UK ex-farm wheat is now trading at well below £100/t, adding to the woes of farmers who have struggled to get their crops off the fields and then faced additional drying costs getting it into a saleable condition.

To some extent the continuing slide in prices, which are now below June 2007 levels and some £85/t off the market peak, reflects a degree of “harvest pressure” from late cut crops.

“As available grain is still coming to market, on top of the stuff that was sold for September/October delivery a couple of months ago,” said trader Robert Kerr of Robert Kerr Agriculture.

But the main factors weighing down the trade are to be found on the international market.

Recent crop reports from around the world confirm the massive increase in grain output this season – the direct result of farmers raising their plantings in response to last season’s high prices, combined with generally favourable growing conditions across the northern hemisphere.

In Europe, latest figures from French analysts Strategie Grains put EU-27 wheat production this summer at 137.6m tonnes, which is almost 4m tonnes up from their August estimate and a market-altering 26m tonnes more than in 2007.

As a result, wheat exports from the EU are expected to double this season to over 15m tonnes, with France contributing 8m tonnes alone.

Russia and Ukraine have also enjoyed bumper harvests and are looking at record exports, adding to the bearish sentiment.

american harvest

According to newswire reports from Moscow, the government is predicting up to 100m tonnes cereal production this year, of which 60m tonnes is wheat. Russian wheat exports for the first two months of the season already exceed 3.8m tonnes, with sales to Turkey, Iran and North Africa. Total grain exports this season are forecast at 25m tonnes.

Meanwhile, Ukrainian grain production is put at 47.5m tonnes, according to market analyst UkrAgroConsult, 18m tonnes up on last year.

And further afield, India has reported a record wheat harvest of 78m tonnes.

“Everywhere you look in the northern hemisphere, countries are reporting above average harvests,” said Mr Kerr. “It’s a reversal of last year.”

This has prompted a lot of aggressive selling, especially in the second half of the season.

“The main consuming areas, such as North Africa, Pakistan and India have all been in and bought and have good cover to Christmas,” said David Doyle, export manager with Grainfarmers. “Exporters with big crops to sell are now looking to trade in the January to June period and this has brought forward prices down.”

Having seen values slide for several months now, there is very little to provide UK and EU cereal growers with much cheer.

About the only “bullish” factor to emerge in recent weeks has been a weakening of the € against the US$ – down about 8% since July to about $1.46. This makes EU exports more competitive in world markets and assists export earnings, though the € has now started to recover.

The US Department of Agriculture has also trimmed its maize estimate, due to the late harvest and the impact of Hurricane Ike in some southern states.

And in the southern hemisphere, Australia has cut its harvest estimate for 2008/09 from 24m tonnes to about 22.5m tonnes due to continued problems with drought. But this is still well up on last year’s pitiful 13m tonnes, suggesting Australia will be more of a player in the international market this time around.

Meanwhile, Brussels is understood to be considering reintroducing import tariffs to lend support to the market. Reports from last weekend’s informal meeting of EU farm ministers in southern France suggested that agriculture commissioner Mariann Fischer Boel was “keeping a close eye” on market developments.

But there was no need to step in to shore up prices just yet.

USA predicts record world wheat crop

The US Department of Agriculture this month predicted a world record wheat crop of 676m tonnes, raising its August estimate by 5.5m tonnes. This compares with a 2007/08 world wheat harvest of 611m tonnes.

This is largely in response to the bigger wheat crops in Europe and the Former Soviet Union, though the USA is also expected to contribute 67m tonnes and Canada 25m tonnes.

With global demand pitched at 655m tonnes, the USDA is predicting a significant increase in “end stocks”, up from 119m tonnes to 140m tonnes – putting downward pressure on prices.