February 8, 2013

UK grain millers were forced to turn to the US for purchases of soft wheat due to the extent of the squeeze on UK quality grain supplies from last year's dismaying harvest.

UK buyers have, after buying two container loads to test that US supplies are a suitable replacement for lost domestic supplies, purchased "a boat load", believed to be of 25,000 tonnes, of soft red winter wheat for March delivery, traders said.

While the UK typically imports large amounts of hard wheat a year, largely from Canada, to blend with domestic supplies and improve flour quality, the purchase of US soft wheat is believed to be the first in at least a generation.

One large European commodities house, saying that "at least one UK miller has now bought some soft red winter wheat from the US", said that its traders believed that the last time such imports were made "was well in excess of 20 years ago".

The trade, while relatively small in US terms, comes at a sensitive time for its wheat markets too, amid talk that the non-traditional buyers forecast to turn to America as supplies from other exporters dry up.

Talk of US exports to Brazil and Russia helped support wheat prices on Wednesday (Jan 30) even as values of other grains fell in Chicago, where soft red winter wheat is traded, although that resilience wore off in early deals on Thursday (Jan 31). More on US wheat shipments will be revealed later on Thursday, when the USDA unveils weekly export sales data.

The UK is typically an exporter of soft wheat, used in making biscuits and cakes, with the relevant Group three varieties accounting for more than 20% of domestic wheat sowings. However, last year's rain-damaged harvest meant that the proportion of Group three varieties meeting minimum quality specifications tumbled to 14%, from 49% in 2011, according to the HGCA crop bureau.

Market rumour suggests that the wheat is being imported to Tilbury docks, close to London, in a deal arrange by Frontier, the joint grain trading venture between Cargill and Associated British Foods, although the group declined to comment on the speculation.

The market talk also says that there is some of the load left to purchase, although most of has been taken by two leading milling groups.