“Flour remains at the heart of UK food consumption. The UK is self-sufficient in flour. Most of the wheat used by UK millers is grown in the UK. The UK flour milling industry is the largest single processor of British wheat. There are 32 Nabim member companies operating 53 mills. Approximately 5 million tons of wheat is milled annually. There is a consistent market for UK grown quality wheat if the quality specifications are met.”
The United Kingdom is made up of England, Wales, Scotland, and Northern Ireland. It has a long history as a major player in international affairs. The United Kingdom is a leading trading power and financial center and is the third-largest economy in Europe after Germany and France. UK has a population of 64.6 million.
On June 23, 2016, the UK voted to leave the European Union. The UK is now negotiating with the EU on the terms of its leaving the EU and once this is agreed will negotiate its future trading relationship. The uncertainty surrounding the terms of the UK’s departure from the EU and the terms of the future UK-EU relationship may impact the overall attractiveness of the UK as an investment destination for companies.
The United Kingdom (2016 GDP of $2.7 trillion) has the fifth-largest economy in the world. The City of London is a world centre for financial services. The UK economy grew by 1.8% in 2016, reflecting a uncertainty caused by the Brexit vote and what it will mean for the UK economy. The UK has an extensive trade relationship with other EU members through its access to the single market and economic observers have warned an exit could jeopardize its position as the central location for European financial services.
Agriculture is intensive, highly mechanized and efficient by European standards but, in terms of gross added value, represents less than 1 percent of GDP. While UK agriculture produces about 60 percent of the country’s food needs with less than 2 percent of the labor force, the UK is heavily reliant on imports to meet the varied demands of the UK consumer who also expect year round availability of all food products.
As a result of food scares over the past two decades, the UK food supply chain is now heavily scrutinized, meaning that UK retailers, foodservice operators and manufacturers are uncompromising on traceability and quality assurance. UK buyers often require technical specifications above the level mandated by government legislation.
14-15 MILLION TONS OF WHEAT PRODUCTION EACH YEAR
According to Nabim (National Association of British and Irish Flour Mills), wheat is the largest arable crop by area with an annual planting of approx. 1.9 million hectares in the UK. Production is centred towards the eastern parts of England. The annual UK production varies greatly, depending mainly on the climate, but UK growers produce 14-15 million tons of wheat each year, supplying approximately 5 million tons to the British milling industry, and also exporting over 2.5 million tons to countries mostly in the EU. Total wheat production in Britain was less than 5 million tons in the early 1970s. Average yields for feed wheat are 8.5tons/ha with bread making varieties being slightly lower at 7.80 tons/ha. Most wheat grown in the UK is winter wheat. Winter wheat accounts for more than 95% of the UK grain used by millers.
2017 wheat harvest for the UK is 15.2 million tons, an increase of 5.4% on 2016. It is above the five year average 2012-2016 of 14.5 million tons. The barley production figure for the UK has increased by 10.6% to 7.4 million tons in 2017. It is above the five year average 2012-2016 of 6.7 million tons. UK barley is grown for human consumption, malting, brewing or distilling and for animal feed. It is an important crop in the rotation system on many farms.
And also on average, 700,000 tons of oats are produced every year for human and animal consumption. Oats are used in breakfast cereals, beauty products and animal feed. Over 35,000 tons has been exported from the 2013/2014 season, mostly to the EU.
SELF-SUFFICIENT IN FLOUR
Flour remains at the heart of UK food consumption. The UK is self-sufficient in flour and also supplies most of the flour used in the Republic of Ireland. Most of the wheat used by UK millers is grown in the UK. The UK flour milling industry is the largest single processor of British wheat and it has worked hard to encourage production of the best varieties and to make use of what UK farmers produce. The result is that usage of home-grown wheat is now double the level of forty years ago; typically a large number of flours and breads are produced entirely from UK grown wheat. UK-grown wheat usually accounts for 80-85% of total usage by UK millers, Nabim points out. Nabim is the trade association representing the sector. Nabim members account for 99% of the flour produced in the UK and Republic of Ireland. The association is active in many policy areas, including trade, technical and regulatory affairs, food safety, environment, health and safety, employment affairs and training. Fundamentally, Nabim’s role is to advise and represent its members on these issues, promoting a competitive, efficient and socially responsible sector of the food industry.
A proportion of imported wheat is milled mainly because it has different qualities used to produce stronger flours that are required by the customers. Imports, where necessary, are sourced mainly from Germany, Canada, France and the USA.
Flour millers also use rye, spelt, durum wheat, malted barley and some minor grains to produce a range of products for different markets. UK milling sector remains compact and highly efficient with a total annual turnover from all sources of approximately £1.25 billion.
In recent years the industry has seen a modernisation in capacity with several new mills being built. There are now 32 Nabim member companies operating 53 mills. Wheat is the industry’s main raw material, with approximately 5 million tons milled annually to produce approximately 4 million tons of flour for consumption as food. Approximately 1.6 million tons of flour are produced by the starch and bioethanol industries. There is a consistent market for UK grown quality wheat if the quality specifications are met. The quality and safety of both raw materials and end product is paramount to the industry. UK millers only purchase wheat that has been ‘assured’, Nabim underlines.
KEY FACTORS AFFECTING THE MARKET
As a result of advances in technology and the skill of the miller, the industry produces more than 400 different types of flour to meet increasingly specific customer demands. Much of the flour that is produced is sold in bulk to the larger bakers and food manufacturers. Smaller amounts go to craft and instore bakeries; some is pre-packed and retailed direct to consumers.
Key factors affecting the market include the area of crops planted, weather conditions around the world, the quality of crops (which varies from one harvest to the next) and the yield, i.e. how much is produced from the area planted. The UK’s decision to leave the European Union will have far reaching economic impacts, but will not change the fundamentals of how grain markets operate. UK flour millers will continue to require access to wheat from around the world (including the EU) and will also wish to maintain a trading relationship with the Republic of Ireland, which buys 80% of its flour from the UK.
59KG FLOUR CONSUMPTION PER PERSON
According to Nabim, about 60% of flour produced in the UK is used in the manufacture of bread products, with the remaining 40% being used in a huge diversity of food products. UK flour consumption reached 59kg per person per year in 2016/17. Bread is bought by 97% of British households, and the equivalent of nearly 11 million loaves are sold each day. Approximately 60-70% of the bread UK citizens eat is white and sandwiches are thought to account for 50% of overall bread consumption.
Large bakeries, which produce wrapped and sliced bread, account for 85% of UK bread production. In store bakeries within supermarkets produce about 12% of bread, with the remainder accounted for by high street bakeries.
The main sources of imported wheat within the European Union are Germany and France, whilst Canada and the US are the main sources for the rest of the world. Canadian wheat is generally imported for bread-making purposes, because it has excellent characteristics and gluten strength which work well in a blend with UK wheats. French wheat is generally used in the manufacture of French style products where softer flours are required. German wheat usage fluctuates according to the quality of the British crop.
The majority of flour produced in the UK is also used at home. Imports account for approximately 1% of UK flour sales, whilst about 2% of production is exported. Both import and export volumes tend to fluctuate along with currency appreciation or depreciation. The main export destination for UK millers is the Republic of Ireland (about 160,000 tons per year), whilst France (about 20,000 tons per year) is the country of origin for the biggest proportion of flour imports.