The strained trade relationship between the US and China is having a fundamental impact on world grain markets, delegates at AHDB’s Grain Market Outlook Conference heard last week.

The US Department of Agriculture’s Seth Meyer's keynote presentation told the 150 stakeholders from across cereals and oilseeds supply chain that the US would break with the norm of supplying China for six months of the season and was looking to export to elsewhere in the world year round.

Also at the event, Charles Clack, of Rabobank, pointed out that the 25% tariff imposed on US imports left China in a dilemma about where to source enough soyabeans to meet demand – a potential impossibility. It is expected to import 94m tonnes, equivalent to all soya exported by countries other than the US.

Also impacting on that is the fact that global consumption of grains is expected to exceed production for a second consecutive year, thus putting pressure on other protein sources, such as soya.

At a global level, drought in key growing regions has been partly responsible for a tightening of the wheat market, with the market also sensitised by the potential for Russian export controls.

And, while rapeseed supplies remain tight, with China forecast to import an additional 11% in 2018/19, record soya production in the US has meant that prices have not seen a significant rally.

At UK level, the AHDB balance sheet shows wheat production is down 5% at 14.1m tonnes and barley down 8% at 6.6m tonnes. The oilseed rape crop is down 5% TO 2m tonnes, despite an expansion in the planted area.

However, there is lots of uncertainty at regional level, with the shut-down of the Vivergo biofuel plant is already impacting locally – planned Rank Hovis plant closures will do the same.

Animal feed demand is expected to rise following the summer drought and lack of forage, though there are questions around what grains will be used. Added to this, the last three months of the season will be post-Brexit and it remains unclear what the trading environment might be.

Helen Plant, AHDB's senior analyst, said: “The crop size being smaller means we have less export availability for both wheat and barley. In addition, there may be a shift in the type of grain we export.

"Spain has been a good customer of feed barley in recent years but it’s currently a nett exporter, while drought has affected malting barley quality in Europe, so there may be an opportunity there. There’s limited opportunity for stock recoveries, because of the smaller size of the harvest.”

Supply chain expert, Christof Walter, said that opportunities existed for all players in the UK industry through improved relationships, but improving the cereals' supply chain would mean collaborating on specifications required by the buyer; building, measuring and improving relationships; making each individual supply chain specific to the customer; and to develop leadership in all aspects of the supply chain.

AHDB Cereals and Oilseeds chair, Paul Temple, pointed out that the UK remains a nett importer of agri-food goods and that only 61% of the food consumed in the UK is currently grown and/produced in the UK.

That means that the UK is an important 'customer' for other European economies, receiving significant proportion of some nations’ exports – for instance, from Ireland the UK takes 34% of its butter exports, worth £150m and 91% of its baked goods, which has a value of £200m. This means the UK has a strong bargain chip within the Brexit negotiations with regard to food trade.

Our star exports remain whisky and salmon, which has a particular relevance to Scotland within that framework.