As the barley harvest gets under way in parts of England and wheat crops start to ripen, prices continue to feel the pressure of a large carryover from the old season and good output prospects for the new season.
“Markets were driven lower last week by the higher maize and wheat plantings estimates from the USDA, and there is still a hangover from that in the grain market this week,” said HGCA economist Jack Watts.
“The global feed grain market is well supplied, and as each day goes by and we do not have a weather problem, so the market becomes more relaxed.”
On Wednesday this week, spot ex-farm feed wheat was quoted at £93/t and feed barley at just £77/t, though at these values – which represent a drop of £17/t and £19/t, respectively, on month-ago figures – very little has been traded.
As well as the larger US feed grain crop, UK merchants continue to point to the large stocks of grain at home and in Europe weighing down the market. “There is a lot of old crop about and it has to price itself in if it is to be cleared,” said Frontier grain trader John Duffy.
There has been some support from the weaker pound this week. Against the euro it was quoted at 86.5p midweek, compared with 84p in mid-June. This has helped the UK’s export competitiveness and prevented prices slipping even lower.
Barley has been particularly pressurised in recent weeks. “It has become disconnected from the feed wheat market and is now having to compete with US maize,” said Mr Watts.
Figures produced by ADAS last month suggested that the spring barley area would be 18% higher than in 2008, more than compensating for the 4% drop in the winter-sown area.
UK barley is, therefore, expected to be in plentiful supply, which is adding to the pressure caused by the significant volumes of old crop still to dispose of and the arrival of new crop supplies in continental Europe.
It’s a similar story for wheat. “There are plenty of stocks around Europe and consumers have little reason to buy,” said David Doyle of Openfield.
Spot prices are being driven down by farmers looking to clear their stores ahead of harvest, though this is helping to set up a premium in the market for new crop, he adds. August wheat is quoted at £98/t ex-farm, rising to £106/t for November.
International commodity analyst Rabobank believes that, while there will be further volatility in the grain market, price levels are “reflective of their fundamental fair value”. There is a threat of an El Niño weather pattern disrupting supplies in the southern hemisphere later this year, but this should be counter-balanced by an increase in global wheat stocks for a second successive season, they suggest.
• For a Farmers Weekly view on the state of the grain market, see Phil Clarke’s Business Blog