Drought continues to boost grains and oilseeds

Grain and oilseed rape prices have jumped again this week, amid ongoing fears of the effect dry weather across Europe is having on yields.

Old crop wheat prices rose by £7/t, to average £188/t ex-farm, with November futures up by almost £11/t on the week.

France’s crops are already in crisis, with Agritel’s first estimate of the 2011 wheat harvest pegged at 31.7m tonnes – a drop of 11% on the year. Germany’s crops are also suffering, with the Co-operative Association estimating a 7% drop in production, to 22.3m tonnes.

“Slow US corn plantings and declining crop ratings for US winter wheat are also seen adding support to the wheat complex, with London new crop wheat futures up almost £30/t since the beginning of the month,” says David Sheppard, managing director at Gleadell Agriculture.

However, crop prospects in Eastern Europe and the Black Sea regions remain favourable, meaning any rain could spark profit-taking in the market, he adds.

Oilseed rape values have increased by £14/t over the past week, to about £400/t ex-farm for both spot and harvest movement. “The German co-op association put production down 23% and similar losses are expected from France and the UK,” says Gleadell trading manager Jonathan Lane.