The Russian wheat crop is getting smaller. The North American spring wheat crop ratings have been downgraded by 40%. The Brazilian maize crop has also been reduced to 93 million tonnes from its starting point of 109 million, and some South Americans think it could be as low as 80 million tonnes. A lot is hanging on the USA having a big maize crop. Well, that may be the case in the east, where they have had wet weather, but in the west, where there are big producing states like Ohio, Minnesota, North and South Dakota, it’s been mostly drought.
This ‘maize story’ has been going on for a few months. I doubt if the USDA will address global maize until September. There have been so many ‘statisticians’ forecasting ‘trend’ yields for the next five years (for trend read record) that it’s a bit of a climb down to start talking about “real” yields at this stage.
I think the world wheat story has gained more traction than maize since my last report. The UK wheat harvest had hardly started at the end of the first week in August. France and Germany have started harvesting, but that is not good news for them. First the pre-harvest talk of above average yields stopped, then the low bushel weights in French barley have continued into their wheat and so have lower protein and hagbergs which I forecast last month.
Parts of Germany are in the same boat as they have reduced their wheat crop from 24 to 21 million tonnes. They say they will have enough milling for their own use and for small boat export, but by early August half was still in the field, as it was in France. Futures markets based on milling quality are nervous to say the least, from Minneapolis to the MATIF. I would not want to be selling milling wheat or premiums just now.
The UK winter malting crop, which is not big, has been disappointing in the south. The early cut lots were low in retention, bushel weight and high screenings. As before, the lack of sunlight hours at flowering was the main problem. This led to low proteins (nitrogen) which are ok to a point for malting barley but would be disastrous for milling wheat. Early spring barley in the south is encouraging, with some good Planet variety samples. We expect some fine weather in the second week of August which could see a large proportion of the springs cut, but we cannot assume anything. Bearing in mind the ‘statisticians’ are saying we could have half a million tonnes of surplus spring malting barley to dispose of from the UK, the premiums are high. But, we haven’t got it yet!
Merchants who were confidently predicting a UK wheat crop of 15.5 million tonnes have suddenly gone very quiet. Maybe it’s because the AHDB new farm survey is suggesting there could be 80,000 fewer hectares planted than was thought. I will stick to my circa 14.5 million tonnes at this stage. In my view low bushel weight (if that’s what we get) does not equate to big yields. When you think about it, you are really harvesting radiation in your crops, so the lack of ultraviolet sunlight would be significant.
My parting shot last month was: “You have already had some opportunities to sell at good prices and you will again”. Well you have, with wheat having been £15 up on the November futures since then. Spring malting barley is getting its turn now but our big competitor, Denmark, has started a good-looking spring barley crop. Forward values for malting barley are currently at market highs, so when you know you have the quality sell some, just in case we do have a half million tonnes surplus.
Last thought. Still crops like oilseed rape and linseed are best sold when you know what you have combined. My advice to my committed group members this year for all grain was to manage your risk by pooling and use a market tracker, but don’t sell your hoped-for surplus until it’s in the barn. I reckon that’s up there with my average of ‘three out of five decisions being right’.
