Blending scheme keeps UK export market open

Blending Careful blending of low specific weight wheats is keeping export opportunities open for hard-hit UK producers in exceptionally challenging trading conditions, says Nidera Trading Director Stuart Shiells.

National yields are estimated at 12 percent below the five year average and a high proportion of wheat has a specific weight below 65 kg/hl. Not only are some producers facing problems trying to sell their crop, traders are being forced to think creatively about how they can fulfil their obligations and get the best returns for growers, he says.

“We estimate around 75 percent of the wheat crop we’ve traded so far is below 72kg/hl with a large proportion of this in the mid to low 60's. To put this into perspective, the average for the previous three years was 77.5kg/hl.

There was a lot of confusion at harvest with many merchants unable to deal with the lower quality wheat and if anything, the situation has got worse during the autumn.

English: Wheat (Triticum aestivum) near Auvers-sur-Oise, France, June 2007 (Photo credit: Wikipedia)

“The export market has been trading at a significant discount to the UK domestic market and as such the most commercial approach would have been for us to cash settle all of our exports sales and allocate all our grain to the domestic market. This is in fact what a lot of other merchants have done but as a result they have been struggling to place anything below 65 kg/hl.

“Our approach has been to try and keep shipping through liaising with our offices in Rotterdam and Spain and using the resources we have in the UK to supply overseas customers with an acceptable standard of wheat and give our growers an outlet for low specific weights.”

With the Nidera blending scheme, suppliers of high quality wheat are paid a premium and their material is blended at the company’s Ipswich Grain Terminal with the lower specification wheats.

To meet Nidera’s contractual obligations with its customers a consistent 72kg/hl has to be made on feed wheat cargoes, Stuart Shiells explains.

“It’s taken a lot of thought as to how we can best use our resources to deliver the required specification to our customers and provide farmers with an outlet for wheat where others have struggled to find a solution.

“We’ve had to work very hard to achieve the required consistency and from our own commercial point of view, it’s not the most efficient way of doing things. The blending process is costly and kilogram for kilogram, better quality wheat is far more expensive than the value recouped through the fallback scale, but it has given producers have a safe outlet for their grain without the threat of costly rejections and we’ve managed to keep a valuable export programme going.

Edwin Cross of Riverfen Farms Ltd in Ely, Cambridgeshire, has put over 1000 tonnes of wheat into the Nidera programme.

“We would normally aim to grow around 60% of our wheat for milling and the rest as feed, but a lot of our crop just hasn’t made the milling premium this year and the highest specific weight we have achieved is 70 kg/hl with the lowest being around 60-61kg/hl. We would normally average between 72 – 75 kg/hl,” he explains.

“Our view was we wanted to move it off the farm quickly and get a fair price and that’s exactly what we’ve been able to do with the Nidera scheme.”