The latest AHDB Grain Market Report (19th October) showed UK feed wheat futures (Nov-23) gained during the week ending at £191.30/t. The Nov-24 contract closed at £202.40/t, up £3.40/t over the same period.
Domestic feed wheat futures followed gains in European wheat markets. This was largely due to a weakening euro and British pound, making wheat more competitive on the global market. Some support from bargain buying on the US wheat market also filtered through.
Earlier in the week the October cereal supply and demand estimates were published. It predicts a tighter wheat balance than the 2022/23 season but not for barley.
For wheat, the biggest increase is anticipated across the human and industrial sector, primarily through bioethanol and starch requirements. Both bioethanol plants are expected to remain operational in 2023/24. AHDB’s current estimates also assume the resolution to the renewable energy directive (RED II) requirements following the UK’s exit from the EU.
The feed wheat sector is also expected to recover by 3% to 7.119 Mt. Total animal feed production by GB compounders and UK Integrated Poultry Units is expected to remain fairly static. However, the cereal inclusion and the proportion of wheat used in comparison to other cereals are both expected to rise due to wheat’s relative price. As it stands, although input costs are expected to fall for livestock and poultry producers, a significant rebound in feed production is unlikely. However, this will be something to watch over the next few months.
Human and industrial barley usage is also expected to be up estimated to reach 1.991 Mt this season. However, total domestic consumption of barley is estimated down 120 Kt on the year, being offset by a 3% decline in barley usage for animal feed.
This is due to wheat and maize being expected to price more competitively this season resulting in a slide of barley inclusions in rations. The cost of living crisis is also expected to push brewing demand lower but the distilling sector will remain robust due to increased capacity coming online last season.
Ukraine rapeseed exports add to the pressure
Since 2019/20, the UK has been a net importer of oilseed rape (OSR), with imports ramping up as production has gradually reduced. For this marketing year, the UK is provisionally estimated to have produced 1.2 Mt of OSR, down 154 Kt from 2022, with yields impacted by both weather and pest pressure.
This means that for 2023/24 significant imports of rapeseed are expected to continue,
The discount to nearby Paris rapeseed has increased At the start of the marketing year (spot +1, into Erith) the discount stood at £3.16/t. On Friday 13th October, spot domestic rapeseed was quoted at £354.50/t, a £13.20/t discount to Nov-23 Paris rapeseed futures, which closed at £367.70/t. Further to that, August Paris rapeseed futures expired at a large discount to the respective November contract.
Causing this pressure on rapeseed is the wider pressure in the oilseed complex, from a large South American soyabean crop expected in 2024. A large amount of Ukrainian rapeseed is continuing the element of short-term pressure to nearby prices.
Currently, the continental rapeseed market is being supplied by large amounts of Ukrainian rapeseed. As of 11 October, 1.8 Mt of rapeseed has been exported from Ukraine for 2023/24. Throughout the month of August, Ukraine alone exported 711 Kt of rapeseed, with the potential to export close to 1.6 Mt more this season (UkrAgroConsult).
This volume of Ukrainian rapeseed is why nearby physical domestic rapeseed prices are discounted in comparison to the nearby Paris rapeseed futures values, and this trend could be set to continue as supplies are scheduled to continue leaving Ukraine.