As we enter the summer, the grain market currently has two opposing factors affecting it. First is the developments in Ukraine, which are still at the front of traders’ minds with the ongoing uncertainty around the availability of both the remaining old crop grain in the country and the produce from this year’s harvest.
The other factor is the start of the harvest in several major production areas of the northern hemisphere, such as the southern US states, southern Europe and areas of Russia. Whilst the bullish nature of the Ukrainian conflict cannot be ignored, the market has seen significant revaluations with the harvest gaining momentum. More on this later in the update.
There is great optimism from growers around the likely performance of this season’s cereal crops due to the favourable growing conditions throughout the growing season.
However, there are some reports of crops, particularly spring-sown barley, that have stressed rather badly from May and June’s dry conditions. It is worth noting that these areas are relatively small and are mostly in southeast Scotland.
With reports of crops being harvested in the south of England, there are many farmers in the north of England and the south of Scotland expecting to harvest winter barley before the end of July. Winter wheat is also progressing very quickly, and many crops could be ready to be cut in the first half of August. Nearly all spring barley is now headed and most has flowered, so once again, expect the combines to be pressed into action in early August.
Crop 2021 harvest
With the expectation of an early harvest, those hoping for a late bounty by holding on to the last of their 2021 product have been disappointed as the demand for late deliveries into July/August has fallen away. Old crop wheat is now trading at £270 ex-farm, well down on last month’s highs.
Crop 2022 harvest
Prices in grain for the 2022 harvest have fallen massively in the past few weeks. In one week alone from 20th to 27th June the November wheat futures market fell by over £33/t. Despite a small rally in prices last week, the trend has continued and, as I write, these futures are at £267. Considering the Nov 22 wheat position hit a high of £360 on 17th May, this is a massive readjustment in only a matter of several weeks.
The initial drift was primarily down to buyers being unwilling to continue supporting the very high prices along with good rainfall in droughty regions and the wheat trade seemed to settle for a while at prices just over £300 which many speculators assumed was a more realistic value in the circumstances. However, with the physical harvest in progress and early reports indicating quite good harvest tonnages, the grain values have fallen away once again to the current levels (wheat ex-farm locally for harvest is £262 and barley ex-farm is £240 is today’s price).
Given the uncertainty which has troubled the grain markets since the Ukraine war commenced, it is still expected that the volatility will remain so what to prepare for next in these never-previously-experienced circumstances is a difficult one to call. These current prices could present a great buying opportunity or, if harvest tonnages come in well above average across US and Europe allowing healthy export tonnages, there may be further rationalisation on prices to come yet. Only time will tell!