October 29, 2012

 

Britain's wheat imports to rise as crop quality fails

 

 

For the first time in a decade this year, Britain will be a net importer of wheat after a disease-ravaged harvest, much of which fails to meet the quality required for bread, turning customer to its traditional export rivals.

 

Traders and analysts said diseases fuelled by the wettest June since records began more than a century ago have left Britain, the EU's third biggest producer, with a lot of wheat which fails to meet minimum quality standards required by industries such as flour milling.

 

"The expectation is we will import quite a lot more wheat in the current year, probably about double the normal level, and that is because the quality of what is available in the UK is much lower than normal," said Alex Waugh, director general of the National Association of British and Irish Millers.

 

Britain normally imports about one million tonnes of high quality wheat for the milling sector while exporting up to 2.5 million tonnes of lower grade supplies, much of which is used in animal feed rations.

 

This season, imports look set to soar while there appears to be little interest from overseas buyers in Britain's often sub-standard supplies. Trader estimates for UK wheat imports this season range from about 1.8-2.5 million tonnes.

 

"We've got an incredibly bizarre quality that has been produced in the UK which is causing a lot of problems for a lot of people," one trader said.

 

Britain's farm ministry earlier this month estimated that UK wheat yields have fallen to a 23-year low, citing high levels of disease and a lack of sunshine in the key grain-fill period.

 

The UK crop was estimated at 13.31 million tonnes, down 13% from the prior season and well below the record 17.23 million harvested in 2008. The low level of yields has been compounded by poor quality with specific weights, a measure of the density of wheat, particularly low.

 

"There is simply not the same amount of flour in the UK wheat as there would be in a normal year. So that is part of the reason for having to look overseas," Waugh said.

 

Strategie Grains estimates that only about 10% of this year's British wheat crop is of milling standard against 27% in 2011. Germany, France, the US and Canada are the UK's traditional suppliers but this year the net has been cast wider to include Lithuania, Denmark, Sweden and Poland, traders said.

 

"Initially there has been a bit of a hunt around to find what works best but the main sources are going to be Germany, France, Canada and the US," Waugh said, noting they had all supplied the UK market for years, though not in the quantities that will be needed this season.

 

Traders in Germany said British buyers have been in their market seeking both standard and higher protein grades.

 

"We have seen some purchases in the last month or so of several shiploads of between 1,500-3,000 tonnes from German Baltic Sea ports," one German trader said. "These are relatively small volumes but are probably being used as test blendings to see how the flour turns out. Talk is they were successful and I think we will see more substantial business in coming months," the trader added.

 

The final level of imports will depend on the extent to which domestic consumers make use of the poor quality UK wheat.

 

Some British traders noted biofuels producer Ensus has been willing to buy wheat with specific weights as low as 60 kilogrammes per hectolitre, which probably only excludes the bottom 5% of the crop.

 

"Ensus appears to be a friendly home for low specific weight wheat," said Jack Watts, senior analyst with Britain's Home-Grown Cereals Authority.

 

Traders said bioethanol producers outside Britain may also take a look if the price was right.

 

"No one (overseas) is interested in low grade wheat at the moment because there is plenty of corn that is cheap but we've got nine or 10 months to go (until next year's harvest)," one British trader said.