Amandeep Kaur Purewal Senior Analyst, AHDB James Webster Analyst, AHDB

Transcription

1 WGIN Stakeholders Meeting, Rothamsted 30 November 2017 Wheat Market Update Amandeep Kaur Purewal Senior Analyst, AHDB James Webster Analyst, AHDB

2 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

3 Global perspectives

4 A smaller world wheat crop, that has grown M tonnes Global production M tonnes Production in top exporting countries Australia Canada EU Russia Ukraine United States Source: USDA

5 Nearby global wheat futures UK prices move up UK feed wheat Chicago wheat Paris milling wheat $/t Source: AHDB

6 China is distorting perspectives on global wheat 40% Wheat stocks-to-use ratio Global STU Global STU exclud. China 35% Stocks-to use (STU) 30% 25% 20% 15% * Forecast Source: USDA

7 Top five wheat exporters (Mt) 2015/ /17 (est.) 2017/18 (proj.) EU USA 29.1 Russia 32.5 Russia 25.4 Russia 27.6 USA 26.7 Canada 21.9 EU EU USA 21.6 Australia 22.1 Canada 20.8 Ukraine 17.4 Canada 20.3 Australia 19.0 Source: IGC

8 Dryness in Australia hits wheat production estimates 1 June 31 August September Source: Australian Government

9 EU wheat supply and demand Euro strength impacts need monitoring Mt 2015/ /17 est 2017/18 f cast Opening stocks Cumulative EU exports - soft wheat 2015/ / /18 Production Imports Domestic demand H&I usage Animal feed Exports inc. flour Ending stocks M tonnes Jul Oct Jan Apr Source: EU Commission

10 Global maize supply and demand 1,150 Production Demand Stocks-to-use 24% Production and demand, Mt 1, % 20% 18% 16% 14% 12% Stocks to use ratio / / / / / / / /18* 10% * Forecast Source: USDA

11 Wider price spread between global wheat and maize UK feed wheat Chicago wheat Paris milling wheat Chicago maize $/t Source: AHDB

12 Global wheat heading towards a precarious situation? 30 Harvested wheat area US Canada EU Australia Russia 38% Proportion of global wheat stocks held by top exporters 25 36% 34% Mha % 30% 28% 10 26% 5 24% Source: USDA

13 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.

14 Bringing the UK into focus James Webster

15 Above average production driven by yield year rolling average UK wheat production Mt *Provisional Source: Defra

16 UK wheat S&D increasingly important to domestic price formation Mt Opening stocks Production Imports Closing stocks Exports & free stocks Exports Operating stock required 0 Mt 3 2 Dom. Use (Mt) 13/14 14/15 15/16 16/17* 17/18** Total feed *Estimate **2017/18 First official estimate Source: DEFRA, AHDB

17 Competition in the feed sector /18 Q1 Usage of wheat, barley and maize in GB animal feed /17 /t / / /14 Feed Wheat Feed Barley 0% 20% 40% 60% 80% 100% Wheat Barley Whole and flaked maize

18 Cumulative net wheat trade many moving parts 1,000, , , , , , , , ,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 UK wheat trade and cumulative net-trade (2013/ /17) Imports Exports Cumulative net-trade 2013/ / / / /18 Source: HMR&C

19 Challenging bread quality and consistency, but offset by a stronger group 1 & 2 area Source: AHDB Cereal Quality Survey

20 Gross margins positive for winter wheat

21 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 % of group 3 samples meeting 74Kg/hl, 220s, 11.5% Disease resitance rating (1-9, where 9 is best) Average resistance of nabim wheat Groups to Septoria tritici Group 1 Group 2 Group 3 Group 4 Soft Group 4 Hard / / / / / /18 Source: AHDB Recommended List

22 Indication of lower area in 2018/19 2,500 GB wheat area 2,000 1,500 Kha 1, *

23 What about Brexit? 170 EU import tariffs applicable For in quota volumes Outside TRQ system or once quota limit is exhausted Import price subject to reciprocal import tariff Import price Low/ medium quality soft wheat High quality soft wheat (14% protein, 12% moisture basis) 12/t n/a 95/t Variable rate per tonne Domestic market price Export price 120 Export price subject to EU import tariff 110

24 Wheat isn t just wheat 180 A grade of wheat in surplus e.g. low grade bread wheat 180 A grade of wheat in deficit e.g. high protein bread wheat per tonne Domestic market price per tonne Domestic market price

25 Challenges and opportunities for the UK wheat market Challenges Feed wheat facing a more competitive market. Agronomic challenges leading to higher spring plantings (in particular barley). Brexit Opportunities With potential import substitution in wider agriculture, feed wheat demand could grow. Could spring wheat see a boost, from the increased spring plantings? Niche markets present potential opportunities for export. Opportunity to press forward with productivity, and have a competitive agri-food sector.

26 For more on Brexit

27 Inspiring our farmers, growers and industry to succeed in a rapidly changing world

28 Thank you