Fears for maize crops push up grain prices

Grain prices are climbing, powered by fears for maize crops in the EU and US, as the hot, dry summer takes its toll on yields.

The EU’s Mars crop survey this week reduced the forecast for EU grain maize yields to 6.63t/ha. This was a 9% drop on July’s estimate and is 16% lower than the five-year average.

At this yield, EU maize production would turn out at 60.45m tonnes, more than 5m tonnes lower than the most recent forecast and the lowest EU maize output since 2015, said AHDB Cereals and Oilseeds.

In the week to Wednesday (23 August), the London feed wheat November 2022 futures contract put on £16, to sit at £269/t.

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Ex-farm spot values midweek were up almost £5/t on the week to average just over £250/t, and ranged regionally from £246 to £257/t.

With some good yields on later harvested wheats, trade estimates for the size of the UK wheat crop range up to 16m tonnes, slightly higher than earlier suggestions.

Feed barley values averaged £230/t, a rise of £8/t on the week. Barley remains tight both domestically and globally, with markets following movements across the wider grains complex, said AHDB.

With harvest complete in many regions, farmer selling has slowed, said Simon Wilcox, manager of UK farm grain origination for Cefetra.

Compounders and millers had come back into the market when prices dipped recently but this week things were quieter.

“Most are covered through to October, some to pre-Christmas, and at these prices they are not rushing,” said Mr Wilcox.

The International Grains Council recently forecast global cereal stocks at the end of the current grain year at 577m tonnes, which would be an eight-year low, adding to the upwards pressure.

Demand remains strong for wheat, although growing Ukrainian exports and a large Russian harvest are tempering price rises.

Higher wheat feed use is expected, alongside higher inclusion by ethanol plants, adding to the tightness of European wheat supply.

Uncertainty over demand from China is a downwards factor on grain markets as the global economic outlook remains depressed.

Estimates for the Russian wheat crop have included a string of upwards revisions, with the latest from analyst SovEcon revised up by 3.8m tonnes to 94.7m tonnes on the back of record yields and a better outlook for the spring crop.

This compares with a 2021 crop of 76m tonnes and is expected to provide a high level of export competition, although how successful it will be remains to be seen, said Mr Wilcox.

Other merchants have expressed doubts over shipping and insurance market appetites for this business.

Shipments from Ukraine continue to gather pace, with an estimated 563,000t moved through the Black Sea in the first half of August.

This was mainly maize, and Ukrainian officials have a target of 3m tonnes of exports in September and up to 4m tonnes a month after that, using up to 100 vessels a month.

Looking further ahead, the Ukraine Grain Union has warned that winter plantings for the 2023 crop could fall by 30-60%, mainly because of a lack of cashflow or access to borrowing at farm level.