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What is driving cereal exports?

The relatively low value of sterling against the euro and dollar combined with large stocks from last year’s bumper harvest have seen buoyant UK cereal exports in recent months, including some recent large shipments of feed wheat to Asia. Marianne Curtis reports

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UK barley exports highest for 19 years #clubhectare

UK wheat exports highest for five years #clubhectare

From July last year until the end of May (the latest month for which figures are available) 2,573,377 tonnes of UK wheat was exported – the highest level for five years. Barley exports for the same period stand at 1,889,746t, the highest since the 1996/7 season. Reports of large shipments in June are likely to further boost these figures.

 

The export data bucks the trend of the last decade, according to Millie Askew, AHDB analyst, market intelligence. “In the previous ten years, exports tailed off from April to June but not this year. From December onwards they soared.”

 

As well as currency volatility, continuing low interest rates and recent reports of a poor wheat harvest in France are supporting UK wheat exports. Citing data from FranceAgriMer Ms Askew says only 42 per cent of French wheat was rated good/very good in the week ending July 18 with the amount rated bad/very bad reaching 26 per cent, compared with 6 per cent at that point last year.

 

EU cereal export destinations 2015/16

EU countries are the main importers of UK wheat, accounting for 81 per cent of exports. Spain was the largest importer in the 2015/16 season by some margin followed by the Netherlands, Portugal, Eire and France.

Mostly feed wheat

 

Most of this was feed wheat but producing high quality milling wheats will be critical to export success for the 2016/17 season, with low quality French wheat likely to be competing with UK feed wheat, predicts Glencore Grain senior wheat trader, Nick Burchell.

 

“The French situation will be a game changer. France has a smaller crop of wheat – around 30 million tonnes – of lower quality than normal. The key to our market will be to get quality wheat this year. If it’s good quality, we can capture north African business. If it’s only feed wheat, we will be competing with France into other European or non-European countries.

 

“Countries like Spain have a bigger domestic crop of wheat and barley and are unlikely to import the volumes they did in crop ‘15.”

 

Non-EU cereal exports 2015/16

Outside the EU, the top five destinations for UK wheat in 2015/16 were Algeria, Tunisia, USA, Japan and Morocco. Algeria imported 175,510t to the end of May and Tunisia, 158,728t, with both countries key markets for milling wheat, says Mr Burchell.


“Tunisia looks for a specific weight of 78 with some allowance on test weight to 75. Moisture is a maximum of 14 with an allowance to 14.5. Hagberg is 250 and 11.5 per cent protein. It doesn’t have to be Group 1, it can be a blend of Group 1, Group 2 and occasionally Group 4.


“Algeria is similar to Tunisia but slightly higher on the more difficult varieties. More Group 1s and Group 2s. You won’t get away with any Group 4s.”


Morocco mainly imports Group 3 soft wheats, says Mr Burchell. “They generally get their wheat from France but this year it’s been a bit expensive.”

 

Severe drought

 

A severe drought in Morocco leading to an estimated 0.9 million tonne fall in wheat production since the March estimate may further boost UK export opportunities in Morocco, according to AHDB.


Japan and the US were significant non-EU importers of UK feed wheat in 2015/16 with Japan having high phytosanitary requirements which UK product was able to satisfy, according to Mr Burchell.


There have also recently been large shipments of UK feed wheat to Indonesia and Thailand as well as Glencore shipping 70,000t to Vietnam last month. “This year has been unusual in that the corn (maize) price from February onwards got expensive versus feed wheat; there was a decrease in the pound against the dollar,” says Mr Burchell.

 

Spain leading importer

 

EU countries accounted for 66 per cent of UK barley exports in 2015/16 with Spain, as for wheat, the leading importer followed by Portugal, the Netherlands, Belgium and Germany. While most of the exports would have been for feed, these countries also import malting barley.


Highland Grain CEO, Simon Barry, says: “Feed barley has been pretty good. A huge tonnage has been exported.”


Top non-EU destinations for barley in 2015/16 were Algeria, Tunisia, Saudi Arabia, Japan and Israel with most of it likely to have been feed. Saudi Arabia and South Korea require a maximum of 14% moisture and many other destinations, a maximum of 14.5 per cent, which can rule the UK out, says Mr Burchell.

Good potential for malting barley exports

The UK exports at least 300,000 tonnes of malting barley each year with Germany the largest importer but demand coming from as far away as Ukraine.

 

Openfield exports about 60 per cent of this total, says the company’s head of UK malting barley exports, Elved Phillips. “Last year was average to slightly down. We’ve had bigger years; we shipped more the year before.”

 

The company has worked to develop long-term end-user supply contracts with European maltsters. “Germany is the biggest importer. There are lots of maltings on the upper and lower Rhine and into eastern Germany. Next is the Iberian Peninsula and even though it’s coals to Newcastle we also supply Belgium and Holland, with some going into France, though not much.”

 

Openfield works with growers to ensure they are growing malting barley varieties in demand on the Continent. “There is always a demand for good quality malting barley,” says Mr Phillips. “The big maltsters and breweries are not tied into one supply. They don’t want all their eggs in one basket.”

 

He is optimistic that a deal is possible to maintain British malting barley exports when the UK leaves the EU. “There will still be a market into Europe whatever happens. We may have to sort out tariff arrangements – it could be a quota system that if you exceed it you pay a tariff.”

 

While it is too early to predict the quality of this year’s UK malting barley crop, Mr Phillips is hopeful it could be better than the winter barley harvest. “Spring barley was sown later than usual anyway. It is 2-3 weeks later than winter barley. It’s had a bit of sun on it. If we have more dry weather from here on in it will probably be ok.”

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