Over recent months, global grain prices have felt some pressure from the large availability of competitive Black Sea grain and slower demand. As of the end of May, the market is expecting ample total grain supply, with record global wheat and maize production due (USDA). Global wheat supply and demand is due to remain finely balanced, but Northern Hemisphere crops are generally progressing well, with dryness exceptions in Spain and the US something to watch going forward.

The wheat balance in the EU is expected to be heavy for the new season. Ukrainian grain supply, and uncertainty regarding the Black Sea Initiative, continues to create some price volatility. However, as Ukrainian grain continues to move, overall the market is returning to focus on market fundamentals, after a year ruled by geopolitics.

In the UK, despite greater exports, due to high production in 2022 and declines in animal feed demand this season, wheat ending stocks are set to remain high, up over 30% on the year. 

We know we will be entering the new season with significant domestic opening stocks, so the bigger question mark is over new crop production prospects. In AHDB’s Early Bird Survey of plantings and planting intensions, the total UK wheat area for harvest 2023 was estimated to be up 1% on the year, at 1,821Kha. Using this intended area and Department for Environmental Food & Rural Affairs (Defra) five-year average, minimum and maximum yields, basic wheat production scenario projections for harvest 2023 can be made.

As of the week ending 30 May, 85% of the GB winter wheat crop was in good/excellent condition, ahead of 82% at the same point last season. Generally, crops are developing well and yield prospects are good. Septoria is the primary concern in terms of disease pressure. Though with recent dry weather, some areas could do with a little rain in the upcoming weeks. With this season’s good development so far in mind, it seems likely production will be nearer the five-year maximum production scenario (based on the highest average yield in the past five years) rather than the five-year average production scenario. As it stands currently, and based off the information we know, it's looking likely that production for 2023/24 could be in the realms of 15.5-16Mt (subject to final planted area and any weather events between now and harvest).

While it was reported that inflation in April fell to 8.7%, the first dip below 10% since August last year, according to the Office for National Statistics (ONS), food costs are still 19.1% higher than they were a year ago. The chief economist from the ONS also added that it could take six to 12 months before supermarket contracts expire, and we see any changes in food prices.

So far this season, data from UK flour millers suggests total flour production (excluding demand from the bioethanol and starch industries) has been slightly impacted by changing consumer habits and people eating out less. While usage by the brewing, malting, and distilling (BMD) sector is expected to be higher in 2022/23, there have been reports that some craft brewers have been struggling of late due to the cost-of-living crisis. However, there has been an anecdotal shift from craft beers to cheaper own brand products. Looking ahead, with food and drink prices unlikely to fall much in the next six months, and out-of-home consumption likely to be down due to the rise in cost of living, wheat demand in these sectors could see a squeeze.

For the bioethanol and starch industries, wheat usage for the remainder of this season was increased in the latest estimates due to its price competitiveness against maize. If wheat remains competitive against maize, we could see usage up further in the new season. The new season EU maize crop is currently pegged at 62.1Mt by Stratégie Grains, up 9.9Mt from this season’s estimate, but remains relatively low. According to anecdotal reports, cereal demand in the EU feed market for the 2023/24 season is expected to remain sluggish, which could see greater availability – something to watch out for.

Finally, animal feed production isn’t expected to rebound quickly heading into the new season. With pig and poultry feed being the main drivers of the decline in animal feed production, changes in demand will weigh largely on those sectors. According to AHDB’s pork market intelligence team, pig breeding numbers are seeing a slight climb at the moment. It’s thought higher pig prices and lower feed costs could encourage growth. However, it’s likely recovery will be slow, and we won’t see an immediate rebound at the beginning of next season. Energy costs and the impact of avian flu are also leading to slow poultry feed demand. Again, it’s unlikely the sector will fully recover in the next few months.

With heavy carry-in stocks and another relatively bumper crop expected for harvest 2023, it’s looking likely 2023/24 will be another season of high available supplies. However, with a recovery in animal feed demand expected to be slow and the cost-of-living crisis continuing, we could also see another season of relatively lacklustre demand. If the S&D situation does pan out like this, then it's likely the UK will have another hefty balance and exportable surplus.

It is worth noting this situation could change as there is still a good couple of months before harvest, and animal feed demand may make a faster recovery than expected. However, 2023/24 is initially looking to be another season with a heavy balance sheet.

In terms of what this means for price direction, it’s likely as we head towards harvest we will continue to see UK wheat prices pressured as the surplus grows and if demand remains weak.

Keep up to date with market movements with more information on the AHDB Cereals and Oilseeds markets.

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