UK wheat exports, which latest data showed are continuing to fall well below historical levels, could ironically get help from weak prices of corn – making European imports of the yellow grain vulnerable to import levies.
The UK, the European Union's third-ranked wheat producer, exported 137,389 tonnes of the grain in November –a drop of 33% year on year despite the country's stocks being boosted by, for the first time, two successive harvests above 16m tonnes.
The volume of shipments did outpace imports, which came in at 82,404 tonnes, largely from Canada and Germany, suppliers of hard milling wheat.
However, for 2015-16 as a whole, which began in July, the UK remains a net importer – a status it had rarely held until 2012, the nation's second wettest year on record, hurt quality and prompted both domestic and export buyers to seek new origins which many have continued to turn to.
The weakness of the UK's trade performance has left it facing huge stocks, implying pressure on prices, with the country having an exportable surplus of 3.55m tonnes according to government estimates – up from less than 1m tonnes two seasons ago.
The November data, which defied market talk of a busy month for UK wheat shipments, are "hardly supportive for pries in a year over overburdening world supplies", traders at a major European commodities house said.
However, the UK, whose wheat exports are typically of feed quality, could see its shipments helped, ironically, by the fall of prices of rival feed grain corn in Chicago.
The drop in Chicago futures to a succession of contract lows, combined with low shipping charges, drove the price of corn imports, as calculated by the European Commission, to E160.71 a tonne as of the end of last month, not far above the reference price of E157.03 a tonne below which EU import duties can kick in.
"Due to falling prices in the US, we are getting close to the point where import levies could be triggered for corn coming into the EU," the traders said.
"The problem for the shippers is that they can come into effect immediately, so a cargo sold levy-free could incur the levy by the time it arrives at an EU port. Shippers will have to build this risk into their prices."
The result is that EU feed manufacturers "may well switch to more feed wheat at the expense of maize as the two are now almost at the same price".
And this is "good news" for the UK, given that the country's shipments have been rendered competitive both by the pressure on prices from large supplies and the drop in the pound, which last week fell below $1.46 per £1 for the first time since 2010, making shipments more competitive.
"Apart from Argentinean, UK feed wheat is about the cheapest in the world at the moment," the traders said, adding that Argentine supplies "will probably not go to EU destinations due to concerns over pesticide residues".
They may also be "excluded from some South East Asian markets" because of high levels of DON, or vomitoxin, a toxic fungal residue encouraged by the rains which have plagued the Argentine harvest.
Furthermore, the Argentine wheat exports face the logistical problem of competing with volumes of corn and soybean shipments elevated by the reform of export taxes and quotas last month by the country's new government.
"Therefore, the UK is well placed to make some substantial export sales at the moment and there is already a good tonnage on the books for January."
The growing pressure for EU corn imports, after a dryness-depressed harvest, has seen imports reach 6.93m tonnes a little over half way through 2015-16, compared with 4.1m tonnes as of the same stage of last season.
EU corn imports have averaged 8.32m tonnes over the past five seasons, according to the European Commission.
For the UK itself, where corn has grown in popularity as a feed ingredient, imports in November rose to 259,232 tonnes, double those a month before.
UK corn imports in the first five months of the season are up 13.8% at 816,333 tonnes, the highest for the period on data going back to 1992-93.
By Mike Verdin