problems for them at the moment.

"Butter, for whatever reason – and I'm not sure why – has gone up 40 or 50 per cent in the last three months," he says. "We use quite a lot of butter and there's quite an impact on our prices. But we cannot change our prices, so we just have to take those (increases) on board. Customers are very price-sensitive, particularly at the moment. Then we have to look at other ways of reducing costs."

The fear is that this could mean job losses in Yorkshire according to Paul Rhodes at English Farming and Food Partnerships.

"Because the food industry's so important, if the profitability falls, then jobs will be at risk. The supply chain needs to work closer together. Risk is a double-headed coin. Farmers have risks as well as food companies. If they work closer together they can draw lines through that risk."

He urges farmers and their customers to sit down in a room and try to plan things better. With what end in view? "Everybody to get out of a relationship what they need. Everybody making a reasonable return – and it can be done. There has to be a reference to a market place but (planning) takes out the volatility which is actually crucifying many of the food businesses in the region."

Jonathan Knight, chief executive of deliciousl- yorkshire, which represents more than 600 businesses, says it highlights the importance of having sustained and self-sufficient food production. "Many of delicouslyorkshire's producers safeguard against the effects of food inflation by forging supplier links across the region.

"With food inflation forecast at between three to four per cent, even if prices do go up, consumers can help the local economy by putting locally-produced food in their shopping basket."