Agribusiness News May 2024 – Cereals and Oilseeds

UK Supply & Demand v 2024 progress

March 2024 UK Cereal Supply and Demand Estimates (AHDB) show well above average end of season stocks for wheat and barley. Despite 2023’s production being down 10% and 6% respectively, imports are up over 40% for both crops and exports down considerably (83% and 36% respectively). Reduced availability of oats, combined with average exports, leads to the smallest ending stocks of oats forecast since 2011/12. The impact of the UK’s second wettest August through February since records began is clearly shown in the latest crop condition report (Fig 1). Information collected up to the end of March shows just 33% of UK winter wheat, 38% of winter barley and 37% of winter oats in a good or excellent condition and similarly, less than a third of all oilseed rape. These ratings are sharply lower than last year and even March 2020.

Fig 1: Winter cereal condition, Feb 2024. Source: AHDB

Similarly, many European crops have been continually impacted by unfavourable wet conditions across the key production regions, with reports last week that the state of French soft wheat is the poorest since 2020; 61% of crops are rated good or excellent, down from 97% last season. The spring barley area remains uncertain, and despite an increase expected due to a lack of winter cropping, current weather leaves doubts over area existing.

Spring barley planting here in Scotland is progressing variably from region to region. Surface drying belies the wetter conditions beneath, and creating sufficient tilth for good seed coverage is proving troublesome with decisions as to whether to roll seedbeds very much dependant on soil type. Reports of having to re-drill earlier sown barleys, lost to surface capping, are also concerning.

For the UK an estimate of breadmaking wheat production for 2024 based off the forecasted area and yields from previous years indicate the upcoming harvest could be the smallest in over ten years and down almost 40% compared to 2023 (Fig 2). The spread between breadmaking wheat and feed wheat futures, currently around £80/t in the first quarter of 2024, could push higher still exacerbated by the decline in popularity of Group 1 varieties.

Fig 2: UK wheat production. Source: UK Flour Millers

The UK feed wheat futures have risen considerably over the past few weeks to regain value lost since January, closing 26th April at £183.00/t (May-24). The Nov-24 contract gained over the same period too, ending at £208.10/t which means that the price premium between May and November (old and new crop) has moved from parity 6 months ago to £25/t. The recent bullish market temperament comes from dry conditions reported both in Russia and US states coupled with ongoing Black Sea tensions prompting investment funds to cover short positions.

Following a strong pace over the autumn/winter period for UK oat exports, movements appear to have slowed slightly. According to HMRC, imports of oats this season to date (Jul-Feb) totalled 94.2 Kt. This sits 48% above the five-year average (63.8 Kt) for this period, but 27% below the same point last season (128.6 Kt). Exports to the EU totalled 86.2 Kt this season so far (Jul – Feb). The main destinations for oat exports were Belgium (37.8 Kt), Spain (19.8 Kt) and the Netherlands (15.4 Kt).

Lower supplies of rapeseed are expected in Europe for harvest 2024 (down 8%), which is putting greater reliance on Ukrainian rapeseed supplies this summer (although anticipated down 9%), and on Australian rapeseed supplies at the end of 2024 coming to the market. UK planted area is estimated now to be down 37% this year. Prices will also be helped if the rumours are true of the EU applying 50% import tax on Russian oilseeds and products.

Mark Bowsher-Gibbs, mark.bowsher-gibbs@sac.co.uk 07385 399 513

Indicative grain prices week ending 27/04/2024 (Source: SAC//trade/AHDB)