Bioethanol and starch demand holding firm: Grain market daily

• UK feed wheat futures (May-24) closed at £195.35/t yesterday, down £0.85/t from Friday’s close. The Nov-24 contract was up £0.15/t over the same period, ending the session at £207.80/t.
• Domestic old crop wheat futures followed global markets down yesterday after concerns that the string of US wheat exports to China purchased last week will not continue. However, losses were capped by a rise in Russian wheat export prices as difficult weather conditions at the country’s ports hinder shipments (Refinitiv).
• Paris rapeseed futures (May-24) gained €4.25/t yesterday, ending the session at €448.50/t. The Nov-24 contract closed at €453.50/t, up €2.75 over the same period.
• Paris rapeseed futures followed the wider oilseeds complex up yesterday. Concerns over Brazilian weather continues to drive global soyabean markets. Yesterday, AgRural reported that Brazil’s 2023/24 soyabean plantings were 91% complete as at last Thursday, up 6 percentage points on the previous week, but behind last year at 95%.

The latest UK human and industrial cereal usage figures show that this season to date (July-October), demand from the bioethanol and starch industries has remained strong. The ‘other flour’ category in the data is largely made up of output from the starch and ethanol industries, meaning we can use this figure as an indication of wheat demand for the sector.

In October, 112 Kt of ‘other flour’ was produced, relatively in line with September (when 112.9 Kt was produced), and up 61% or 42.2 Kt from the same month last year. This season to date, 435.3 Kt of ‘other flour’ has been produced, up 29% or 97.8 Kt from the same period last year. It is also the highest level produced for this period since 2018/19.

In the latest UK supply and demand estimates, human and industrial wheat consumption is forecast to increase by 328 Kt on the year, to 7.664 Mt in the 2023/24 season. This increase is largely down to the bioethanol and starch industries, with usage expected to remain firm for the rest of the season. It is assumed in these estimates that both UK bioethanol plants will be operational this season. A positive resolution to the renewable energy directive (RED II) requirements following the UK’s exit from the EU is also assumed. However, it is worth noting that should we see any changes to the RED II status of domestically produced grain, the UK wheat balance would change significantly through the rest of the season.

What does this mean for domestic feed wheat prices?

Firm wheat usage by the sector has been reflected in strong premiums in the North East of England over the past few months. On Thursday (7 Dec), feed wheat delivered into North Humberside for January delivery was quoted at £203.50/t. This was at a £16.00/t premium to feed wheat delivered into East Anglia for the same month. For comparison, at the beginning of May 2023, feed wheat delivered into North Humberside for spot delivery was quoted at £197.00/t, at a £5.50/t premium over feed wheat delivered into East Anglia for the same month.

Due to increased usage in both human and industrial consumption and animal feed, as well as reduced availability this season, supply and demand of UK wheat looks finely balanced this season. At the moment, surplus wheat available for either export or free stock is estimated at 947 Kt, down 54% on the year. As a result, looking ahead to the rest of the season, if demand in the bioethanol and starch sector is even firmer than expected, we could see strong premiums sustained or increased imports of wheat should it price competitively. If demand stays as expected, premiums could remain at the current high level for at least the short-mid-term.

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