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Highest UK wheat stocks since 2015/16: Grain Market Daily

Friday, 20 September 2019

Market Commentary

  • UK feed wheat futures rose to £136.00/t yesterday, up £0.65/t. Globally wheat futures continued to drift with Paris (+0.1%) and Chicago (-0.3%) recording minimal changes.
  • Optimism surrounding a potential Brexit deal helped buoy sterling again with sterling worth £1= €1.1341 at yesterday’s close, the highest since 21 May. UK prices will continue to be currency led and could come under pressure should the UK comes closer to reaching a deal.
  • Trade talks between the US and China have resumed, which combined with the largest net sales of US soyabeans since late march has offered support to Chicago soyabean futures.

Aidan Wright

Analyst

Highest UK wheat stocks since 2015/16

  • Wheat ending stocks at 1,911Kt, up 11% from the previous season.
  • Estimated 2019/20 UK wheat production and opening stocks the highest since 2015/16 at between 17.8Mt-18.1Mt.
  • Likely to see reduced animal feed demand for wheat and uncertainty remains around bioethanol usage.

UK 2018/19 ending stocks of wheat are up 11% from last season at 1,911Kt, the highest since 2015/16, according to the AHDB/Defra end-season balance sheet. Combined with current wheat production estimates of 15.9-16.2Mt*, this would result in UK wheat availability at the start of the season reaching between 17.8-18.1Mt in 2019/20.

*(ADAS harvest report yield figures 8.8-9.0t/ha, Planting and Variety survey wheat area 1.802Mha)

The end-season domestic consumption figures are notably lower year-on-year, at 14.7Mt (-933Kt from 2017/18). The reduced consumption is driven by lower animal feed demand (-111Kt) and a large drop in human and industrial (H&I) consumption (-816Kt). The fall in H&I consumption was due, in part, to the reduced demand for wheat for bioethanol, following the closure of Vivergo and the use of maize at the Ensus bioethanol plant.

Moving into the new season there are indications that demand for wheat could remain subdued again this season further increasing the UK’s exportable surplus.

Higher grass growth over the summer and plentiful silage stocks mean that we could see wheat demand for animal feed stay low. Furthermore, there is a question over how much bioethanol demand will be seen this season.

With uncertain demand the ability to export will be key this year, with potential tariff barriers in the event of a no-deal Brexit we could see UK prices ease further in order to compete. In the short term Brexit news will continue to drive currency fluctuations and lead domestic wheat prices over the coming weeks.


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