What is the relative value of New Crop Milling Wheat?

This week, Strategie Grains released a UK wheat production figure of 11.8 mln MT for Harvest 2020.  Compared to last year’s bumper crop of 16.2 mln MT, this 25% reduction in wheat availability will lead to a greater dependence on foreign wheat imports than usual.

Notwithstanding some Canadian high pro and French specialist wheats, the UK miller uses both UK Group 1’s and German A wheat interchangeably in its 13% protein flour grist.  Group 1’s and German A’s have similar gluten characteristics, and the miller will generally spread risk between these two origins – and indeed geographical areas within both Germany and the UK.

Although the wet weather has reduced autumn wheat plantings in France, Denmark and the UK, Germany remains relatively unscathed.  Area planted to wheat is normal and both crops and soils have over-wintered in good condition as they enter the spring.

Referring to the chart, new crop German wheat imports are already competitive into port-side flour mills in Scotland and Northern Ireland against domestic grown UK Group 1’s.  As currency strengthens from 1.15 towards 1.25, this allows import parity to increase to include reaching inland mills despite all the on-costs of freight, discharge and haulage associated with wheat imports.

In an export surplus scenario, the UK miller only needs to pay more than the export price to use UK wheat – the surplus being placed at a similar/lower value for export.  A common misconception of a smaller wheat crop is sustained higher prices, except this year the UK has a higher exposure to cheap imports from countries experiencing better crop production conditions.

Call our grain team today for more advice on the markets: 01243 784171