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UK wheat imports look like keeping on coming

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Will UK wheat imports maintain their heady pace?

Customs data showed the UK, normally a sizeable exporter of the grain, buying-in 256,067 tonnes of wheat in February to meet the void in supplies created by a disastrous, rain-hit harvest last year.

The purchases took the total imports in the first eight months of 2012-13 to 1.86m tonnes, twice the level bought in in the whole of last season.

By contrasts, exports so far have come in just below 550,000 tonnes so far, down 74% year on year.

In February, exports fell below 18,000 tonnes, the worst for the month on records going back 20 years.

Pound pounded

The latest purchases, again, largely of German milling wheat, lifted the UK's average monthly imports this season to 232,822 tonnes.

At that rate, full-season volumes would hit a historically high 2.8m tonnes.

But will they?

The depreciation in sterling, fuelled by the Moody's downgrade of UK sovereign debt, is one factor mitigating against a slowdown in imports.

A decline of some 5% against the euro over the last six months has helped render UK milling wheat some £20 a tonne cheaper than German bread varieties.

Furthermore, UK demand for feed wheat has taken a hit with the news, which Agrimoney.com revealed last week, of the fresh closure of the 100,000-tonnes a month Ensus wheat ethanol site in the north of England.

Wheat vs corn

However, that does not mean that buyers are ditching the habit of buying abroad.

In feed, supplies of a UK crop so poor much even failed to make compounders' usual standards still face fierce competition from imported corn.

For new crop at least, feed users can buy Ukraine corn, delivered, some £10 a tonne cheaper than feed, a UK merchant told Agrimoney.com.

"The question is whether livestock producers want it. Livestock don't like a change of diet, so if you are taking maize, you need to make the commitment long-term," the merchant said

Many are taking that step. UK corn imports of 178,676 tonnes in February took the total for 2012-13 so far to 1.1m tonnes – more than in the whole of last season.

Preference for German

Habit is playing a role in flour mills' desire for imported wheat too.

"Old crop German is now considerably dearer than UK Group 1's, but UK mills and bakeries are reluctant after all the quality issues this year to change the grist at this late stage," a major European commodities house said.

Indeed, with new crop values of German crop at a discount to the UK, mills "can consider the prospect of keeping the German wheat in the grist right through harvest and beyond".

'Question of consistency'

"It is a question of consistency," the UK trader told Agrimoney.com.

"UK milling wheat varies from county to county, farm to farm, load to load.

"Millers have got very skilled at dealing with that, but having been reminded of the consistent quality of foreign supplies, many would rather pay up than be bothered with the fuss.

"It makes it so much easier for them when they are trying to make their roll or cake fit the packaging. They do not want their Bakewell tart to sit too high in the silver foil, or get lost in it either."

Import parity

For soft milling wheat too, bakers have found imports attractive, testing US soft red winter wheat, and finding it can indeed meet specifications usually filled by UK Group 3 varieties.

Besides, the poor start to this year's crop means the UK looks like being a net importer in 2013-14 too.

The harvest looks almost certain on overall quantity to fall short of the 13m tonnes plus the UK consumes, even factoring in the mothballing of Ensus, even before taking account of an quality curve balls the harvest may bring.

Indeed, the market already looks to be pricing such an outcome in.

"The difference between new crop wheat priced at £180 a tonne and barley at £160 a tonne is that the first priced against import parity, and the second at export parity," the trader said.

By Agrimoney.com

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