Significantly higher UK wheat balance, barley remains tight: Grain market daily

• UK feed wheat futures (May-23) closed at £261.00/t yesterday, down £5.10/t on Friday’s close. The Nov-23 contract lost £3.80/t over the same period, closing at £243.50/t.
• Markets were pressured by the large supply of cheap Russian wheat after the Black Sea grain corridor was renewed for 120 days. The tightening of covid rules in China also fuels concern over global demand moving forward.
• Paris rapeseed futures (May-23) closed yesterday at €603.75/t, down €6.25/t. This tracked losses in Canadian canola markets, and was also pressured by warm weather in October benefitting rapeseed development across much of Europe.

Earlier today, AHDB published the first official UK supply and demand estimates for wheat, barley, oats and maize for the 2022/23 season.

Heavy wheat balance leading to substantial exportable surplus

In 2022/23, total availability of wheat is forecast to rise 8% on the year to 18.735Mt, driven by a rise in production and carry-in stocks, outweighing a drop in imports. On the back of higher than average yields, UK wheat production for 2022 is provisionally forecast at 15.664Mt, 12% higher than 2021 levels. With a larger domestic crop this season full season imports are expected to be 39% lower on the year at 1.225Mt as they are not pricing competitively.

Total domestic consumption of wheat this season is forecast to increase by 2% on the year to 14.982Mt, with a rise in usage by the bioethanol and starch sectors expected to outweigh a drop in animal feed demand.

Bioethanol demand is expected to be up on last year’s levels, with wheat pricing favourably and both plants expected to be online. However, it is not anticipated that both plants will be operating at full capacity for the full season, partly due to longer maintenance periods. Demand by flour millers is forecast to come back ever so slightly, with the increase in the cost of living expected to impact flour used in premium and alternative products.

Demand for wheat in feed rations is expected to remain relatively stable on the year. Even though wheat is forecast to be included at a higher rate this year, the overall projected decline in animal feed production (driven by the monogastric sector) will cap any gains.

With supply expected to outweigh demand this season for wheat, the balance has increased by 40% on the year to 3.752Mt. Taking into account an operating stock requirement of 1.500Mt, this leaves a surplus available for export or free stock of 2.252Mt, over 1.5 times the volume in 2021/22.

There are a few key watch points which may affect UK wheat supply and demand as the season progresses:

• Demand by the bioethanol sector
• The full impact of Avian Flu on the poultry sector
• Spring weather conditions for turning out livestock

 Barley balance higher, but remains below five-year average

Despite decade low carry-in stocks, a rise in production has led to a 1% increase in available supplies this season at 8.226Mt. Barley production is provisionally estimated at 7.190Mt, up 3% on the year, driven by higher-than-average yields outweighing a drop in planted area.

In terms of demand, total domestic usage is expected to fall by 3% on the year to 6.138Mt. This is driven by a drop in animal feed demand outweighing a rise in usage by the brewing malting and distilling sectors (BMD). Despite the recession, BMD demand is expected to remain robust this season with new distilling capacity online in Scotland.

At the start of last season barley was being included heavily in rations, which was a lag from 2020/21 when there was ample supply. As there was a large wheat crop last season, wheat featured more heavily in rations from Oct-Dec ‘21 at the expense of barley. With plentiful supply of wheat in 2022/23, this trend is expected to continue.

With the rise in supply, outweighing a fall in demand, the barley balance has grown this season to 2.088Mt, 16% up year on year. However, this remains lower than the previous five-year average and is the third lowest in a decade.

Minimum maize imports

With maize usage expected to come back this season, imports are forecast to fall by 9% to 2.010Mt. From July to September 22, the UK imported 627Kt of maize, nearly double the volume imported during the same period last year. However, with plentiful supply of domestic grain, and maize not pricing competitively, imports will steady.

In terms of usage, bioethanol demand for maize is expected to be down on the year, but not drop out of inclusions completely. For animal feed, maize usage is expected to fall back to 1.150Mt, levels last seen in 2016/17.

Another large oat export year

Total availability of oats this season is forecast to fall by 3% to 1.253Mt but remains above the previous five-year average. Oat production is provisionally forecast at 1.081Mt, down 4% on the year, but remains relatively high in a historic context.

With animal feed demand expected to drop back slightly from last year, outweighing a rise in milling demand, domestic usage is forecast to fall back by 1% to 995Kt. This leaves a balance of 257Kt, which is down 8% from last season, but again remains high in a historical context. As such exports are forecast at 115Kt this season, 8Kt lower than last years record level.

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