Wheat and barley markets face differing challenges

A tight UK wheat market and a large barley surplus mean the markets for the UK’s two main grains are very different this season.

The average feed wheat-feed barley price gap stood at £13.50/t midweek.

“If we have a wet harvest we usually have a big pile of feed wheat to export, but that’s not the case this season,” said Jack Watts, lead analyst at AHDB for cereals and oilseeds.

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Speaking at the AHDB’s Grain Outlook conference in London this week, Mr Watts said wheat quality issues had added an extra layer this year. While breadmaking quality and consistency had been challenging, a stronger Group 1 and 2 area offset this.

The strong bread wheat area was a key source of resilience against a wet harvest and feed wheat overload, he said.

Good demand

“Demand for biofuels and strong feed demand for the poultry sector in particular means we don’t have to rush to the bottom of the global market.

“The influences on UK grain prices are more pronounced than in the global market and we have the currency effect as well.

“We have a substantial barley surplus to clear, the EU will be a key market and UK feed barley should find some good continental demand at current prices.”

A very much reduced Spanish crop would offer opportunities but we would have to compete with the French for this business.

“There is also potential [barley] demand from North Africa,” said Mr Watts.

On a wider scale, the market was even less certain, with the US becoming less dominant in global feed grain supply.

The world has seen five consecutive years of grain surplus, although annual supply and demand are relatively finely balanced.

With Russia set to be the world’s number one wheat exporter this season and smaller wheat crops in the US and Canada, the dynamics of global grain trading continued to evolve and the risks were increasing.

Moving trade

The established bread baskets of the world were seeing a greater share of trade move to post-Soviet Russia, while China dominates world wheat stocks, and headline global wheat stock figures no longer gave an indication of tradable availability, said Mr Watts.

Although confidence in Russia’s ability as a supplier was growing and the world was becoming more dependent on this low-cost producer and exporter, the Russian market was opaque and subject to policy change that could swiftly distort trade.

In both Russia and China, crop and market data was less reliable than in more established grain trading and holding countries, said Mr Watts.