UK wheat exports started off 2016 with their best performance in four years, helped by the decline in sterling – and are expected by traders to remain strong until at least into next month.
The UK, the European Union’s third-ranked wheat producer, exported 309,640 tonnes of the grain in January – the highest monthly volume since December 2011, according to customs data.
With wheat imports falling to a near-two-year low of 82,319 tonnes, the UK was a net exporter of 227,322 tonnes of the grain in January, also the best performance since December 2011.
The improvement came as the pound weakened on international markets, depressed by uncertainty over the UK’s future as a member of the EU, on which the government last month announced a referendum.
The decline continued last month to take sterling below $1.39 for the first time in nearly seven years, and to its lowest against the euro since late 2014 – boosting the export competitiveness of UK wheat, which has fallen in price to near-six-year lows too.
The combination of currency and price weakness has given UK wheat supplies an edge in what is a difficult international market, marked by ample supplies in many major exporting countries, with the US, for example, expecting its weakest shipments this season in more than 40 years.
Wheat vs corn
In fact, it was UK shipments to European buyers which benefited most from the dynamics, with exports to the EU in January topping 276,000 tonnes, also for the first time in four years.
The total included 175,332 tonnes shipped to Spain, the EU’s main importer of feed grain, besides nearly 30,000 tonnes exported to France – the biggest monthly total on this route since late 2010.
Demand from the EU for feed wheat, which comprise the bulk of UK exports of the grain, have been boosted by some tightness in supplies of corn, following a drought-affected harvest in the bloc last year.
“Importing consumers across Europe – Ireland, Netherlands, Italy, Spain – have eyed the discount of feed wheat to corn and refocused their demand accordingly,” a major European commodities house said in a report last month.
‘Demand ahead too’
Indeed, it looks like the impact of the weakness in the pound and in UK wheat prices – which fell below £100 a tonne this month on London’s futures market for the first time since 2010 – has fuelled a further rash in orders from importers.
Traders are talking of volumes totalling 1m tonnes in the January-to-March period, a trader told Agrimoney.com.
“And there are bids at port for wheat and barley for April, which tells you that there is demand ahead too,” the trader said.
The pick-up means that after a poor start to the 2015-16 (July-to-June) marketing year for UK shipments – with net exports totalling just 82,000 tonnes over the first half of the season – merchants are making “pretty good progress” on volumes.
“However, they need too, if the UK is going to have any hope of instilling a bit of tightness into stocks before the next harvest,” the trader said.
Defra, the UK farm ministry, estimates that the UK has an exportable surplus of 3.96m tonnes for 2015-16, with stocks buoyed by the harvest topping 16m tonnes on two successive years for the first time.
(Source – http://www.agrimoney.com/news/falling-pound-propels-uk-wheat-exports-to-four-year-high–9417.html)