The UK could be faced with a relatively high proportion of lower quality wheat this year thanks to the elevated price of fertilizers, which is prompting some growers to scrimp on applications.
UK wheat production will swell by more than 700,000 tonnes to a three-year high of 14.70m tonnes, thanks to benign conditions for sowing and for crop development since, the US Department of Agriculture’s London bureau said.
However, the proportion of milling wheat in the mix may be depressed by the expense of fertilizers – whatever the harvest-time conditions, which are a particular lottery for UK growers, given the country’s relatively wet climate.
The comments come as farmers are finishing up on their third nitrogen applications on their milling wheat, viewed historically as crucial in supporting protein levels and boosting the chances of the crop making the grade.
Milling vs feed
“For those producers not under contract, the current relatively narrow price premium between milling and feed quality wheat is reported to be acting as a disincentive for some producers to apply all of the crop management tools at their disposal,” the bureau said.
“This could lead to an increased proportion of domestically produced feed quality wheat in the UK in 2022-23, other factors such as weather aside.
Feed wheat prices have outperformed milling wheat prices during this year’s rally, depressing the spot milling premium to £29 per tonne, as measured between Northampton bread wheat and East Anglian feed wheat, data from the AHDB bureau show.
At the close of last year, the milling premium stood at £55.50 a tonne.
The price of nitrogen, meanwhile, grew by 20% in 2022 up to April, and by some 180% year on year, AHDB data show.
‘Still make sense’
However, the USDA bureau’s assessment surprised commentators that GrainPriceNews spoke too, with one pointing out a far broader milling spread for 2022 crop, with a premium of potentially £60 a tonne.
AHDB data show a premium of £45.50 a tonne, Northampton milling wheat versus East Anglia feed wheat, while another trade contacted talked of a gap of “more than £40” a tonne for crop from the 2022 harvest.
“At these kinds of levels, the maths still make sense for farmers to put on nitrogen, despite the extra cost of buying it,” the trader said.
“But cashflow might be an issue. Some people might jut not have the cash to afford it at these prices.
“Some people might also be feeling poorer if they sold wheat early on at £200 a tonne, rather than the more than £300 a tonne you get now.”
‘A month out of date’
The trader also questioned the forecast for a 14.7m-tonne UK wheat crop this year, which while above the USDA’s official estimate of 14.5m tonnes remained “too low”.
“That forecast is a month out of date.” With recent rains easing April’s dryness, in contrast to the continued drought in France, “the thinking is now more like 15.2m-15.5m tonnes.
“I would be betting on 15.4m tonnes.”
The USDA bureau forecast growth in UK wheat consumption in 2022-23 too, of 600,000 tonnes to 15.93m tonnes, “driven by an increase in the bioethanol sector” as the UK’s adoption of E10 (10% ethanol blend in gasoline) bolsters demand for the biofuel.
“There are two biofuel plants in the UK, Ensus and Vivergo, which are both capable of processing over 1m tonnes of grain” a year.
UK wheat stocks will rebuild by nearly 300,000 tonnes to a three-year high of 1.94m tonnes, backed by continued wheat imports, pegged flat year on year at 2.25m tonnes.