How different this green and pleasant land is in 2013 compared with last year, with its perpetual deluges. The cold spring has impacted the output down on the cereal farm, but the initial fears are not as bad as first thought and a high-quality and better-yielding cereal crop seems to be emerging.

The form in the UK seems to be replicated in other key growing zones, particularly North America where a substantial Canadian crop is anticipated, while the USDA foresees fulsome output for wheat, maize and soybeans. Such expectations have been understandably manifested in softer commodity prices.

While global demand for foodstuffs remains robust, we expect upward price pressure to remain subdued for the next six to nine months until we see how the southern hemisphere harvest goes and the spring planting data for the north. With the silos filling, what does the harvest mean for the households and supermarkets of Britain?

” Rising incomes and easier inflation could improve volumes”

Well, while arable farmers may wince at easier prices, it is likely be a different matter for most households, where prices, including food, have been rising ahead of wages for some years. We see food inflation remaining in the system but at lower levels than in recent years maybe at 1.5% to 3% rather than 3% plus.

Income growth is far from uniform in the UK, but we see more working hours and rising employment levels making for more haves than have-nots. Rising incomes and easier food inflation could create the basis for food industry volumes to improve. They may already be doing so, which will be warmly greeted by retailers that have endured unprecedented volume contraction for three years.

Volume growth will help the financial performance of the trade. Operating costs are better covered and trading tactics can move away from a preoccupation with promotions. Indeed, if consumer confidence continues to improve then a holy grail of volume growth and trading up could feature.

The northern hemisphere harvest, therefore, should contribute to improving consumer sentiment and market conditions. How good it is to be writing from a more optimistic stance. Enjoy!

Dr Clive Black is head of research at Shore Capital Stockbrokers

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