Analyst insight: H&I usage continues to drop with a stable feed sector

The demand picture this season continues to be split into two halves. Animal feed demand for total cereals should hold relatively stable in comparison to last year, but human and industrial (H&I) demand is forecast to slide further to a 20-plus-year low.

Total H&I usage is estimated at 8.998 Mt, down 171 Kt from January’s estimate, with H&I usage across wheat (-35 Kt), barley (-120 Kt), and maize (-23 Kt) continuing to trend lower in March’s estimate, compared to January. The fall underscores continued pressure on consumer demand and changing habits across processed food and beverage markets.

These estimates were made before this morning’s government announcement of support for the Ensus bioethanol plant to resume production to bolster UK CO2 availability. CO2 is a byproduct of bioethanol production and has been disrupted by the Iran war. This could benefit UK H&I cereal demand, though when production resumes remains to be seen.

The most notable drop for the H&I usage is barley, which is down 120 Kt from January, now forecast at 1.464 Mt, the lowest on records going back to 1990/91. The demand for brewing, malting and distilling continues to be lacklustre.

This is from cost-of-living pressures, shifts in drinking habits and global sector issues, which is also impacting the export market of processed goods. BMD demand is expected to continue to be subdued as we head into the 2026/27 marketing year too.

Total animal feed usage of cereals is forecast at 13.304 Mt, a downgrade of 8 Kt from January’s estimate, and tracking sideways year-on-year. A decrease in wheat usage for animal feed (-71 Kt) and oats (-12 Kt), has been partly compensated for with increases to barley (+75 Kt) in comparison to January’s estimates.

Growth in poultry (including Integrated Poultry Units) and cattle compound feed continues to offset declines in pig feed. Good grass turnout conditions and lower milk prices are expected to temper cattle feed growth later in the season.

Animal feed demand is expected to stay strong over the next 12 months, underpinned by tight forage stocks and broadly supportive livestock margins.

But there is a risk that geo-political unrest might dampen some of this demand indirectly through pressuring livestock sectors through higher production expenses.

The wheat imports forecast remains the same as January at 2.20 Mt (down 28% year-on-year) due to strong domestic milling quality. This quality has led to levels of imported wheat in the grist returning to more typical levels.

There has been a slight cut to maize imports (-23 Kt) for March’s estimate, now forecast at 2.15 Mt (down 31% year-on-year), reflecting continued weakness in the BMD sector.

The year-on-year drop also reflects the suspension of bioethanol production since September.

The estimates for exports of barley and wheat remain unchanged at 450 Kt and 170 Kt. However,  there has been an increase (+15 Kt) to the oats exportable surplus, now forecast at 75 Kt.

The rise for oats reflects the stronger than expected HMRC trade data (up until Jan 2026), which put current oats export at 54.2 Kt, with large shipments to Spain and Turkey in December and January.

With total domestic consumption decreasing to 23.1 Mt, down 179 Kt from January, total cereals commercial end-season stocks are now forecast at 4.6 Mt, up 156 Kt from January.

Total cereal commercial end-of-season stocks are forecast to now increase by 3% year-on-year; in the January they were initially forecast to drop 1% year-on-year.

In comparison to January, commercial end-of-season stock forecasts are increased for wheat (+106 Kt) and barley (+45 Kt).

The March supply and demand update introduces only modest adjustments but reinforces a key theme: persistent weakness in the human and industrial sectors is the main pressure on UK cereal demand.

In contrast, the feed sector remains broadly steady, cushioning the overall decline. Many revisions from January’s estimates stem from the latest available usage data, showing slower-than-expected usage in flour production and by the BMD industries.

The UK market now looks set to end the 2025/26 season with slightly higher cereal stocks despite smaller maize imports.

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