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Rare sales to Asia, data doubts erode UK wheat mountain fears

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Knock-on effects from the collapse in shipping rates, and questions over the accuracy of official data, are raising hopes that the UK might end the season without a mountain of wheat, despite a slower-than-expected export pace.

The UK, the European Union's third biggest wheat producing country, exported 224,881 tonnes of wheat in December, customs data showed.

While the highest monthly figure in nearly three years, the performance was not enough to avoid the UK remaining a net importer for the July-to-December period, the first half of the 2014-15 marketing year.

Total exports for that period, at 938,155 tonnes, fell more than 20,000 tonnes short of imports.

While the UK is typically a net exporter of wheat, its shipments continue to feel some shockwaves from 2012, the UK's second wettest year on record, which hurt the quality of that year's harvest and, in hampering sowings, depressed the quantity of the 2013 crop.

'A lot of work to do'

The export performance so far this season - termed "disappointing" by one merchant that Agrimoney.com spoke to, leaving cumulative volumes well short of trade forecasts of at least 1m tonnes by the end of December – has confronted the UK with the prospect of large carryover stocks.

A bumper harvest last year, pegged at 16.32m tonnes, has left the UK with an exportable surplus estimated by the country's farm ministry, Defra, at 3.46m tonnes.

"That still leaves us with an awful lot of work to do on exports," a grain trader said.

However, the "job may not be quite so difficult", depending on how a review of UK data turns out, and if low freight rates can extend a boost of shipments to unusual importers which are now on the cards.

'Mountain a little lower'

Defra is reviewing its stocks estimates "to achieve consistent cereals balance sheet estimates", according to the HGCA crop bureau, flagging that the ministry's current estimate for carry-in wheat inventories for 2014-15 is some 380,000-400,000 tonnes above the level suggested by surveys of farmers and consumers.

Traders at a major European commodities house said: "There has been some concern, especially amongst the trade, that the carryover stock from last season had been overstated."

Initial readings suggest that "there's 400,000 tonnes less wheat to ship out of the UK before the end of the season than we thought.

"The export mountain the UK has to climb is a little lower now," if still posing "a major challenge".

Unusual buyers

However, as an extra fillip to UK export hopes, lower freight rates – evident in the decline in the Baltic Dry index to 554 points this week, matching the record low set in 1986 – have brought more distant importers in range, through diluting the advantage to trade of geographic proximity.

The UK is this month to being loading Panamax cargos – of more than 50,000 tonnes – of wheat to Thailand and Japan, Agrimoney.com has learned,

Thailand - a major chicken-producing country, for which feed wheat is preferred over corn as it does not colour the meat – has not taken exports of UK wheat on this scale since September 2010.

Japan, which imports some 6m tonnes of wheat a year, has not on records going back to 1992 bought UK supplies in more than marginal amounts.

"If we can remain competitive on exports to some of these more unusual destinations, UK wheat stocks at the end of the season might not look quite as large as you might think," the UK grain trader said.

Stock levels are closely watched as an indicator of likely price performance, with large inventories, compared with demand, implying that buyers do not need to pay up to secure supplies.

By Agrimoney.com

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