UK feed wheat has recorded its first annual average price increase since 2012, despite a fourth consecutive year of record global grain output.
The monthly average nearby UK feed wheat price for January is currently £139.35/t, 22 per cent higher than the same month a year ago (£109.77/t in January 2016).
Although currency exchange rate has played a role, with sterling down 10 per cent against the euro and 18 per cent against the US dollar since the Brexit vote in June helping to support UK wheat prices, there are also supply and demand factors at play, explained Millie Askew, analyst, AHDB market intelligence.
In the first official Defra UK Supply and Demand Update, published in December, UK wheat availability is forecast at 18.916 million tonnes, 7 per cent less than the 2015/16 balance sheet. Due to a smaller crop in 2016 the wheat surplus available for either export or free stock is 1.85mt, 55 per cent lower than the 2015/16 season.
Also, from July to October the UK exported 860,000t of wheat, leaving 990,000t to either export in the remainder of the season (November-June) or carry over into 2017/18, according to the Defra figures.
“It’s also worth bearing in mind that since the latest release of the balance sheets, Defra has published its final UK production estimate, trimming it from the provisional estimate by 84,000t,” said Ms Askew.
Higher wheat quality in the 2016/17 season means that more wheat is hitting milling specs, reducing availability for the animal feed industry and consequently boosting feed wheat prices, said Isobel Robinson, analyst, AHDB market intelligence.
This situation partly accounts for narrow premiums of milling wheat over feed wheat at the moment as well as potential competition from milling wheat from e.g. Germany, she added.