Larger UK wheat crop may drive exports and weigh on prices

The expectation of a larger domestic wheat crop this year could leave the UK having to compete more on global export markets, according to grain industry specialists.

A panel discussion at the Croptec Show in Birmingham on 15 January suggested the UK was likely to be at export parity later this year, which could put pressure on domestic grain prices.

Philip Bestwick, key account business manager at Openfield, said: “The UK is expecting a bigger harvest, nature permitting.

“And we will be looking at a situation where the UK will have to go to parity with exports, rather than the current climate for trading in parity with imports.”

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Mr Bestwick suggested this could mean a price adjustment of roughly £15/t at farmgate level in order for UK growers to be able to compete globally.

He advised growers to make sure to utilise Sustainable Farming Incentive (SFI) actions as an additional source of income.

“You need to maximise your SFI payments without cutting back on your production, because production and yield are the key to profitability,” said Mr Bestwick.

Rupert Somerscales, chief analyst at Lincolnshire-based independent consultancy Agri-Analytics, suggested the global price structure at the minute was relatively depressing for cereal farmers.

But he said the UK was not alone in this, with farmers in other countries such as the US and France also feeling the impact.

He added that there was ample global wheat supplies, with harvest finishing in the Southern Hemisphere and at near record levels in Argentina and Australia, while Northern Hemisphere farmers had successfully planted their winter crops.

Mr Somerscales said the trade was not looking at any dynamic change to the economic fundamentals, with futures prices for November close to spot prices, but geopolitics may provide some triggers.

He added that UK feed wheat was at roughly a £3/t premium over French milling wheat (Matif).

This was backed up by AHDB senior cereals analyst, Helen Plant, who said UK prices were generally neutral to slightly above global markets.

“If we get bigger crops, there is a risk that we [UK prices] could need to come down below global markets to stop the imports and encourage exports as well, potentially.”

She advised growers to stay in touch with merchants and traders, with changes potentially ahead, as they could still be some little selling opportunities.