Millers and manufacturers are paying a costly premium for British wheat, which has gone from being among the most competitive in the world to among the most expensive, according to AHDB.
UK feed wheat futures reached £146.75/t this week, up 38% from the same week last year and 6% higher than three months ago. This means UK feed wheat is currently more expensive than European milling wheat, says Helen Plant, senior analyst at AHDB Cereals and Oilseeds.
“On 6 February, Paris milling wheat futures equated to £145.26/t. This is £1.49/t less than the nearby price for UK feed wheat futures - an unusual relationship,” she adds. “A year ago, nearby Paris milling wheat futures were £14.21/t above UK feed wheat futures.”
In contrast, world prices have fallen, with Chicago milling wheat futures at $155.23/t this week, down 10% from last year.
“We’ve seen a continuation of the situation before Christmas, when UK wheat prices rose while world prices fell,” says Plant. “Part of that has been attributed to the weakness of sterling, but there has also been a contrast in crops.”
EU wheat production for 2016 is estimated to be down 10% from the previous year after poor weather hit major producers, particularly France. UK production is down 13% on 2015’s bumper crop at an estimated 14.4 million tonnes. In contrast, global production in 2016/17 is forecast at a record 758 million tonnes by the FAO, up 3% or 23 million tonnes from 2015/16. Higher demand for UK wheat has also pushed up prices, Plant says. The UK exported 987,000 tonnes of wheat in July to November, up 34% year on year, reflecting the “big devaluation in sterling” as well as carryover stocks. There has also been higher domestic demand for UK wheat from the milling, poultry and bioethanol industries.
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