London – December 01, 2020
The UK’s lowest wheat harvest in nearly 40 years will leave it with its “tightest balance” in the grain since at least the 1990s, despite a surge in imports, and a switch by livestock feeders to barley and maize.
The first official forecasts for UK grain balance sheets in 2020-21 showed, in a highly unusual move, that wheat stocks were poised to end the season below pipeline supplies, pegged at 1.50m tonnes.
The bureau estimated the UK’s surplus of wheat available for exports at a negative 166,000 tonnes.
“Despite wheat consumption forecast at a 13-year low, a substantial drop in availability has led to the tightest balance in over 20 years,” said the AG bureau, which with farm ministry Defra compiled the data.
The supply figures included a forecast for imports which, at 2.20m tonnes, would represent a more than doubling year on year, to the highest since 2012-13, when the UK suffered a moisture-devastated harvest.
They excluded any allowance for exports which, while down 86% year on year, reached 58,064 tonnes in the July-to-September period, latest customs data show.
The bureau acknowledged that its forecasts were open to revision, with the “current deficit is a result of a number of supply and demand factors which may change as the season progresses”.
These uncertainties include “the future of trade after the end of the UK’s transition period from leaving the European Union”.
A so-called “no deal” Brexit would see the UK impose, for example, a levy of £79 a tonne on wheat imports even from the EU and £74 per tonne on oats, although maize would remain tariff-free.
The wheat supply and demand forecasts factor in a domestic harvest which, at 10.13m tonnes, was the lowest in nearly 40 years, after an excessively wet autumn in 2019 hampered sowings of winter crop which comprises the vast majority of production.
Consumption of wheat for food and industrial use was seen falling by 5.6% year on year to 6.53m tonnes, “largely driven by a drop in usage by the bioethanol and starch sectors”, factoring in too the closure of Roquette’s plant-based ingredients plant in the east Midlands.
However, feed mills were seen leading the rationing process, with the amount of wheat used in rations in 2020-21 seen dropping by 10.8%, or more than 800,000 tonnes, to 6.63m tonnes,
“Due to the size of the domestic crop and the relative price of wheat this season, it is assumed that producers will yield more from selling the grain than feeding it to livestock on farm.”
Livestock farmers will instead switch largely to barley, for which feed use was seen soaring to 4.89m tonnes – 18.1% higher year on year, and nearly 1.1m tonnes above average levels.
“With the greater availability of barley compared with other feed grains and its subsequent price, a higher proportion of barley is expected to be used in all rations throughout the rest of the season,” and this trend would by driven by an “increase in the amount of barley fed on-farm”.
For maize, by contrast, livestock use was seen flat year on year at 1.35m tonnes, a reflection of the relatively high prices of the grain, which must be imported to the UK, after a weak harvest in Ukraine, and against a backdrop of soaring Chinese demand.
Indeed, maize use might have fallen were it not for the fact that, with the weak 2020 wheat harvest long heralded, “processors have bought quantities [of maize] forward until at least the new year,” the bureau said.
“Despite the recent rise in maize prices, it has been reported that some feed processors bought ahead earlier in the season when prices were more competitive.”
UK maize imports, which for the July-to-September period rose by 9.2% to 613,042 tonnes, “are expected to remain relatively strong during the second quarter of the season”.
In fact, UK maize prices ex-port have risen to about £195 per tonne, ahead of the £190 per tonne wheat is achieving ex-farm, which is in turn ahead of the £140 per tonne that barley is achieving, a UK grain trader told
The price differential means that livestock feeders are “maxed out on barley”, the trader said, although acknowledging that there were limits, particularly for the poultry industry, in the extent to which the grain can be substituted for wheat in rations.
“In broilers, once you get much above 15% barley, their bones get brittle, meaning that a lot of cuts have to be discarded in processing.”
The trader added that livestock feeders may face some more competition ahead from maltsters for malting barley, given increasing optimism over Covid-19 vaccines, and a potential recovery ahead in pub and hospitality trade.
“The announcement of the Covid-19 vaccines has added £5 a tonne to the malting barley premium.
