23 July 2017

Tight Wheat Supply Risks Leaving U.K. Reliant on Imports

The U.K., the European Union’s third-largest wheat grower, is entering the new season with the unusual prospect that it may be a net importer of the grain for a second straight year.

The crop that farmers are starting to collect is expected to remain little changed from the 2016 harvest, which was a three-year low. Smaller supply and bigger demand prompted U.K. imports in the 2016-17 season that ended last month to exceed exports for just the fourth time in the past two decades.

U.K. wheat imports probably exceeded exports by about 200,000 tons in the season that ended June 30, according to preliminary government data. That compares with average net exports of about 1.2 million tons in the previous 20 years.

The share of plantings matters because most of the U.K.’s feed wheat goes to animal food or local ethanol production, while the milling variety is used to make flour or favored for exports to markets such as North Africa. Milling varieties accountedfor 40 percent of the total area for 2017, the most in a decade, while the share of a type of feed grain fell to 48 percent, the least since 2009, the Agriculture & Horticulture Development Board said.

Exports at the start of this season are unlikely to be as large as a year earlier, when a weaker pound boosted the allure of British supplies, said Benjamin Bodart, a director at adviser CRM AgriCommodities in Newmarket, England. A rally in U.K. wheat prices has since reduced the grain’s competitiveness, and there are less supplies available to ship out.

“Stocks are already tight, so with an average crop it is unlikely we will see strong exports at the beginning of this campaign like last season,” Bodart said.

The first cuts of this year’s crop show good yields and high protein levels, though harvesting was slightly interrupted by widespread storms the other day, CRM said in an emailed report Wednesday.

While the quality and size of this year’s crop will become clearer as harvesting picks up, yield potential in some areas was probably hurt by June’s heat wave, which shortened the gap between flowering and harvesting, said Tom Bradshaw, a farmer in Colchester, England, who’s preparing to begin collecting his wheat later this week.

“It is difficult to predict the pace of exports and imports for the season as the yields and quality of the U.K. crop is still unknown,” said Millie Askew, an analyst at AHDB Market Intelligence. “The final picture will depend on a lot of factors other than just the domestic crop.”

Source: https://www.bloomberg.com