Are UK milling premiums to remain high? Grain market daily

• UK feed wheat futures (Nov-22) closed yesterday at £263.00/t, up £5.10/t on Friday’s close. The May-23 contract closed at £268.90/t, up £4.30/t over the same period.
• Speculation over an export deal in the black sea region remains, but UN chief claims there is a long way to go before peace talks.
• Paris rapeseed futures (Nov-22) gained €1.25/t over the weekend to close at €681.25/t yesterday.   

While wheat prices have been coming down over the past few weeks, from the peaks recorded when the conflict began in the black sea, UK milling wheat premiums have remained historically high.

In 2021/22, spot UK ex-farm bread milling wheat prices averaged a premium of £29.74/t over UK ex-farm feed wheat for the season. For comparison, in 2019/20 the premium of UK ex-farm bread milling wheat over feed, averaged £18.46/t. Looking at this season premiums are remaining strong. As at 14 July, UK ex-farm bread milling wheat was £47.90/t above UK feed wheat.

According to the results of the latest planting and variety survey, it is expected that the total UK wheat area for harvest 2022 will be 1% higher on the year at 1807Kha. 2022 is the first year that the planting and variety survey has covered the whole of the UK. It is estimated that 24%, or 437Kha of the total UK area has been planted to Group 1 milling wheat varieties for harvest 2022. In 2021, it was estimated that 29% (512Kha) of the total GB area was planted to Group 1 varieties. While the area planted to Group 1 varieties is down year on year, it is expected that 321Kha has been planted to Group 2 varieties in the UK this year compared with 246Kha in GB last year.

Input costs have risen considerably over the past year and it could be that farmers have chosen to change varieties as a way of improving margins. We are still a week or so away from the wheat harvest getting underway. While we can’t be certain what yields will actually be until the crop is in, the recent dry and hot conditions may have compromised yields slightly.

With a smaller area planted to high spec milling varieties and questions over yield potentials due to weather, milling wheat premiums are likely to stay supported for at least the short term. However, this will be very much dependent on the quality and quantity of the crop when the combines get rolling.

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