Flour mills expected to import 2m tonnes – the biggest wheat import since 1980 – to make up for shortfall
Flour mills have been forced to order the biggest wheat imports in more than 30 years after the spring weather hit British farmers’ crops.
The Department for the Environment, Food and Rural Affairs said millers were expected to import 2m tonnes of mostly German wheat to make up for a 13% shortfall in the homegrown crop.
It will be the biggest wheat import since 1980, and is expected to lead to a substantial increase in the price of bread next year.
The price of bread-quality wheat for delivery to the north-west, the worst-affected area of the country, rose by £5.50 a tonne last week to £261.50 a tonne, according to the Home Grown Cereals Authority (HGCA), a trade body.
The cost of basic feed wheat on the futures market rose to a record high of £227 a tonne, a 45% increase since January. Global wheat prices are also at near-record highs.
Charlotte Garbutt, an analyst at HGCA, said the British crop, as well as being much smaller than normal, had been very poor quality this year because the ear of the wheat had not been exposed to enough sunlight. “You need warmth and sunlight to develop the ear, without it the grains don’t fill and are much smaller,” she said.
Garbutt said much of the British wheat was so poor quality that it was not good enough to be used for milling into flour. She said there were already concerns for next year’s crop as the recent bad weather had adversely affected sowing. “The condition it gets sown into affects the growth of the grain for the whole season.”
Analysts say bakers will be forced to pass on the price rise to consumers, and they expect a jump in the cost of products ranging from bread, biscuits and beer to meat, as wheat is used in animal feed.
Bryan Wiley, grains analyst at Rabobank, said: “There have been terrible harvests around the world due to adverse weather. Russia is in the throws of a [once in] 100-year drought. We are looking at a continued acceleration in the first quarter of next year, but bigger harvests in the spring should provide some relief.”
He said there had been a direct correlation between the soaring wheat price and the cost of bread in Russia, but said the relationship was more complex in western countries.
Associated British Foods, maker of Kingsmill, has held discussion with retailers about raising its prices. “When wheat goes up by a third, you have to recover that,” said the finance director, John Bason.
Premier Foods, the company behind Hovis bread, has described the UK’s wheat crisis as “more worrying than in 2007-8 during the global food crisis”.
Glencore, the global commodities trader, which controls about 8% of the global wheat trade, is expected to be a big beneficiary of the price rise. This year the boss of its food trading business said the worst drought to hit the US since the 1930s would be “good for Glencore”.
“In terms of the outlook for the balance of the year, the environment is a good one,” Chris Mahoney, head of Glencore’s agricultural division, told investors this summer. “High prices, lots of volatility, a lot of dislocation, tightness, a lot of arbitrage opportunities [exploiting price differences in different markets].”