Closure of Hovis Southampton has increased Milling Wheat Premiums
Hovis Southampton mill closed at the end of 2018 as significant reinvestment was needed to improve efficiencies. Naturally, quality wheat growers were nervous that the loss of a local mill would erode milling premiums, as milling wheat of all grades would need to be transported further distances. During this time, milling wheat from the South of England was placed as shown in this diagram.
At its peak, Hovis Southampton processed approximately 200,000 MT of milling wheat, most of which grown in the South of England. On closure, the UK didn’t lose this wheat demand for flour, instead simply transferring it to other locations including Tring, and ports such as Avonmouth, Shoreham and Poole, thereby servicing milling shipments to Scotland and Northern Ireland.
The adjoined graphic shows the transfer of demand to nearby locations for an increase in haulage rates of £1/MT. However, with the demand of these mills now increased to offset the lack of processing in Southampton, it was our view that local milling premiums had to increase due to this higher demand. Therefore, the mills were pulling from a larger catchment area which would cost more in road haulage, but the increase in milling premiums would more than offset this haulage and lead to sustained higher premiums as evidenced below.
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