03 August 2023
Last year, following the Ukraine crisis and the blockading of ports surrounding Odesa, wheat prices increased dramatically to over £340 per tonne. This was perhaps unsurprising, with 13 million tonnes of grain locked inside Ukraine accounting for nearly 9% of global wheat production. The Black Sea grain deal was influential in opening up the Ukraine market, and by June 2023, wheat was trading at an almost normalised price of £160 per tonne. The collapse of the Black Sea grain deal and a string of Russian drone attacks on Ukrainian ports have seen wheat prices soar. There are fears for global food security and prices. Alternative export routes are now starting to be established from Ukraine, but this is difficult because Ukraine's railway gauge differs from the European network, meaning any grain exported by rail must be cross-loaded at the border. Some price relief has been seen because other producers have stepped up production, restraining price increases to around £200. So how does this international event impact feedstock for biogas plants?
As Ukraine is a significant wheat exporter, the disruption in the supply chain will lead to reduced wheat in the global market. In turn, this will cause wheat prices to rise due to increased demand from alternative sources, such as the UK.
In the UK, maize and grass crops are particularly good as break crops and are also common feedstock for anaerobic digestion (AD). With wheat prices rising, break crops such as maize could be replaced with higher-value wheat crops. However, break crops play a crucial role in arable rotation, which helps improve soil health and fertility. Farmers will need to balance the economic benefits of growing wheat with their land's long-term sustainability and productivity. A diverse crop rotation plan can lead to better soil health and pest management, improving wheat crop yield and quality. Despite this, if high wheat prices prevail, wheat will inevitably be planted instead of crops such as maize, and AD feedstock prices will rise. Last year, some UK producers charged up to £55 a tonne for maize, significantly exceeding most AD operators' budgets.
Furthermore, sunflower oil is another major Ukrainian export, and the bombing of its ports has disrupted the supply of this commodity. This has led to increased demand for sunflower oil from other countries, pushing up prices. The UK is generally too cold to grow sunflowers competitively, so we are unlikely to see these plants competing against AD feedstocks. However, sunflowers production may start to feature as a competitor for AD feedstocks for our continental neighbours.
The war in Ukraine has also disrupted the global fertiliser market. Russia and Belarus are major fertiliser exporters, and the war has led to sanctions on these countries. This has reduced the fertiliser supply, making it more expensive to produce food. Last year, many AD operators saw a sudden and marked increase in digestate demand as farmers sought to mitigate their fertiliser costs.
In summary, the decision to replace break crops with high-value crops would be influenced by a complex interplay of market dynamics, profitability, sustainability concerns and local agricultural conditions. Wheat prices feature strongly in the crop choice, which will inevitably impact the availability and price of AD feedstocks.