The UK farming and environment ministry, Defra, will on Wednesday unveil fresh forecasts for UK cereals supply and demand in 2012-13, a season marred by a dismal harvest, with wheat yields at a 20-year low, and the lowest bushel weights on records.

The poor result has provoked ideas that the current Defra estimate of UK wheat imports of 2.0m tonnes, while a historically high figure, may be too low, after topping 1m tonnes in the first five months of the marketing year.

Import upgrade?

A major European commodities house “it looks as if the season [import] total will be above 2.5m tonnes”, a figure which would top the 2.3m tonnes that Saudi Arabia is expected to import in 2012-13, according to US Department of Agriculture forecasts.

It would come in just short of the 2.7m-tonne buy-ins forecast for Iran, although these countries, as structural importers, will not export as much wheat as the UK over the season.

To judge by historical precedent, which shows that UK imports in the July-to-November period an average of 44% of total volumes for the whole marketing year, buy-ins should hit 2.3m-2.4m tonnes over the whole season, said the HGCA, which assists Defra on its cereals estimates.

“However, we are very much not in a typical year, so it is hard to know whether this will hold this time,” HGCA senior analyst Charlotte Garbutt told Agrimoney.com.

“In a year like this, imports may not be linear,” she said.

‘No demand rationing’

The revisions come against a backdrop of apparently resilient demand, with wheat use by millers, starch and ethanol producers rising 9.8% to 2.72m tonnes in July-to-November period.

This figure has been boosted by the Ensus and VIvergo biofuel plants coming onstream, and the poor flour extraction rates the poor-quality wheat is offering mills, forcing them to use more.

Production of animal feedstuffs was, at 1.1m tonnes, 4.9% over the period than a year before.

“Data on usage in the first five months of the season does not yet show significant demand rationing,” the HGCA said.

Wheat vs maize

However, it does reveal a switch in usage in feed from wheat to barley, which is relatively plentiful, and maize (corn) being imported from France and the Ukraine, Ms Garbutt said.

The commodities house said: “New crop Ukrainian maize is already trading into Europe and it could be bought delivered to the UK at about£165 a tonne, far below current UK wheat prices for autumn delivery.

“What’s more, even old crop maize from the Black Sea looks cheap and we are getting to the stage when some feed manufacturers may take the step of switching to more maize, in the knowledge that they would benefit, not just for the rest of this season, but next season as well.”

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The poor quantity, and quality, of the UK wheat crop, coupled with demand spurred by the opening of bioethanol capacity, could see imports “rise as far as 2.5m tonnes, or higher”, Jonathan Lane, trading manager at merchant Gleadell said.

“Import amounts continue to rise as millers turn to imports to blend or replace UK supplies,” he said, adding that imports of 2.5m tonnes would be “a figure not seen for many years”, besides one which has constrained milling premiums despite the weak harvest.

It would also appear likely make the UK, unusually, a net wheat importer. UK wheat imports in 2011-12 came in at 867,000 tonnes, well below exports of 2.39m tonnes, customs data show.

‘Mills have been struggling’

The idea of significant imports was also flagged by UK grain traders at a major European commodities house, who highlighted talk over the trouble that mills were having generating flour from a poor quality domestic crop.

While lowering to 70 kilogrammes per hectolitre, from 76 kilogrammes per hectolitre, their hurdle rate for specific weight – a key quality metric – they will take for top grade wheat, mills “have been struggling” with the grain.

They have reportedly been “running flat out for 24 hours a day but still are unable to produce enough flour for their customers due to the very poor extraction rates”, the traders said.

With German milling wheat “available delivered into the northern mills at about the same price as full spec Group 1s, and with consistent quality and specific weights well over 76 kilogrammes per hectolitre, It’s no surprise that millers are turning to this better material”.

Imports from the US?

For Group 3 milling wheat, used in making biscuits, the dearth of supplies may even force millers to turn to US supplies, they said, echoing comments made by US broker Benson Quinn Commodities last month.

“The only alternative is US soft red winter wheat,” the type traded in Chicago, which is “less than £20 tonne above our Group 3 prices delivered into the northern mills”, the traders said.

“Again, with its better quality it may already be a viable option and we have to remember that once the decision is taken, it turns up in cargoes of 25,000 or 50,000 tonnes.”

‘High levels of disease’

The comments came as Defra, the UK farm ministry, in its first estimates for the 2012 harvests warned that “yields for all [major] crops have fallen between 2011 and 2012, with wheat and oilseed rape showing the greatest drops”, after the wettest summer in a century.

In wheat, “yields have been affected by the poor weather, which led to high levels of disease during spring and summer along with low sunlight levels during the grainfill period”.

The wheat yield of 6.7 tonnes per hectare was the “lowest it has been during the last 20 years”, with the harvest pegged at 13.3m tonnes, a 13% decline year on year.

The production figure is in line with a 13.25m-tonne estimate last week from the National Farmers Union, with Strategie Grains on Friday putting the crop at 13.4m tonnes, and the US Department of Agriculture on Thursday putting the crop at 14.0m tonnes.

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