Exports of UK grain needed to clear the decks

COLD, RAW, damp and windy conditions continued again this week and so far this winter we have had no real hard frost in arable areas.

Even with the mild conditions, total compound animal feed production was up 5% from July to September this year, compared to the same time last year. However, total cereals used in all animal feed demand, including on farm, for 2015/16 are forecast 2% down than in 2014/15 at 11.598m tonnes.

Beef and lamb production is forecast to increase by 2% each in 2016, but driven by higher carcase weights rather than extra animals. It is thought that mild weather at the beginning of the season, combined with good quality forage may contribute to a reduction in compound feed consumption by cattle and sheep for 2015/16.

On the other hand, pig and poultry compound feed consumption is forecast to increase in 2015/16. Wheat usage for this is forecast to increase by 2% compared to a year earlier, due to its price competitiveness with other feed grains.

Barley use is forecast 1% lower for this season, compared to last, at 3.264m tonnes, but is still higher than the five-year average. Currently, ex-farm feed barley is around £10 per tonne lower than feed wheat, meaning it is being included at relatively high levels.

Maize for animal feed is expected to decrease by 23% in 2015/16 due to more competitively priced grains. Even so, 73,500 tonnes of French maize was imported into the UK in October and, with lower use in animal feeds, stocks are on course for another jump.

The volume of oats used in animal feed production is expected to decline by 30%. This is a result of a good quality domestic oat crop recorded for harvest 2015 and it going for a growing human and industrial demand.

In comparison to the 30% reduction of oats in animal rations, the human and industrial usage of oats is expected to be 4% up, compared with last season, at 518,000 tonnes, as demand for oat products continues to grow. If realised, this would be a record high for oat milling demand.

Usage data for last July to September shows that oat millers used 6% more oats in comparison to the same period last season – the biggest volume of oats milled in the first quarter of any season on record.

As total cereal usage in animal feed is forecast to decline this season, the increase in total compound feed production can be attributed to a forecast increase in use of other raw materials. The inclusion of soya cake and meal in in feed rations for the first quarter of this season has increased by 13%, compared to the same time last season.

Similarly, the presence of field beans in retail animal feed in July to September increased by 79% year-on-year, reflecting a sharp increase in the area grown for harvest 2015. This trend is likely to continue, as more UK farmers are using pulses as break crops in their rotations, mainly to satisfy the ‘three-crop rule’.

But reduced demand for home-grown cereal in feed means strong exports are needed to prevent a large cereal surplus rolling into next season. This is not helped by forecasts suggesting that human and industrial demand for cereals in 2015/16 will decline by 7%, compared with last year.

The malting, brewing and distilling industries used 11% less barley and 8.7% less wheat in October, 2015, as a result of falling beer and whisky production.

Cereal markets have remained flat this past week with no fresh news to excite demand. The USDA updated global production figures this week had little significant change, other than an increase of 1.5m tonnes for EU crops.

In the UK, milling wheat premiums remain low due to a surplus of quality wheat from this year’s harvest. Also, French common wheat exports are 13% behind last year’s pace due to tougher competition in Europe and, during October, more than 1m tonnes of wheat was exported – half destined for outside the EU.

Progress with barley has been more positive, with exports exceeding last year’s level by more than 40%. Again, exports to non-EU countries are driving demand, with China purchasing 2m tonnes in the first four months, compared to 708,000 tonnes last year.

In contrast, China, as the biggest consumer of oilseeds, has restarted weekly sales of rapeseed oil by offering 64,000 tonnes. It sold 57,000 tonnes, which will make little dent in the 5m tonnes of government stocks, some of it stored since 2009.

Canada has surprised the market by releasing a canola production figure of 17.2m tonnes, compared to the market estimate of 15.5m tonnes, which will put pressure on European prices.