Further strengthening of milling wheat premiums in January: Grain market daily

Wednesday, 21 February 2024

Market commentary

  • UK feed wheat futures (May-24) closed yesterday at £163.00/t, up £3.00/t from Monday’s close. New crop futures (Nov-24) closed at £181.30/t, up £2.80/t over the same period. This slight rebound in the market filtered through from US wheat markets yesterday, with rising uncertainty regarding the upcoming spring growing season in the Northern Hemisphere.
  • Competitive Black Sea exports combined with lacklustre export demand continue to cap any major gains in European and domestic wheat markets. However, tension over Ukrainian grain entering the EU and displacing polish grain has risen, with speculation regarding the introduction of quotas.
  • Paris rapeseed futures (May-24) closed yesterday at €426.25/t, down €0.50/t from Monday’s close. The Nov-24 contract ended yesterday’s session at €428.75/t, up €0.25/t.
  • Despite gains in US soyabean markets yesterday, old crop EU rapeseed prices moved down with the vegetable oil and crude oil markets. Nearby Brent crude oil futures were pressured 1.35% over yesterday’s session.
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Ella Roberts

Trainee Analyst

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Further strengthening of milling wheat premiums in January

The gap between the UK monthly average ex-farm spot price for bread and feed wheat widened in January to £66.40/t. This was up compared to £60.00/t in December, and up from £56.70/t a year earlier. It is also well above the five-year average of £27.10/t for the month of January.

Since then, milling premiums look to have remained firm though have eased slightly. On 15 February 2024 (latest data), UK spot ex-farm bread milling wheat was at a £61.80/t premium to feed wheat.

Graph of milling premiums this season 21 02 2024

As has been well reported, milling premiums remain historically firm due to limited availability but stable demand for domestic milling grade wheat. In AHDB’s latest UK supply and demand estimates, wheat usage for human and industrial consumption was forecast up 193 Kt (3%) on the year. While this increase is largely due to a strong start from the bioethanol and starch industries, relatively firm demand for wheat for milling also contributes to the yearly climb. 

Due to the tight domestic milling wheat outlook and therefore rising premiums, it is expected that a greater proportion of imported wheat will be used this season compared to last. AHDB currently estimates full season wheat imports at 1.725 Mt. According to the latest UK trade data, this season to date (Jul-Dec) wheat imports (incl. durum) have totalled 1.037 Mt. up 45.1% on the year, and up 3.2% on the five-year average. In the month of December, wheat imports totalled 254.1 Kt, the highest for this month since December 2020 following the poor harvest that year.

Where next?

Looking ahead, it’s likely that premiums will remain at high levels as long as imported wheat doesn’t become more competitive. With growing concerns over next year’s domestic crop due to unfavourable weather, import pace is expected to continue, especially towards the end of the season. With the majority of imported milling wheat coming from Germany and Canada, imported prices will of course depend on conditions and output in these countries, something to watch over the next few months. 

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Olivia Bonser

Senior Analyst (Cereals & Oilseeds)

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