UK wheat prices set to continue rising

Increased demand and a dip in availability have been tipped to bring further hikes in the cost of wheat.

Figures published by the Agriculture & Horticulture Development Board (AHDB), last week have revised available wheat supplies down by 141 kt from the December forecast. Industrial and human consumption is forecast to be 202 kt higher than predicted in December.

Use by millers (including the bioethanol and starch industry) was revised up from the previous forecast, reflecting strong demand for bioethanol following the re-opening of Ensus, one of the UK’s two large bioethanol plants. Wheat demand for animal feed was also revised up, due to higher-than-expected demand from the poultry industry.

In addition, production in the UK was down 13% year on year to 14.4 mt, following a decline in yields and a smaller planted area.

“As a result, the balance of availability and domestic consumption was revised down to 3.08 mt. The minimum operating stock requirement is estimated at 1.60 mt, resulting in a surplus of 1.48 mt”, said commodities analyst firm Mintec.

“However, with exports for the first half of the season at 1.09 mt, this reduced the surplus to 393 kt for the remainder of the season (due to end in June). Given the tight supply situation, we expect prices to continue to increase in the UK until at least the start of the new season.”

Writing in its latest Supply & Demand report, the AHDB said: “Domestic demand has pushed wheat prices to import parity in many areas, leaving them open to further volatility.”

AHDB last month announced that wheat use by the British wheat milling industry was up 10% year on year in the last half of 2016, and was the largest amount of wheat milled over this period since 1997.

The rise in use was driven by an increase in bioethanol usage and the low specific weight of the current UK crop, which would mean more wheat had to be processed to produce the same quantity of flour.

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