As we enter August, with favourable conditions, it is great to report that the northern hemisphere harvest is progressing at a rapid rate while the main factor influencing the grain markets continues to be the Ukraine conflict.
An announcement that agreements had been reached for the safe passage of grain from Ukraine had been reached in mid-July produced a significant downturn in wheat and barley values. A Russian missile attack on a target near Odessa docks where the export of grain is due to take place caused a turn-around in the market. Throughout most of last week, prices recovered most of the lost value. In the last couple of days, a cargo of maize has sailed, so markets are once again on the slide. The progress of the harvest coupled with reports of respectable yields has further added to the bearish sentiment.
The much-anticipated early harvest has happened, with the first reports of conventional harvesting commencing on 13th July, which is the earliest on record.
Many farmers feared that the crops maturing so quickly would have a knock-on effect on grain quality and yield. Happily, the majority of growers of winter barley are reporting higher than average yield and respectively high specific weights, with many near or over 70kg/hl.
The warm dry weather has also seen crops harvested with moisture levels below 15%, with some being cut below 12%. This is saving farmers a significant amount on drying bills, which is a major factor when energy prices are so high.
The early harvest has extended into oilseed rape crops with spring barley and winter wheat crops progressing at a rate too. Weather permitting, it is likely that the majority of cereal crops will be harvested in August.
Following the performance of winter barley, there is greater optimism amongst farmers about the likely outturn of the spring barley and wheat crops. However, there is a slight concern around the quality of some of the spring barley crops which look to be maturing too quickly, which could have an effect on grain size and weight.
Apart from a very minor tonnage of old crop 2021 harvest wheat, all the focus is on the current position of the 2022 values.
The volatility in the prices of wheat and barley has continued to make a judgement on when to buy or sell very difficult. While there have been several triggers which have created a minor bullish drive on prices, the general sentiment has been on the bearish side with greater expectations that more exports will be achieved from Ukraine.
The situation is still very fragile, and things could turn around very swiftly again if anything happens to any of the cargo ships transporting the maize and wheat out of Odessa.
There has been little overall change in Nov 22 wheat futures since early July – still trading around £265 which leads to a harvest wheat price of about £260 ex-farm.
Poorer maize crops in Europe caused by the extremely warm temperatures over July are giving some support to the wheat market. Close assessments of the US situation with weather affecting their crops will be needed over the ensuing few weeks to get an idea of how futures prices will go.
There has been a greater downturn in barley prices due to the considerable amount of grain being offered in the market just now because of the active barley harvest and the respectably good yields of the crops. Typical ex-farm prices are currently working around £200 - £205 for immediate movement.
With spring barley harvest just round the corner, if there are large yields or poorer quality in these crops then prices will remain under pressure but, with a significant malting demand being reported, if the quality is all good along with only average yields, it may present a tighter availability causing a firmer base to form again.
Although the grain values appear slightly more settled than seen in the previous couple of months, the volatility could return unexpectedly with circumstances in Ukraine still far from being resolved.
Looking at the prospects for the 2023 harvest and the input costs such as eye-wateringly expensive fertiliser putting pressure on grower’s decision-making over the next couple of months when winter barley and wheat crops are due to be sown. The Nov 23 futures price is a major factor influencing these decisions and while it is trading quite weak at £239 currently, some growers may be tempted to reconsider their normal cereal rotations. Once again, time will tell!