The rain in June and early July has been beneficial to the grain fill. It has brought some Septoria and other disease issues in wheat, especially where key spray applications were not possible, but we could really do with some hours of sunlight now.
We are supposed to be having a week of hot dry weather soon. Some winter barley has gone down with recent storms, but in the main that crop is well formed now. Most of it is feed, and with combining due to start about 20 July it should not have been impaired much. In France, to the south of Paris the rain has delayed their winter barley with one day’s combining followed by two day’s rain, but only the bushel weight has been affected so far; surprisingly the yield has not. It’s still average, the grain size is good and malting quality also.
Early French wheat has both hagberg and low protein problems, but again yield is OK so far. Maybe that is because the yields were going to be above average without this wet weather. Another old saying is “flat wheat can break you” whereas “flat barley can make you”. We will have to wait and see!
Certainly I would prefer to see the rain now rather than in August. I cannot forget last year, when up to 14 August we combined some high-quality spring malting barley. It started raining then and carried on until the first week of September, ruining half the spring malting barley crop still in the field. Generally, all the crops are better established than they were 12 months ago and so are in a better place to withstand issues.
The grain market is now behaving like it normally does pre-harvest in the northern hemisphere, with prices falling further as harvest approaches. The usual suspects who do not have the storage infrastructure and need for hard US dollars from exports, such as the Baltics and Black Sea countries, are pushing cheap barley into the export market to be followed by equally cheap wheat.
The beneficial rain all over the world from America to Eastern Europe has eased crop fears in what were dry areas. I have been commenting since April that our forward grain values were at historically high figures, especially when you consider that we have been expecting a return to more average UK crop sizes. Anyway, for the time being UK grain prices still have the lifebelt of high old crop values about them, until the combines roll! End users are anxiously awaiting the arrival of new crop French wheat which is supposed to be here in July.
Old crop barley, of which there is less left than wheat, is in great demand. Those who can finish off their new crop feed barley before the end of July, by desiccating, should make a good premium to the ordinary ‘as available’ price. Likewise with wheat, which has a differential of £40 between old crop and the new crop price, those who can combine before the middle of August should achieve a premium somewhere between the old and new price. After that the bets are off! Some merchants are talking about the UK wheat crop being up to 15.5 million tonnes. That’s looking too optimistic to me. If we get five million tonnes more than last year at 14.5 million tonnes, then that’s realistic.
From mid Wales to the Midlands there are huge black grass problems. Add to that the patchy areas, particularly in the Midlands where the crops didn’t establish, then record yields are unlikely. But if Russia lives up to being the “biggest wheat exporter in the world” and sorts out its export tax, then it could depress the export market in September and October.
As I have said, if we have half a million tonnes exportable surplus, that should go by Christmas. If there were a miracle and we had a 15.5 million tonne crop, giving an extra million tonnes, that would take longer to shift. However, even with new crop wheat at £25 per tonne off the very top, we still have historical high forward prices for wheat. So if your crop looks good and you have to sell or move before Christmas, that is still an option.
Assuming you have followed advice and managed your risk by committing to pools or trackers, or making forward sales for October, November or December, you should be able to play the longer game from January onwards. You see, the trade can run, but it cannot hide forever from certain facts. The USA stocks of maize, soya and wheat are 44 million tonnes less than this time last year. Global stocks of grain are at an eight-year low. These are real facts and can only be redressed by big world crops. Some places like Australia look good for this, but most of the rest don’t.
Spring-planted wheat in North America and part of Russia and Ukraine have been badly affected by extreme heat and drought. This alone should cause milling premiums to rise, especially when you add the quality issues now in France. When the rest of the world catches up with the UK lifting of lockdowns, this will create greater demand for food and drink than we have seen for 16 months.
So we should have a lot more grain to trade than last year. You have already had some opportunities to sell at good prices and you will again. But the bigger your crop is, the fewer and further apart these will be. Good luck with your combining.
