Why are our milling premiums under pressure?

For several weeks now I have commented that ‘milling premiums have continued to be pressured’, despite a firmer feed wheat base. More specifically, the ex-farm price for milling wheats has remained generally unchanged in recent weeks, despite the increase in feed wheat prices. So whilst the markets are fairly quiet, I thought I would take this opportunity to devote this week’s column to the issue of milling premiums – and discuss why, in such a poor quality season, they aren’t continuing to increase in conjunction with feed wheat.

The HGCA Cereal Quality Survey is a piece of annual research, composed of almost 100,000 wheat samples from various grain sampling laboratories across the UK, is the most accurate and conclusive wheat quality indicator of its kind. The results from this season’s survey (now in its 39^th year) are now available to view in full online (and on our website). Here’s a snapshot of the results…

While both hagberg falling numbers and protein content remain in line with a five-year average, it was bushel weights that have been the main (and fairly severe) problem. Average bushel weight for all UK wheat this year is 69.6kg/hl – a huge downgrade from last year’s 78.7kg/hl.

Looking in more detail, group 1 varieties for full quality bread making are generally bought on a 13% protein / 250secs hagberg / 76kg/hl bushel weight basis and in 2011, 40% of wheats met the specification. This year, just 2% of samples have met this specification.

Group 2 varieties for bread making are usually bought on a 12% / 180secs / 74kg/hl basis and in 2011, 51% of wheats met the specification. This year, just 16% of samples have met this specification.

Consequently then our domestic millers looking to source full specification group 1 and 2 varieties, have rather thin pickings of a rather expensive crop. Obviously there will be a larger percentage of group 1 varieties that will tip with a (probably fairly hefty) claim, but at £240/T+, it’s hard not to sympathise with their frustration – particularly as low bushel weights are undeniably responsible for poor flour extraction rates.

German and French wheats have been imported into this country for years; and this year, they could provide the alternative our domestic millers are looking for.

This season’s German wheat harvest was similar to the last according to the HGCA, with final tonnages on par at an estimated 22.4M/T. Output was however “generally of higher quality”, with an average protein of 13.5% and bushel weights at 79.5kg/hl. It’s hardly surprising then that 19.4M/T of the total crop (that’s 86%) made the milling wheat grade (well above the three year average of 16.5M/T).

Over in France, the HGCA believe 88% of their total 35.9M/T of winter wheat made the milling grade; slightly down from last year’s 91% but hardly anything disastrous.

Import data for the first quarter of the 2012-13 marketing year (July, August September) suggests that imports from France have already almost doubled with 79,107/T imported in those first three months, compared to 42,923/T at the same point last year.

Data has also confirmed that almost four times the amount of German wheat had arrived by the end of September compared to the same point last season. Imports for the first quarter in 2011 stood at 36,042/T – a tiny amount compared to this year’s 141,097/T.

It would seem then that both German an d French wheats have indeed provided our domestic millers with the alternative they were looking for; an abundance of high quality, ready accessible and competitively priced milling wheat which not only nicely infill’s the gap left by this year’s poor harvest, but looks like a rather attractive offer compared to our own 2% of 76kg/hl bushel weight wheat.

This therefore puts a cap on the value of our milling premiums; they do not need to rise in line with feed wheat when there is such an attractive alternative. There could be an awful lot of group 1 and 2 varieties on the feed heap by the end of the season…