Demand from the UK bioethanol and starch sectors remained strong in September, according to the latest UK consumption data. The production of “other flour” is mainly production from the starch and bioethanol sectors, so higher production of “other flour” indicates higher sector demand for wheat.
In September, 112.9 kt of “other flour” was produced, 34% more than September 2022 and the highest for the month since 2018-19. A total of 323,000 tonnes were produced in the season so far (July – September), an increase of 21% compared to the previous year.
The total volume of flour milled in the UK this season (July – September), including for starch and bioethanol production, is 585.6kt. This is an increase of 8% compared to the same period last season.
Higher demand from the bioethanol and starch sectors was an important part of the AHDB forecast that total wheat consumption in 2023/24 will be higher than in 2022/23. Together with a projected increase in use as animal feed, total domestic consumption of wheat in the 2023/24 season is estimated at 15.1 million t, an increase of 534 kt or 4% compared to the previous year. Please note that current forecasts assume that there will be a resolution to the requirements of the Renewable Energy Directive (RED II) following the UK’s withdrawal from the EU.
While demand is higher, production in the north of England is lower than last year. Wheat production in Yorkshire and the Humber and the North East of England is down 8% from 2022 and is at its lowest level since 2020.
Taken together, current higher demand and a smaller harvest than last year are supporting delivered feed wheat prices in the North East of England relative to forward prices. Feed wheat delivered to North Humberside on May 24 cost £212.50/t last Thursday (02 November). This was £14.00/t higher than the May 24 UK feed wheat futures price on the same day. A year ago (03 November 2022) feed wheat delivered to North Humberside on 23 May was £12.50/t higher than the UK feed wheat futures price of 23 May on the same day.
The region saw higher premiums for UK futures, albeit in seasons associated with higher import volumes. For example, two years ago (04 November 2021) the price of feed wheat delivered to North Humberside on 22 May was £15.00/t higher than the 22 May futures contract on the same day.
Could premiums increase?
This season, supply and demand for wheat in the UK appear to be well balanced. An estimated 734,000 tons of wheat are currently available for export or as free stocks. This is a 64% decrease compared to last season due to lower harvest and higher demand. Production of “Other Flour” is off to a strong start, with the starch and bioethanol sectors overall contributing to higher expected consumption. If demand exceeds current expectations, could we see prices move to attract imported grain?
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