Politics and the weather were once again the two primary factors affecting the grain markets in July, with both playing a significant role in creating volatility in cereal prices across both local and global markets.
With a little rain falling in June and July, seeing only localised rainfall, the drier spring conditions have brought the harvest to maturity earlier than ever before. The hot, dry weather across Europe has triggered wildfires, as well as taking a toll on grain performance. Many arable farms in central and southern England have seen yields seriously affected, which could well influence food pricing further down the line.
To date, the new Prime Minister has yet to comment on rural affairs, while focusing his early comments on welfare and health. At this point, it is uncertain and unlikely that the 2026 harvest will be so poor that it will put food shortages on the agenda. There is a possibility that food inflation may come to bear over the next few months.
Again, the ongoing wars in Ukraine and Iran have been active. The ceasefire that had been in place between the US and Iran has fragmented, and oil prices have once again soared. In the Black Sea, Russia and Ukraine have been targeting export facilities at crucial times when cereal shipping should be at its peak.
Crop conditions
What
With the warm, dry conditions, the 2026 harvest is already underway. For much of the south of England, this means it will be completed earlier than ever before.
Further north and into Scotland, there is little to no wheat yet cut due to the increased levels of rainfall that these areas have seen, which has prevented crops from maturing too quickly
This situation will be reflected in the crop yield, where drought-affected crops are variable and, in many cases, substantially poorer than in areas where there has been more rainfall. Reports from areas with more advanced crops are still suggesting that, despite poor yields, grain quality hasn’t been too seriously affected by the dry conditions.
Barley
The winter barley harvest has now been completed. Unsurprisingly, there is a north/south split over feedback on yield and quality of the grain from the harvest. As with wheat, the drought conditions in the southern counties have had a substantial effect on yield.
More concerning are the reports that many barley samples from those areas are showing smaller and lighter grains, which could affect their marketability.
Yields and grain quality in the crops further north are being reported as very respectable, which reflects the pre-harvest assessment ratings. All crops were cut during very dry weather, so famers will be able to keep drying costs down.
Spring barley is now being cut in the south of England, and much like winter crops, the dry weather has affected both yield and grain quality.
Many crops originally marked for malting are likely to fail the specification test. This means that growers will miss out on any possible premium on their crops. It is too early to judge the crops in the north of the country, as so little has been cut. With crop ratings showing very high potential, it is hoped that they will perform well. With no signs of lodging, harvest should progress reasonably easily.
Markets
Wheat
Previously, there has been a strong bearish sentiment from both UK wheat futures and physical market values easing back. Driven by the weather and geopolitical situations, which have triggered concern over the availability of grain, over the last few weeks, the whole trading situation has been turned on its head and has followed a very strong bullish trend.
The main areas of concern are the very hot and arid conditions across much of western Europe, along with the conflict between Russia and Ukraine, creating major issues in the shipping of grain from Black Sea ports of either of these countries. The weather has led to quite poor harvests across many parts of France and the UK, and is giving concerns about planting next year's crop. The Black Sea situation is preventing twoof the most aggressive sellers of wheat from being overly active in the market for the time being. In both these cases, it is difficult to know how big an effect they will have in the longer-term positions in the wheat trade, but they are certainly making their presence felt in the current markets.
At the start of July, the UK November wheat futures were trading at £179 and during July they rose very rapidly, topping out at £207 before falling back to the current level of £196.50 following some profit taking and recent talk of Ukraine finding means to protect some cargos which could take some pressure off the short-term supply concerns. The response noted in the futures market has been reflected in the more recent physical pricing of feed wheat, with October ex-farm prices in South Scotland reaching £200 (below £180 ex-farm at the start of July), and the feeling in the trade is that this market looks well supported at this level.
Barley
It is no surprise that the feed barley market has followed the upward trend shown by wheat. Although the winter barley harvest is complete, there is more physical barley being offered and traded. This has prevented the prices from showing as large an increase, with the Sept/Oct ex-farm prices in South Scotland trading at £170, only up about £5 from the start of July.
The expectations among merchants are that this price will likely strengthen given two main factors. Firstly, the bullish wheat market will pull barley prices along with it and, secondly, the recent announcements that the US are lifting tariffs on scotch whisky have suddenly given the malting market an unexpected boost. This will firm the demand for malting barley from a much-reduced spring barley acreage, which, in turn, will tighten feed supplies and push that market a bit higher. Another, slightly lesser factor but one which also lends support, is the possibility of a strengthening export market following the reports of drought-stressed crops of maize in France, expected to perform quite poorly. This situation will develop over the next couple of months.
This goes to prove how challenging it can be to predict market movements. It is only a few short weeks since the wheat market appeared to be comfortable, with reasonable stock and expectations for a good enough harvest to prevent any tightness of availability. Currently, the sentiment appears to be much more bullish, with growing concerns on the short and medium-term positions both within the UK and globally on all grain types.