Summary

Despite the challenges posed by Lockdown, Carr's Flour Mills has remained in full operation throughout, and again we are grateful to our suppliers and staff for operating as normally as is possible in these circumstances. We hope that all our customers who have been closed over this period will be able to recommence business in a safe way soon.

Weather conditions for the upcoming crop have continued to worsen over the last month, we’ll analyse the reasons why in this report, along with a first look at the new UK Global Tariff that was announced by the Government last week.

UK Wheat

With the beginning of harvest in the UK less than 10 weeks away, it still remains an exceptionally challenging growing season. The UK is forecast to produce its smallest wheat crop since 1981 (est. 9 - 9.5Mmt, compared to 16.3Mmt in 2019) after the wettest Autumn and Winter in the last 20 years which left land waterlogged and impossible to sow. Key production regions in the Midlands, Lincolnshire and Yorkshire saw some of the largest decreases in plantings.

Of the crops that did get sown there is considerable variability in condition ratings compared to last season as key spring fertiliser and pesticide applications were severely delayed or missed altogether. The difference between 2020 and 2019 crop ratings is significant, with only 31% of wheat rated as either good or excellent in 2020 compared to 83% in 2019. Whilst at the opposite end of the spectrum, 26% of crops are rated as poor or very poor for the new season in contrast to 6% we saw last year.

Since March, the UK has experienced its 2nd driest Spring (March to May) in 20 years whilst at the same time recording the highest solar radiation (sunshine) levels in nearly 7 decades. This has been compounded by mean temperatures for the March – May period being 11% above the recent 10-year average.

Wheat as a crop requires a good balance of sun and rain and the continued dearth of precipitation at such a key point in the growing season could hinder yields of a crop whose area is around 30 – 40% down. The overall result is very likely to be a further decline in forecast UK wheat production. Any rains that come now, will only help to halt further decline, there is little chance of yields being recovered at this stage. As we get closer to harvest attention will turn to potential quality of crops and their suitability for bread and biscuit making. After such a sustained period of dry weather the chances of rainfall increase significantly. Many will be hoping this happens sooner rather than later, occurring when crops are ready to be harvested and are negatively affected.

International News 

Very dry conditions persist in some important wheat areas as well as the UK: Central France, Northern Germany and parts of Ukraine. This crop is not written off yet, but with no great amount of rainfall in the current forecast, then yield potential is certainly being limited.

Brexit/Tariffs

On the 19th May, the UK Govt published the UKGT (UK Global Tariff) covering all imports of every product into the UK from countries that we do not have a Trade Agreement in place with by the end of this year. Wheat is included at a level of £79/mt, apart from “high quality” (Like Canadian Spring Wheat) which will continue at a zero tariff. This is hopefully subject to change, especially in a season with a potential need for 3-4 Mmt of imported wheat – most which would normally come from our near neighbours in Europe.

Market Pointers
Bearish factors 

Covid19 continues to reduce local & global demand

Oil markets remain weak – reduced demand for grains into Bioethanol production

Large global area planted with maize which could produce large crop if it gets favourable weather conditions crops from Harvest 2020 due to reduced plantings and yields

Bullish factors

Dry conditions in UK and much of Western EU wheat area – at a time when the crop needs a drink
 
UK will have significantly reduced crops from Harvest 2020 due to reduced plantings and yields 

Increased requirements for imported wheat

BREXIT and potential tariffs on imported wheat will increase logistics