AS THE UK cereal harvest approaches, grain traders are keeping a watchful eye on the rest of the world's crops - none more so than Gary Bright and Edward Rust of Newcastle-based GrainCo.

Last Friday, the company celebrated its tenth year of trading by officially opening new offices and laboratories at Tyne Dock.

David Loane, chairman, said the volume of cereals traded had tripled in ten years and, last year, had reached one million tonnes. He thanked the farmer customers who had put faith in a business which originally had no track record.

He also praised Mr Bright, based in Newcastle, and Mr Rust, who works from Turriff and deals with the Scottish crop, for their hard work and vision.

GrainCo is now the biggest barley exporter in the UK, trading 200,000 tonnes annually, of which 85,000 tonnes is from Scotland, shipped from Dun-dee, Montrose and Peterhead. Most of the crop is loaded at Tyne Dock where 50,000- and 30,000-tonne ships can be accommodated.

Cereals are drawn from all the big grain-growing areas in the North of England, as far down as Yorkshire.

In Scotland, since their acquisition of Ucos in 2002, farmers from the borders of Scotland to Aberdeenshire have put their faith in GrainCo marketing their crops.

Grain trading is highly influenced by the global market and, at the moment, all eyes are on Australia where cereal farmers are experiencing a severe drought. Australia is the second largest exporter of grain after the US but, with no rain since March, there is concern over global stocks, which are already at an historically low level.

"Australia would normally expect a harvest of about 23 million tonnes but, if there continues to be no rain, it looks as though that may come down to about 16 million tonnes this year," said Mr Bright.

Mr Rust pointed out that Spain was the single most important market for UK cereals, taking an average of 1.5m tonnes. Owing to the severe drought this year, Spanish demand would be very strong, though it was vital that the UK stayed competitive with Germany, France and Eastern Europe.

"At the moment the euro/dollar situation is supporting European wheat but sterling is strong against the euro so it works against British traders," said Mr Rust.

He pointed out that prices had rallied about £5 in the last month but said he would recommend any farmer to sell at least a proportion of his crop on GrainCo's minimum price contract. This costs the producer about £3 a tonne and protects him from downward market movements, but allows him to take advantage of any improvements in price.

"Taking out a minimum price contract is sound business sense," he said, "Sure, it costs to do that, but farmers at least know they are covered.

"Last year we had a huge amount of minimum-priced wheat sold at £80 a tonne 15 months before harvest, and it worked well for our customers."

GrainCo believes one of its strengths is that it is a farmer-controlled business, operated by people who recognise the need for a strong commercial marketing organisation to balance the activities of the multi-nationals by maintaining a direct producer role within the grain industry.

Pool marketing is another tool used by the company to improve continuity of supply and minimise risk. GrainCo's wheat and barley pool of 300,000 tonnes is renowned as probably the most successful in the UK.

The shareholders of GrainCo own 130,000 tonnes of grain storage and drying facilities in Northern England, including substantial stores at both Piercebridge and Meldon, as well as the very latest export storage facilities at Tyne Dock.

During the current marketing season, it has exported barley to Saudi Arabia and Tunisia in 50,000- and 30,000-tonne vessels.

The high premium achieved on larger vessels enabled feed barley from as far north as Angus, Fife and Perthshire to be marketed through Tyne Dock.

GrainCo also exports cereals, pulses and oilseeds through Blyth and has recently developed port storage facilities in Aberdeen for farmers in North-East Scotland.