Since 23 June November LIFFE futures have risen £10. That is back to the last market high point of November 2015. But, more than half of that has nothing to do with Brexit. It’s because of the now expected reduction in the French wheat crop. They had about 40 million tonnes last year, and the rumour is it may be only 28 million this time.
That, coupled with the admitted poor yields and low bushel weight of French winter barley has caused a sea change for the time being. Merchants are struggling to move available feed barley at only 55/58 kilograms specific weight. All the export sales are minimum 63 kgs. As a shipper, if you take low bushel weight into a port store at 55 kgs, you require an equal amount of 71 kg to achieve the minimum cargo specification, and that is not easy to find so far.
I was present at a maltings in France last week when the first cuts of Irina spring barley came in. The moisture was low, the barley was 82/83 retained upon a 2.5 millimetre sieve. But it was straight off the combine: when the green and thin grains were cleaned out it would make a sample that could be malted.
The germination had not been affected by poor weather and the nitrogen was acceptable. But it was only the first few lots, albeit a big improvement upon their winters. I hope it bodes well for our spring barley. As it’s at least two weeks later, and has just had a week’s sunshine, I am feeling more optimistic.
I have been writing for the past few months that we could not expect another UK crop like we had last year, of barley or wheat. So while yields may be down on our spring barley, quality, as in France, could be maltable. In any event, maltsters have already realised that they don’t have the required quality in the winter crop. So they are prepared to derogate and accept winter malting below the standard 85 or 90% retained on a 2.5 mm sieve, down to 80 retained or lower, but with large allowances.
In the bigger world picture, the American wheat crop is progressing OK – as is their maize crop, which has got through the critical month of July OK, with its high temperatures causing no problems. Canada and Australia wheat estimates get bigger each day. In the Black Sea area, the harvests in Ukraine, Russia, Romania, Bulgaria seem to be producing more wheat and barley than expected, so they have continued to be the cheapest sellers.
Above all this still sits the record world stocks of 245 million tonnes of wheat and 208 million tonnes of maize. None of this is likely to improve UK grain prices. But smaller crops in western Europe should create opportunities for us. A smaller wheat crop of say 14.5 million tonnes would only create a 1.5 million tonne UK surplus. At that modest level we don’t have to worry about being sellers all the time. We can afford to wait and pick off the better export deals, but good quality is key.
If we have 1.5 million tonnes of 68kg wheat that would be very difficult to liquidate. But anything like our normal quality would give us an entré to European Union and other markets available because of poor French quality – but we have to get it first. Some early oilseed rape results are disappointing. But all this does is support my consistent view that there is not enough oilseed rape being produced in the world to meet the need for that particular oil this year. So, if you don’t like the spot price, don’t sell it! Openfield have stores within a short haul. Seed can be moved now and priced when the market improves later. This is the year when the cost of storing off farm will be more than covered by the rise in the market.
So there we have it: an exciting market caused by weaker sterling – all because of Brexit – and potentially smaller crops in western Europe. It’s created the opportunity for you to sell at better prices than we have seen for the last two harvests. So make sure you sell some. Also, look at selling some wheat and malting barley for harvest 2017. When the excitement about Brexit and this year’s harvest has died down, we will still be left with huge stocks of cereals overhanging the world markets.
