WGIN Stakeholders’ Meeting , Rothamsted 30 November 2017 WGIN Stakeholders’ Meeting , Rothamsted 30 November 2017 Wheat Market Update Wheat Market Update Amandeep Kaur Purewal – Senior Analyst, AHDB Amandeep Kaur Purewal – Senior Analyst, AHDB James Webster – Analyst, AHDB James Webster – Analyst, AHDB
Overview Global perspectives Another year of plentiful supply, however, although all looks calm on the surface there are some key risks to be aware of. UK focus A contrasting domestic situation compared with the global picture. Why we can’t just label wheat as wheat and the challenges in store post ‐ Brexit
Global perspectives
A smaller world wheat crop, that has grown Global production Production in top exporting countries 755 Australia Canada EU Russia Ukraine United States 750 180 745 160 740 140 M tonnes M tonnes 735 120 100 730 80 725 60 720 40 715 20 710 0 Source: USDA
Nearby global wheat futures – UK prices move up UK feed wheat Chicago wheat Paris milling wheat 220 210 200 190 180 $/t 170 160 150 140 130 120 Source: AHDB
China is distorting perspectives on global wheat Wheat stocks-to-use ratio Global STU Global STU exclud. China 40% 35% Stocks-to use (STU) 30% 25% 20% 15% * Forecast Source: USDA
Top five wheat exporters (Mt) 2015/16 2016/17 (est.) 2017/18 (proj.) EU ‐ 28 33.8 USA 29.1 Russia 32.5 Russia 25.4 Russia 27.6 USA 26.7 Canada 21.9 EU ‐ 28 26.4 EU ‐ 28 26.0 USA 21.6 Australia 22.1 Canada 20.8 Ukraine 17.4 Canada 20.3 Australia 19.0 Source: IGC
Dryness in Australia hits wheat production estimates 1 June – 31 August September Source: Australian Government
EU wheat supply and demand – Euro strength impacts need monitoring Cumulative EU exports - soft wheat Mt 2015/16 2016/17 2017/18 est f’cast 2015/16 2016/17 2017/18 35 Opening stocks 12.2 14.7 10.1 30 Production 151.3 133.7 151.5 25 Imports 4.1 3.3 3.3 M tonnes 20 Domestic 120.2 116.6 116.3 demand H&I usage 58.5 58.3 58.8 15 Animal feed 55.8 52.4 51.8 10 Exports 32.8 25.0 27.0 inc. flour 5 Ending stocks 14.7 10.1 11.6 0 Jul Oct Jan Apr Source : EU Commission
Global maize supply and demand Production Demand Stocks-to-use 1,150 24% 22% 1,050 Production and demand, Mt 20% Stocks to use ratio 950 18% 850 16% 750 14% 650 12% 550 10% 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18* * Forecast Source: USDA
Wider price spread between global wheat and maize UK feed wheat Chicago wheat Paris milling wheat Chicago maize 220 210 200 190 180 $/t 170 160 150 140 130 120 Source: AHDB
Global wheat heading towards a precarious situation? Harvested wheat area Proportion of global wheat stocks held by top exporters US Canada EU Australia Russia 38% 30 36% 25 34% 20 32% Mha 30% 15 28% 10 26% 24% 5 Source: USDA
Global summary • Another year of comfortable supply but elements of risk ahead • Increasing importance of Russia • Global wheat stocks excluding China paint a different picture from the headlines • Wheat area in the main exporting countries in decline – higher reliance on yield means higher volatility.
Bringing the UK into focus James Webster
Above average production driven by yield UK wheat production 20 5 year rolling average 18 16 14 12 Mt 10 8 6 4 2 0 *Provisional Source: Defra
UK wheat S&D – increasingly important to domestic price formation Opening stocks Production Imports Closing stocks Exports Exports & free stocks Operating stock required 20 6 15 5 Mt 10 5 4 0 Mt 3 2 Dom. 1 Use 13/14 14/15 15/16 16/17* 17/18** (Mt) 0 Total 14.19 15.29 14.81 15.79 15.88 feed 6.37 7.08 7.09 7.31 7.40 *Estimate **2017/18 First official estimate Source: DEFRA, AHDB
Competition in the feed sector 235.00 Usage of wheat, barley and maize in GB animal feed 215.00 2017/18 Q1 195.00 175.00 2016/17 £/t 155.00 2015/16 135.00 115.00 2014/15 95.00 2013/14 75.00 0% 20% 40% 60% 80% 100% Feed Wheat Feed Barley Wheat Barley Whole and flaked maize
Cumulative net wheat trade – many moving parts UK wheat trade and cumulative net-trade (2013/14 - 2016/17) Imports Exports Cumulative net-trade 1,000,000 800,000 600,000 400,000 200,000 0 -200,000 -400,000 -600,000 -800,000 -1,000,000 Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun 2013/14 2014/15 2015/16 2016/17 2017/18 Source: HMR&C
Challenging bread quality and consistency, but offset by a stronger group 1 & 2 area Source: AHDB Cereal Quality Survey
Gross margins positive for winter wheat
Worrying trend for the group 3 area and expect a further fall off in quality. Rebound in 2018? % of GB wheat area sown to nabim group 3 varieties Average resistance of nabim wheat Groups to % of group 3 samples meeting 74Kg/hl, 220s, 11.5% Septoria tritici Group 1 Group 2 Group 3 Group 4 Soft Group 4 Hard 50 45 6 40 Disease resitance rating 5.8 (1-9, where 9 is best) 35 5.6 30 % 25 5.4 20 5.2 15 10 5 5 4.8 0 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2011 2012 2013 2014 2015 2016 2017 Source: AHDB Recommended List
Indication of lower area in 2018/19 GB wheat area 2,500 2,000 1,500 Kha 1,000 500 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
What about Brexit? 170 Import price subject to 160 reciprocal import tariff EU import tariffs For in quota volumes Outside TRQ system or applicable once quota limit is 150 Import price exhausted Low/ medium quality €12/t €95/t £ per tonne Domestic soft wheat 140 market price High quality soft wheat n/a Variable rate (14% protein, 12% 130 Export price moisture basis) Export price 120 subject to EU import tariff 110
Wheat isn’t just wheat A grade of wheat in surplus e.g. low grade bread A grade of wheat in deficit e.g. high protein bread wheat wheat 180 180 170 170 160 160 Domestic £ per tonne 150 £ per tonne market price 150 Domestic 140 market price 140 130 130 120 120 110 110
Challenges and opportunities for the UK wheat market Challenges Opportunities • Feed wheat facing a more competitive • With potential import substitution in market. wider agriculture, feed wheat demand could grow. • Agronomic challenges leading to higher spring plantings (in particular • Could spring wheat see a boost, from barley). the increased spring plantings? • Brexit • Niche markets present potential opportunities for export. • Opportunity to press forward with productivity, and have a competitive agri-food sector.
For more on Brexit… www.ahdb.org.uk/brexit
‘Inspiring our farmers, growers ‘Inspiring our farmers, growers and industry to succeed in a and industry to succeed in a rapidly changing world’ rapidly changing world’ www.ahdb.org.uk
Thank you amandeep.kaur.purewal@ahdb.org.uk 024 7647 8954 james.webster@ahdb.org.uk 024 7647 8844
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