Feed wheat demand in the UK could take a 300,000-mt hit in the wake of the announced closure of the Ensus bioethanol plant, market sources have told Agricensus.
The facility's owner, Germany's Cropenergies, said in a statement on Monday that it would be shuttering the plant temporarily by the end of November "due to the difficult market conditions."
The announcement followed the earlier closure of the UK’s largest ethanol plant Vivergo Fuels at the end of September, which the operator blamed on the “difficult trading environment.”
“I’ve done my calculations and I come up with about 250,000 to 300,000 mt of additional wheat taken out of this year’s demand,” an analyst at one of the UK’s largest wheat merchants told Agricensus.
Both plants have an annual intake capacity of between 1 and 1.1 million mt of feed wheat, but both were running well below that nameplate capacity.
The UK's ethanol producers have faced a twin threat of strong continental ethanol supply, due to deregulation of the internal sugar market, and higher wheat prices, which rose 20% versus the previous year as the country's production fell to a five-year low.
However, it was thought Ensus had been shielded by the loss of its main rival and through its ability to switch up 50% of its intake to cheaper corn feedstock, when running at maximum capacity.
With the facility running at less than half of its capacity, according to market sources, it was unable to boost that feedstock intake to 75% corn, sources told Agricensus.
UK industrial feed wheat consumption is already set to fall 523,000 mt in the wake of the Vivergo closure, according to UK's farm agency AHDB, with the additional loss set to remove a further chunk of demand.
“I calculate (a fall of) 30,000 mt a month for the rest of the season, just because they are using so much more corn these days," a second source said, based on a 'normal' consumption figure of 60,000 mt of wheat.
“Cropenergies hasn’t announced the length of the closure yet,” Millie Askew, senior analyst at the AHDB told Agricensus.
“There will be a reduction in feed demand, but whether that will come out of domestic or import demand is unknown,” Askew said.
The UK government agency is set to publish its first official UK S&D by the end of November.
However, with sources expecting the facility to remain closed for the rest of the marketing year, a 30,000 mt a month demand figure amounts to 210,000 mt of additonal demand lost.
