Success in efforts to bring two major biofuel plants onstream may have an undue impact on UK wheat values, in determining the level of supplies needed to be priced to compete on export markets.
Wheat futures for November touched £151.00 a tonne in London last week, the lowest for a spot contract in 19 months, in a slump attributed to growing harvest hopes leaving the country with hefty supplies to sell abroad.
Harvest estimates, some of which fell below 11.5m tonnes after a cold spring followed an unusually wet autumn and winter, have risen substantially after early harvest results showed far better yields than had been expected.
"The early signs of the 2013 wheat harvest remain positive, with good yields and quality reported," UK grain merchant Gleadell said, adding that the current area and yield figures now put the harvest "just below 12.5m tonnes".
A major European commodities house said: "There have been regular reports of 12-tonnes-per-hectare crops in the UK, although obviously these are by no means the norm."
Expectations for supplies have been further boosted by ideas that stocks left over from last year's harvest were far bigger than had been thought, and "close to 1m tonnes" above pipeline levels, the commodities house said.
"Add that stock to a harvest which looks rather better than was predicted, and the UK is suddenly into a situation of needing to export wheat," with a volume which "could be in the region of 1m tonnes".
This would not be sufficient to save the UK from, unusually, being a net wheat importer in 2013-14, with traders factoring in inbound shipments of some 1.5m tonnes.
The country typically imports some 300,000 tonnes of high quality Canadian wheat, for instance, and millers are believed to have made substantial forward purchases for 2013-14 in expectation of a poor UK crop.
"We have already this month had three boat loads arriving in Avonmouth alone," one trader told Agrimoney.com.
However, the improved supply picture could leave the UK needing, especially for feed wheat, to price for export markets, implying lower values, to get shot of supplies.
"Add the 1.5m tonnes of imports to a harvest of 12.5m tonnes and the extra stocks and you get to perhaps 14.5m tonnes," the trader said.
"That is more than the UK has historically consumed," with the annual average consumption between 2007-08 and 2011-12 at 13.6m tonnes.
"That's the maths the market has been working off."
Bioethanol wild card
However, that ignores the potential for demand from the Ensus ethanol plant, due to restart this autumn, and the nearby Vivergo site which has been expected to start in earnest around the same time.
"That's not a given. The history of UK ethanol plants is one of disappointment," a UK biofuels analyst said.
"But if they do what they are meant to, the UK could use far more wheat than had been thought," with the sites between them potentially swallowing up more than 200,000 tonnes a month.
"Even if they can are going at full blast by the start of next year, that's more than 1.0m tonnes used for the first half of 2014," potentially swallowing up all the surplus supplies, and more.
UK wheat consumption in 2012-13 was pegged at more than 14.5m tonnes, a figure reflecting in part higher feed needs, thanks to the cold spring, but also some months of Ensus operation.
Margin for error
Already, investors appear to be allowing some margin for error from the consensus maths, with cash prices remaining above the £145-150-a-tonne levels needed to compete on export markets.
"That suggests wheat prices have £4, £5, £6 a tonne further down to go," the trader said.
The commodities house said: "We still have some way to go before that export competitiveness is reached.
"We need to come down at least another £5 a tonne against Paris futures, and even that may not be enough to actually find a buyer of UK feed wheat abroad."
As to whether that reduction to export parity is ever realised may be down to ethanol markets, and the ability, and willingness, of Ensus and Vivergo to exploit what margins they provide.