Grain prices drop on yield and currency gains

Grain markets continue to feel the pressure this week, as news comes in of bigger-than-expected yields on the continent, while a stronger sterling undermines the UK’s export competitiveness.

London futures markets dropped another £1 on Monday (10 August), taking the November value to just £97.50/t, compared with £104/t a week ago. That would equate to a November ex-farm feed wheat price of about £92/t.

The most recent slide started in the middle of last week, when French analysts put the French wheat crop at 38.4m tonnes, 3% bigger than last year’s crop, as extra yields more than compensated for a smaller area. This would leave France with a 9-10m tonne exportable surplus.

The US is also looking at a bigger than previously-forecast wheat crop, as harvest nears completion in very favourable conditions. All eyes are now turned on the US department of agriculture, which will be issuing its latest supply and demand report on Wednesday (12 August).

Against this background, spot feed wheat prices have slipped to about £83-£85/t for those who have to sell, while barley is quoted at £75/t.

According to merchant Glencore, buyers are still reluctant to buy anything beyond the spot position.

Meanwhile, sterling has strengthened against the euro and the dollar in the past week. By Monday lunchtime it was worth €1.17, compared with €1.155 two weeks ago, making UK grain less competitive on export markets.

Despite this, the first shipments of UK barley have got under way, with merchant Gleadell loading 3110t of feed barley for export to Ireland.

grain vessel big

“It seems likely that the UK will produce its biggest exportable surplus of barley for over 10 years – maybe as much as 2m tonnes,” said managing director David Sheppard. “A strong export programme now will give growers an alternative to looking at intervention later in the season.”

According to ADAS, about 60% of the UK winter barley area is now off the fields. Yields remain variable (6-9t/ha), but quality is good, with specific weights around 65-68kg/hl and low screenings.

For a Farmers Weekly comment on current prices, see Phil Clarke’s Business Blog