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Wheat farmers and gluten avoidance!

18/7/2015 Dr John Williams, Food & Fibre Supply Chain Institute

Declining profit margins are nothing new for the wheat industry, especially when combined with flat productivity gains, said Dr Williams who was replying to the recent Australian grain growers survey that found two-thirds of growers were no better off financially than before export deregulation occurred in 2008. Global real wheat prices have been in decline for more than 30 years, whereas farm costs have matched inflation increases, which has resulted in a cost-price squeeze that has seen more than 40 percent of growers leave the industry.

Regulated industries cannot magically increase global wheat prices, remarked Dr Williams who is the author of the recent book – Agricultural Supply Chains and the Challenge of Price Risk. If supply chain regulation does not increase farm-gate prices, then what is the objective of reregulation? Ironically, domestic wheat basis and its positive impact on farm-gate prices has been historically high over the past 18 months because of private domestic competition for milling wheat in short supply.

Wheat pricing opportunities for growers were lost in the Obama years because of the US Frank-Dodd Act which prevented US fund managers from causing price volatility in agricultural markets. Now that the Republicans have repealed major sections of the Act, even the US funds lack sufficient ability to increase wheat prices, unlike recent corn prices.

The biggest single challenge to global wheat prices is wheat-gluten avoidance which has created a burgeoning gluten-free food manufacturing industry, worth hundreds of billions of dollars in the North America, Europe, and Australia, said Dr Williams who is currently researching the gluten-coeliac issue with the findings to be released this September. Mintel (2014) found that 22% of the US population was following a gluten-free diet in 2014 compared to 15% in 2013. There are 3.5 million Europeans and 2 million in the USA with coeliac disease that is directly related to wheat-gluten consumption.

Increasing global avoidance of wheat-gluten can explain the flatness in global wheat prices, in contrast to corn prices which have volatility despite record global corn production. No amount of domestic wheat supply chain reregulation is going to change that!

There has been a complete lack of supply chain engagement on the whole issue of wheat-gluten avoidance and coeliac occurrence, said Dr Williams. The GRDC directors have conveniently abrogated any responsibility on this issue, with no research priority apportioned. Some GRDC directors have claimed that a coeliac vaccine will solve the industry problem, despite the vaccine being acknowledged as flawed by the original researchers which explains why it has not reached the clinical trial stage with celiac sufferers in the USA, which is a prerequisite for any registration with the US Food and Drug Administration.

Wiping the hands of responsibility when there are wheat grower funds and consequences at stake is not a good image for the wheat industry, said Dr Williams. If growers see price as a priority, then they should start by questioning the priorities of their research levy funding.