Worst U.K. Wheat in Generation Means Hovis Uses More Grain
U.K. wheat millers will demand as much as 10 percent more grain this year to produce the same amount of flour, after farmers harvested the worst-quality crop in decades following the rainiest summer in a century.
The U.K. likely will be a net importer of wheat this year because wet weather cut grain weights in the domestic crop, meaning millers can extract less flour from every kernel, said Gary Sharkey, head of wheat procurement for Premier Foods Plc (PFD), the maker of Hovis bread and the country’s largest miller and baker. Weights have been the lowest since 1977, the Agriculture and Horticulture Development Board said Sept. 21.
“This is the worst harvest we’ve ever known,” Sharkey said in an interview Oct. 5 at the 52nd European Commodities Exchange in Edinburgh. “All flour millers have been importing wheat since early July from different origins, whether it be increased volumes from North America or other European wheat from France, Germany or some of the Baltic states.”
U.K. imports may be 2 million to 2.5 million metric tons this season, which could spur a backlog for port storage facilities that are already full with lower-grade feed grain, said Sharkey, whose company purchases about 1.2 million tons of wheat annually. Last year, the U.K. imported 908,000 tons and exported 2.545 million tons, according to the Kenilworth, England-based farmer levy AHDB’s final estimates for the season released Sept. 20.
Milling wheat prices on NYSE Liffe in Paris, the European benchmark, have climbed 33 percent this year to 258.75 euros ($335.62) a ton as dry weather hurt grain crops from Russia to the U.S. In London, feed wheat futures are up 30 percent to 198.65 pounds ($318.42) a ton.
The U.K. had 371 millimeters (14.6 inches) of rain in June, July and August, marking the wettest summer since 1912, according to the Met Office. Rainy conditions persisted in September for northern England, delaying the planting of winter crops.
This season, the U.K.’s harvest may be about 13.5 million tons, said Patrick Savage, the president of the Grain and Feed Trade Association, a London-based international industry group. That compares with production last season at 15.3 million tons, according to Department for Environment, Food and Rural Affairs, which will release estimates for this year’s crop on Oct. 15.
Most shipments from the U.K. this year will be feed-grade wheat, said Sarah Mann, the manager of British Cereal Exports, AHDB’s grains trade arm. The group is working to develop new customers for feed wheat in southern Europe and North Africa, and on maintaining relationships with longstanding milling-grade buyers that the U.K. probably won’t be able to supply this year, she said.
“We’re communicating to customers that we have got issues, but that it’s a bit of a blip we hope, and we’re still in the market,” Mann said in an interview in Edinburgh. “We don’t want them to think we’re inconsistent.”
Millers domestically will use 7 percent to 10 percent more wheat this year to produce the same amount of flour, said Premier Foods’ Sharkey. Last year, U.K. flour production totaled 4.8 million tons, according to Defra.
The average price of an 800 gram (1.8-pound) loaf of white, sliced bread in the U.K. was 1.22 pounds in August, up 1.7 percent from a year earlier while still below the all-time high of 1.28 pounds recorded in December 2008, according to the Office of National Statistics.
“We have to face up to higher wheat prices,” Sharkey said, without commenting specifically on bread costs. “If you look at the major producing nations, stocks are all dwindling. We would only need another problem next summer, drought in the U.S. or problems in Europe or the former Soviet Union.”