Record UK yields and high global production are set to keep wheat prices low.
UK crop yields have hit a record high, according National Farmers’ Union figures, although a drop in planting area means total production will be roughly in line with last year. NFU survey results show a 6% year-on-year hike in yield from 8.6 to 9.1 tonnes a hectare. Taking into account a small drop in planted area, production is estimated at 16.7m tonnes for the 2015/16 crop versus 16.6m for last year’s 2014/15.
But the proportion of higher-quality wheat suitable for bread making is set to be higher than last year, according to flour milling industry body Nabim.
It believes about 30% of wheat will meet the Nabim Group 1 standard required for consistent bread making, versus about 15% of last year’s crop, which was very low in the required protein. And it expects the combined total of Group 1 and Group 2 flour – which may also be suitable for bread-making - to be about 50% of the crop versus around 30% in 2014/15.
The increase in yield had been driven by three key factors, said Nabim director general Alexander Waugh: good weather at the start of the year; new wheat varieties that offered greater yield; and less wheat planted as the second crop in a rotation, which typically has a lower yield than one planted as a first crop.
He added the quality of some wheat harvested after heavy rains in August was likely to be lower than that gathered earlier, but said it would “not be a disaster”.
Buyers will now be waiting to see what impact this year’s crop has on prices that are already down year on year, with the premium paid for a tonne of bread-quality flour currently around £20 versus £35 last autumn. Prices are also under downwards pressure as a result of good harvests in other parts of the northern hemisphere.
“Cereal prices are global and like most commodities are currently low. For example, we’ve already seen prices tumble over the past two years, similar to our friends in the dairy sector, and costs of production staying put,” warned NFU combinable crops board chairman Mike Hambly. “Many growers are facing the prospect that grain prices will fail to cover the cost of production.”
Commodity analysts Mintec said influence from the global market were more likely to drive prices in the next few months, rather than UK production.
“High production from other major producing countries is likely to keep the price of wheat low, causing profitability issues,” said a spokesman.
France, the EU’s largest producer and exporter, is reporting high quality and production levels after a poor crop last year.
“This will add to an already well-supplied market place,” added Mintec. “France will need to compete with Russia for export demand and this is likely to put further downwards pressure on prices, globally as well as in the EU and UK.”
Russia recently announced a reduction in export taxes in an effort to increase its share of the wheat market.