Wheat usage for bioethanol and starch steadies: Grain market daily

• UK feed wheat futures (Nov-24) ended yesterday’s session at £188.65/t, down £1.35/t from Tuesday’s close. The May-25 contract fell £1.45/t over the same period, closing at £200.05/t.
• Despite some support in US wheat markets, domestic wheat futures fell in line with European prices. Pressure from cheaper Black Sea supplies outweighed support from disappointing harvests in western Europe.
• Nov-24 Paris rapeseed futures closed yesterday at €457.00/t, up €4.25/t from Tuesday’s close. The May-25 contract gained €2.75/t over the same period, ending the session at €459.25/t.
• European rapeseed prices firmed yesterday, tracking US soyabeans up. Chicago soyabeans found support from technical trading, bouncing back after hitting another four-year low on Tuesday.

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Last week, the latest UK human and industrial cereal usage figures were released, providing a look at data for the entire 2023/24 marketing year. The ‘other flour’ category of the UK flour miller’s dataset is largely made up of output from the starch and bioethanol industries, meaning we can use this figure as an indication of wheat demand for the sector.

In the month of June (2024), ‘other flour’ produced was down 25% or 30.6 Kt on year earlier levels, at 90.0 Kt. For the full season (Jul-Jun), 1.068 Mt of ‘other flour’ was produced, down slightly (0.3%) when compared to the previous year. Despite a strong start to the year, consistent year-on-year declines in usage for each month of the second half of the season resulted in the decline.

As highlighted in AHDB’s May balance sheet, this decline in wheat usage by the sector was expected. It was anticipated that as a result of imported maize starting to price competitively against wheat, maize would feature more heavily in bioethanol and starch production than estimated earlier in the year.

The fact that imported maize priced competitively towards the end of last season is unsurprising given the global market conditions at the time. Towards the end of May, nearby Chicago maize futures fell to a discount of $75.95/t against nearby Chicago wheat futures.

Looking ahead

As we progress into the new season, the availability and price of imported maize will be key to wheat demand for this sector. The discount of maize against wheat on the global market has shrunk somewhat more recently, though remains relatively significant. Expectations of smaller domestic wheat supplies will also likely lead to more imported maize than in a ‘typical’ year.

Another factor to consider for wheat usage in this sector is regarding the recognition of biofuel produced from UK wheat towards the EU’s Renewable Energy Directive (RED II). The European Commission had previously announced that it would no longer recognise the national accreditation body which assesses assurance schemes, which in turn allow growers in the UK to supply wheat for biofuel production. While assurance schemes remain able to assure growers for RED II access currently, the European Commission is expected to announce how the recognition will be implemented by 01 January 2025. Find more analysis on this here.

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