The market is still being driven by the lack of rain in the UK, Northern Europe and Russia. What we have seen so far in the UK has been surprisingly good, at least as far as quality is concerned.

I must preface this by saying this is all from chalk land. The common theme has been good bushel (specific weight) on winter barley and wheat. The first lots of spring barley have also seen good retention and nitrogen. Yields – while probably 10% down on last year – have still been good, with most barley making five to 6.5 tonnes per hectare.

It’s too soon to say on the wheat, but again the chalk land has done well: hagbergs are high so far and protein is high – because of all the fantastic hours of sunshine in June. Heavy land is also OK. I cannot see the gravel or light land maintaining this. But it’s only 23 July: by the time you read this in August we will know a lot more.
In the last month France, Germany and Denmark have reduced their crop estimates. Apart from Spain/Italy, the problems are pretty well pan European: across Northern Europe including the former Soviet Union countries and right up to Russia and Ukraine are affected.

Before all this, the UK was already gearing up to a just about self sufficient wheat harvest with market prices based upon import values. Well we have that alright! The original wheat crop estimates of 14.5 million metric tonnes (mt) are now 14 million mt or lower. Maize is now emerging as a likely replacement for some wheat in compounding. Today maize is buyable for October/November/December at about the same value as wheat: so it does at least provide a ceiling – albeit a high one – to the wheat market.

As I warned last month, UK barley is different to wheat. Whatever happens we will have a surplus of feed and malting barley. What is surprising is the more or less seamless spot demand for feed barley as we have moved from old to new crop. In some cases we have the inverse affect of barley (which is actually available) being worth more now than its value in September or October/November/December. That will change as more barley is combined. So if you have it available, sell it now, while demand is good.

Oilseed rape so far is a very mixed bag. Generally it’s not been as good as expected. Add to this problems with “red seed” and moisture being too low, and I am pleased that I didn’t advocate selling any forward. Weaker sterling is helping: with less planted in the UK and Europe, it was due a rise in price and that should continue.
For a change the world supply and demand situation is playing second fiddle to the UK and Europe. Yes, even the United States Department of Agriculture was forced to reduce world wheat crop estimates last month. And with at least the same good demand as last year, it means strategic stocks in exporting countries will be reduced. Some point to that approximate 260 million tonnes of world wheat stock and take comfort from it. It’s only when you realise that 140 million tonnes of it is in China that they start to worry a bit more. Why? Well, if the rest of the world actually needed that wheat, especially in the west, China would be unlikely to let them have any. I can just imagine what they would say if President Trump asked for some!

The other fact to note is it’s the first time since the last big world price rise in 2012 that world demand will exceed new supply and the world will have to eat into strategic stocks. The trade/industry are making comparisons between the last big UK drought year of 1976 and the last Russian/Ukraine drought of 2012. I do not believe 2018 is a 1976 or 2012 year, and I was trading in both of them.

However there are two similarities to look out for. Firstly, by the end of both seasons, the high prices had disappeared and the market had fallen back to almost unchanged levels. Many greedy sellers missed the boat completely. Secondly, sellers believed that wheat had reached a new world trading level, from which it would not recede. So they would not sell forward for the next trading year, when the old crop was at its peak.

The following year wheat values went back to pre market rise prices. That meant a reduction of £50 per tonne. So the warning from history is there for all to see. I think we are close to the top of the wheat market: if not, so long as you eventually have the wheat, it’s a very good price to be wrong at.