For several reasons, April was a month of mixed blessings. First, there has been a ceasefire in Iran, which in turn has left the oil markets in a state of confusion, with uncertainty around when a resolution will be reached. On a positive note, the UK weather has been kind, with plenty of sunshine across the country. While this has been welcome, there are some areas where rain would be welcome to ensure that crops, which have been promising, don’t suffer from drought.
On the theme of drought, the severe dry conditions in several grain-growing states in the US have continued to be at the forefront of European grain traders' minds. This is beginning to develop into an important factor in global grain pricing.
Crop conditions
Wheat
Winter wheat crops are thriving, with crop ratings across the UK being some of the best seen for several years. The lack of rain across the UK has led to some crops, particularly those in the south, showing some signs of drought stress. If the rain forecast for the start of May appears, it will take some of the worry away.
More advanced crops are at the stage for T1 sprays. These are important preventative fungicide applications to limit disease. There have been some reports of light attacks of septoria and yellow rust, but generally, there aren’t any disease issues for wheat crops. Most crops will have had the majority of their fertiliser, with only a later top dressing still to be applied.
Barley
Much like with wheat, winter barley is looking promising, with TQ sprays recently being applied to most crops. More advanced barley is showing signs of flag leaf emergence. There have been some reports of rhychosporium, but the fungicides applied for the T1 sprays should deal with that.
Spring barley sowing has progressed well, and crops are emerging nicely across the country. There was plenty of moisture in the soil during sowing, but the drier conditions recently will have diminished this, so some rainfall to help keep the spring crops progressing would be very welcome.
Markets
Wheat
During March, the conflict in Iran became the main factor behind the volatility we saw in the markets. As April progressed, the reports of just how severe the drought in the main cereal-growing areas of the US came to the fore. With reports of rain in mid-April, the markets noticeably softened. When this didn’t materialise, the markets bounced back above where they were before. At the time of writing, the level of US wheat assessed at good/excellent is down to 30%, a drop of 4% in a week.
The Iran conflict will continue to affect grain pricing. But, in the short term, it is the forecasts for rainfall in these US states, and some areas of Europe and the UK, which will drive the markets up or down.
Looking into the end of May and June, it will be the maize plantings in the US and Europe that will drive prices. Looking into the autumn, the markets will look at the effects of a strong El Niño and fertiliser supply issues to determine their direction.
Old crop - The UK futures for May have risen quite sharply recently (now £190.20 from £175.50 at the start of April), but much of this is down to technical trading since the May trading will be closing soon.
A better indicator is the ex-farm price for May movement, which has only risen from £175 at the start of April to £178 now. There are signs of slightly stronger export interest, but this needs to develop further to help old crop prices to firm much more, since the supply vs demand in the UK is quite well covered until harvest.
New crop - The UK wheat futures for Nov have continued to firm steadily and now trade at £190.75, up from £187 at the start of April. This is the market which will respond to the US drought and the maize plantings, so the next few weeks may see this bullish trend develop even more, unless there are significant signs of rainfall early enough to save the US wheat and maize crops. At the point of writing, an ex-farm price for feed wheat in Central Scotland for Nov move is £177.
Barley
The trend of old crop barley prices firming, which we saw at the start of April, has continued, with an increase of £5 to an ex-farm value of £160 ex-farm for a May move. This confirms the view that the demand for barley is high enough to put pressure on the process, with a tightening of availability starting to show.
New crop - The first indication of pricing for new season barley is filtering through with one or two merchants offering ex-farm prices around £145 for Aug/Sept and £150 for Oct/Nov. There doesn't appear to have been many takers at these levels, probably because growers are hoping the bullish market trend will continue toward harvest and beyond. Given the current state of affairs, it is quite a logical conclusion to draw.
Potentially, in the short to medium term, these markets could experience a lot of volatility. Looking further into the future, the situation could get even more concerning if the issues around oil and fertiliser are not resolved relatively soon.
The consideration globally by farmers of what to grow, and where, for harvest 2027 will become quite a major factor in market values across the spectrum of crops, not just cereals.