Analyst Insight: UK wheat balance eases while barley remains tight

Market commentary

  • Following Tuesday’s news that Russia and Ukraine are striking a deal to allow exports of food products, global grain and oilseed markets lost ground yesterday.
  • Nov-22 UK feed wheat futures closed down again yesterday, losing £9.00/t from Tuesdays close to settle at £318.50/t.
  • Paris rapeseed futures (Nov-22) closed at €794.25/t on Wednesday, down €15.75/t on the day.

UK wheat balance eases while barley remains tight

This morning, AHDB released its latest UK cereal supply and demand estimates for 2021/22. Since the previous forecasts in March, changing trade dynamics and increased market volatility have impacted import and export forecasts for most commodities, as alluded to in yesterday’s Grain Market Daily. Changes to trade, in turn, has led to a shift in cereal usage by some sectors.

Table showing the latest 2020/21 UK S&D estimates

Below is an overview of the latest estimates and changes from previous forecasts for wheat, barley, maize, oats.

The barley balance remains tight in the latest estimates at 1.819Mt. For context, if this is realised this would be the smallest balance since 2007/08, when the UK had a c.5Mt crop. Compared with March, total domestic consumption is expected to be down slightly by 18Kt, at 6.270Mt. Animal feed usage is forecast to fall by 22Kt compared to March’s estimates, as other grains have become more price competitive. That said, the decline is halted somewhat as cereal inclusions as a whole have been higher than initially expected, with the slower than expected contraction in the national pig herd driving much of this.

Similar to wheat, UK barley was very competitive on the European market earlier in the spring, which has led to full season exports being revised up to 765Kt. Taking all of this into account, barley carry out stocks are estimated at 1.054Mt, marginally (+3Kt) up from March, but remain the tightest in nearly a decade.

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