Within 6 weeks, there have been announcements of 3 major wheat processing plants closing in the UK. Last month, we reported on the closure of Vivergo, one of the two very large bioethanol-manufacturing plants. The other bioethanol plant, Ensus, has now also announced similar plans, to close at the end of November. The third closure is of the Hovis mill in Southampton. The three locations between them have purchased and processed as much as a million tonnes of UK-grown wheat each year they have been operational.
The Ensus announcement suggested the plant would remain closed but ready to become operational again but did not state when that might be or how long they might remain in that limbo before decommissioning the site entirely. It claimed the closure was down to low bioethanol prices. Bioethanol production has always been a tight-margin and high-risk business, with both the raw materials and the finished products (including livestock feed), all being commodities, giving the manufacturers little control of input costs or output price. Furthermore, the commodities are all valued independently. When grain prices have been high and oil prices low in the past, then these facilities have had extended closed periods for maintenance or been mothballed. Ensus for example has had 4 extended closed periods in its short life. The other risk associated with biofuels is the dependence on government subsidies; both the capital required for their establishment and the ongoing per-litre support. Ensus opened in early 2010 and Vivergo followed in July 2013 meaning one was only 8 and the other 5 years old.
Hovis is closing its Southampton mill at the end of this year and is also selling its Selby and Manchester mills to Whitworth Brothers, leaving only one remaining mill in Wellingborough. Whilst a considerably smaller loss than 2016, Hovis lost almost £12 million in 2017. This closure means it is not just feed wheat in the north of England that is being lost but also milling wheat demand in the south of England.
The impact on the price of wheat in the UK has already been felt with a £5 per tonne reduction in domestic values in the week. What was initially expected to be a year with a wheat deficit in the UK, making the UK a net wheat importer once again has now, within the space of just over a month changed totally. After several years of gradually rising wheat processing capacity in the UK, coupled with declining wheat production, the closure of these three sites means that a surplus is likely again most years.