The March crop update was being written as the US/Israeli attack on Iran had just begun, so it was too early to make an accurate assessment of the grain market's response. A month in, and it is still difficult to know just how the markets will rise over the coming weeks and months. However, the general trend is certainly firmer as all markets take stock of events as the conflict continues.
The spring conditions have certainly helped crop development in March, and, at this moment, crop ratings in the UK are the best we have seen for this point since 2023.
All winter crops have now received their first application of fertiliser, and recent warmer, drier days have allowed farmers with lighter, drier soils the opportunity to carry out spring sowing. Reports are showing good sowing conditions across the country, with farmers hoping for friendly conditions in April to help those crops become established.
Reports from the US in late February of drought conditions have been repeated, with some areas of major production describing the situation as severe. This, alongside the Iran conflict, is already having supportive effects on grain prices. It will be worth keeping a close eye on this to determine where these markets may head.
Crop conditions
Wheat
As already stated, winter wheat crops are progressing very well, and crop ratings for this stage are the best they have been for three years. With all crops receiving a top dressing of fertiliser, little signs of any disease, and the temperature picking up, crops look to have great potential at this point.
Barley
Like winter wheat, winter barley crops have now been given their early fertiliser application. Reports indicate strong growth over the past few weeks, and concerns over the wet winter conditions being detrimental seem to be unfounded. Disease levels are low, but many crops will be treated soon, if they haven’t already, with fungicides to maintain their healthy progress.
Improving sowing conditions has allowed a reasonable area of spring-sown barley to be put in the ground. All indications are that the seedbeds are in very good shape, which allows these crops to get off to the best possible start.
Markets
Wheat
In reaction to global grain prices, the UK wheat markets have shown a slightly stronger sentiment over the last month. The situation with Iran is a major factor behind this, alongside vast global increases in the price of fuel and the closure of the Straits of Hormuz. This will also have an impact on input costs, particularly for Nitrogen and Phosphate fertilisers.
Another pressure on the markets is the drought conditions in maize and wheat-producing areas of the US. There are forecasts of rain in the next few weeks, so there will be a focus on where the rain falls and how much.
Situations such as the one we are seeing in the Middle East make countries that are net importers of grain take notice of the long-term stocks they hold, so this has livened up the export markets to some extent too.
Old crop -The UK futures price for May has risen since the start of March by just 4% (from £169 to £175.75) despite all the bullish factors in play. This tells us something about the balance of supply against the current demand from UK consumers. This market is likely to remain reasonably well supported due to the overall global strength of wheat values, but it will take a sizeable export demand for UK wheat before any significant increase is to develop. Ex-farm prices in Southeast Scotland for May move are around £174.50 - £175.50.
New crop -New crop - There has been a slightly greater rise in the new crop value compared to the old crop. The UK wheat futures price for Nov 26 has risen 5% (£178 to £187) and will reflect the effect of the drought in some US states, along with increased growing costs, which will potentially have on new crop values. If these situations progress in a context where they drive more of a bull market, then watch this position strengthen even more through April and May. I will update this in my next report.
Barley
The global values of barley have shown similar upward trends to the other grain markets through March. The UK market has firmed to a greater scale with barley proportionately to wheat, and ex-farm prices have risen by around £15 per tonne through March (locally in Central Scotland) from £140 to £155. This is beginning to indicate that availability is being matched by demand in the current position, and it may rise even more in April if demand continues to increase. There are reports of more export opportunities starting to develop, which could support prices too.
New crop -New crop - As mentioned in my previous report, it is too early to establish an accurate indication of how new crop barley prices will go. However, with global markets firming and export demand likely to increase if the Iran situation continues, and the US drought puts pressure on maize supplies, it is possible the new crop barley market may look a lot stronger in the next month or two.
With so many factors in play, it is difficult to judge at this stage what the future holds for grain markets. However, the trend has a solid, bullish feel about it right now.