My money’s on grain prices staying firm

I should probably apologise to those who have had little or no rain in recent weeks (and I’ve met several) for bragging about how well our winter wheats and barleys look.

We’ve had periods of rain interspersed with showers at the right time to activate nitrogen top dressings and the crops continue, apparently, to be virtually unaffected by the drought that all around me are panicking over.

It’s a long haul till harvest and the forecasters say we should expect a dry summer. If they’re right and it’s as bad as last year I shall regret being sanguine. We had a disastrous harvest in 2011 and I wouldn’t want a repeat. But last year, April was warm and dry, which was when the rot set in, whereas this time, with us, it’s been cool and wet. And the Met Office hardly has a perfect record when it comes to long-range forecasting. So I’m clinging to the belief (the hope?) that it may be wrong again.

Time will tell, but in the meantime, my thoughts have turned to the marketplace and the best time to sell the crop in the ground. Like last year, early pundits in Chicago and elsewhere predicted a glut of wheat but a shortage of maize. A bit like weather forecasters, pundits are somewhat unreliable and I wonder sometimes if they genuinely assess supply and demand around the world or just talk their own books.

In any event, the price of grain, which might, based on “expert” opinion, have been expected to slide to unprofitable levels, has so far held up rather well. Under normal circumstances, early May would be far too early to blame the weather. But as the drought map of Europe – published in Farmers Weekly a week or two ago – indicated, there’s a shortage of rainfall across most of the Continent. Presumably traders are factoring the probability of lower-than-average yields into their calculations, resulting in relatively firm prices.

Rightly or wrongly, we’ve sold about a third of what we expect to harvest, forward at current prices. All things being equal (and we don’t have more drought-reduced yields – in which case we may have sold rather more than a third of it) the prices we’ve achieved should leave a margin. And we’ve insured ourselves against a price collapse for at least part of the crop.

But of course, we may be wrong. Over the course of the next few months the weather market may turn out more extreme than expected at present and prices could go through the roof. Or Russia and the Ukraine could suddenly find they’ve got more to export than previously declared and the price here could plummet. There really seems to be that much uncertainty around the market. I miss the days when a movement of 50p a tonne got me excited. Nowadays it’s merely the price of a 2nd class stamp.

But if I were a betting man, and I’m not, I would put a quid on the market staying firm or even hardening. All around the world as the population soars beyond 7 billion, we’re beginning to see the long-anticipated increase in demand to feed extra mouths and generate energy. The Chinese have been out buying bigger quantities of grain and oilseeds than ever before. The USA is diverting even more maize to ethanol plants to replace or blend with petrol. And climate change or not, unusual weather around the world is making it difficult to produce optimum yields. The future may have arrived.

David Richardson farms about 400ha (1,000 acres) of arable land near Norwich in Norfolk in partnership with his wife, Lorna. His son, Rob, is farm manager.

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