Cereals market outlook
Looking ahead, continued wet weather prolonging this autumn’s planting season means UK growers intend to plant 1.65 million hectares to wheat for harvest 2020, compared to 1.82 million for harvest 2019. This includes crops in the ground, winter crops still to be sown through December and January and intentions for spring plantings.
According to the Early Bird Survey, the winter barley area may also drop to 398,000 hectares, 12 per cent lower than the 452,000 hectares planted for harvesting in 2019.
But the unpredictable impacts of the weather over the coming weeks means AHDB will rerun the survey in the New Year to ensure it reflects the latest intentions of growers as the winter progresses and weather conditions change.
This year’s survey shows a swing towards spring cropping, with growers intending to plant 28 per cent more spring barley at 915,000 hectares, the highest area since 1988.
The oat area is expected to increase again for 2020 harvest to a total of 200,000 hectares of winter and spring oats, a 10 per cent increase on last year.
The 2019 harvest season and 2020 harvest are shaping up to be two of the most contrasting years UK arable markets may have seen.
For 2019, the focus is on exports, and a lot of them! For 2020, the market is likely to switch to a focus on imports as the crop size potentially dwindles amid struggles with crop planting this autumn.
In the first quarter of the 2019/20 season, wheat exports reached 414kt, more than five times the levels seen over the same time period of the previous season. Having a 16.2Mt wheat crop from harvest 2019 have definitely had an impact.
In “normal” times, we would say the UK is likely to see continued strong export volumes; however, the dual effects of a lingering Brexit no-deal threat and a farmer’s reluctance to let crops go out of the shed with nothing in the ground for next year may limit our wheat export potential.
For barley, we face the same Brexit risks. However, as growers move to even more spring barley planted for 2020 harvest, the current surplus needs to move out of the UK before we get another large crop next summer. Barley exports in the July-Sept period have reached 670kt with huge export volumes moved before the previous Oct-31st Brexit deadline.
In order for barley to stay competitive, export price competitiveness and a healthy discount to wheat is needed. Already for new-crop 2020 prices, barley is stretching its discount to wheat to £20/t and this will likely need to stay at these levels as we head into the New Year.
Cereals consumption trends
Many cereal-based products have struggled over the last year. Volume sales of bread are down and, despite an average price increase, spend is also down 1% over the last year. The number of traditional sandwiches eaten in the home has decreased over the past five years, including last year. We anticipate this trend continuing and for volumes to remain challenging. An area of growth for bread is within pizzas, which have seen continuous strong growth in value and volume.
We anticipate further volume challenges for traditional breakfast cereals but there are opportunities for on-the-go breakfast products and healthier variants of traditional lines.
Consumers allow themselves small treats as consumer confidence falls, which has led to an increase in snacking occasions. Biscuits have benefited from this trend and have seen spend and volume increases over the last year. Growth is particularly strong in everyday treat and chocolate biscuits.
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