UK ex-farm milling oat prices reach 19-month high: Grain market daily

• UK feed wheat futures (May-24) closed at £175.95/t yesterday, down £1.55/t from Tuesday’s close. The Nov-24 contract fell £1.75/t over the same period, ending the session at £193.25/t.
• Domestic wheat futures followed global price movement down yesterday on the back of weak global demand and falling Russian export prices. On Monday, the price of 12.5% protein Russian wheat scheduled for FOB delivery in March was quoted at $235/t, down $3 from the week prior (LSEG).
• Paris rapeseed futures (May-24) gained €4.00/t yesterday, ending the session at €428.25/t. The Nov-24 contract closed at €428.00/t, up €5.50/t over the same period.
• Paris rapeseed futures followed the US soyabean market up yesterday on the back of a technical rebound. However, gains were limited by ongoing concerns over Chinese demand (LSEG).

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In the latest ex-farm Corn Returns data updated this week, the UK average ex-farm milling oat price reached a 19-month high in January at £252.20/t, up 5.8% from December’s average and up 14.4% from the same month last year. The premium of milling oats over feed oats for January reached £76.70/t, the highest recorded in at least 10 years.

It’s worth noting that the milling market, particularly in England, is heavily geared towards contracted supplies. These contracts will have been agreed 12 to 18 months ago, in line with wheat futures markets. As such, the spot ex-farm prices do not reflect the prices paid for all oats.

The discount of feed oats to feed wheat is also shrinking, and there is now a firm premium over feed barley.  So, why are prices climbing? And what can we expect moving forward?

In AHDB’s latest UK supply and demand estimates published last week, total availability of oats for the 2023/24 season was estimated at 995 Kt, down 16% on the year, on the back of reduced opening stocks and a smaller crop. On the other hand, human and industrial consumption of oats was forecast up 3% on the year, to 507 Kt. Despite reports of sluggish global demand for oat products, there are expectations of increased hulling losses from this season’s domestic crop, as well as increased capacity. This yearly uptick in demand, combined with reduced availability is likely the reason for the rise in milling oat prices, with the extent of the extra capacity continuing to be assessed throughout the season remainder.

In terms of feed, in last week’s cereals S&D estimates, usage of oats in animal feed was forecast down 21% on the year, at 278 Kt. With animal feed demand overall expected to remain subdued on the year, and the relative price of feed oats to other feed grains remaining high, it’s perhaps unsurprising that usage is expected to be minimal.

As well as reduced availability, another factor influencing high prices is a firm export campaign, with total exports this season currently forecast at 100 Kt, largely due to some demand on the continent from shortfalls in Scandinavian oat crops. This season to date (Jul-Nov), UK trade data shows oat exports totalled 57.8 Kt. The EU commission have also reported that up to 29 January, the EU had imported 76.2 Kt of UK origin oats. While these figures are down on the year, given the smaller crop and minimal cuts to domestic consumption, this pace of exports is estimated to leave 2023/24 oat ending stocks at the lowest level since 2012/13.

Where next?

For the remainder of the season, low availability and an uptick in milling demand in particular will likely keep milling prices elevated in at least the short term. While feed oats will also likely stay firm relative to other feed grains, the extent of this support will depend largely on ongoing export demand from the EU.

Heading into next season, the size of next year’s domestic crop remains a watchpoint. In AHDB’s Early Bird Survey, the UK oat area for 2024 was estimated up 8% on the year, with a climb in spring oat area outweighing a fall in winter area. However, given the poor winter drilling conditions, it could be that we see an even larger climb in spring oat area (subject to seed availability). A considerable increase in this area could weigh on prices longer-term, though the extent of increased capacity will also remain a key factor.         

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