WITH ongoing difficult and variable weather conditions, harvest continues to be a stop start affair, though some are now into their spring barley and winter wheat, having harvested the winter barley and oilseed rape.

The spring barley malting quality appears to be satisfactory, with reasonable nitrogen levels but a higher level of skinning than normal is a problem in most areas. Some maltsters, though, have relaxed their intake specification in order to get their required tonnage, so it's worth checking with your buyer.

Malting barley prices and premiums have picked up this past week as a major EU brewer has come into the market looking for its malting barley requirements.

In 2015, UK malt manufacturers sold 1.27m tonnes of malt, which was the lowest volume since 2011 and just under 15% was exported. Imports of malt in 2015 were 8% lower than 2014 at 43,700 tonnes, indicating a decline in the domestic consumption of malt in 2015.

In the UK, around 50% of the malt produced is used by distillers and 30% is used by brewers. However, unlike other UK agricultural commodities, such as wheat and barley, the majority of UK malt is shipped to destinations outside the EU.

In the first six months of 2016, the UK exported 102,200 tonnes of malt, which is 21% ahead of the same period in 2015. The main drivers behind this increase is a rise in shipments to Thailand, Malaysia, Vietnam, Taiwan and Germany.

How much malt the UK produces in 2016/17 will depend on a number of factors, including the quality and quantity of this year’s barley crop. So far, this seems satisfactory but there's still a long way to go yet in Scotland.

A weaker sterling makes UK malt more export competitive and, since the start of the calendar year, the value of the pound has declined against a number of currencies, including the euro and the US dollar. These are two key price markets for which the UK arable trade is heavily reliant on.

The weakness of sterling against the euro through much of 2016 has helped progress the export campaigns for cereals, especially wheat. Between January and May this year, the we exported 1.6m tonnes of wheat, compared with 992,000 tonnes in the last six months of 2015.

The impact of a 5% reduction of the pound against the euro and an 8% drop against the US dollar at the end of June immediately caused an immediate rise in new crop UK wheat futures of almost £5 per tonne.

Since then, UK prices have also been supported by the impact of European crop concerns. Additionally, the relative weakness of the pound against the euro and US dollar has helped keep UK prices elevated.

This means that sterling's fall against a number of currencies has been a greater influencing factor for UK arable markets than supply and demand over the past few months.

UK wheat yields appear to be satisfactory so far but will not reach levels of last year, though the quality is the best for several years.

Other countries are also experiencing good yields with Canada expecting a 30.5m tonne wheat harvest, which has only been achieved once in the past 25 years, but Russia, which was expecting a 70m-tonne plus crop, is now looking at around 68m tonnes.

Chicago wheat futures hit a 10-year low this past week as the International Grains Council forecast world grain output to a record high, including a record overall wheat harvest as well. The forecast for combined 2016/17 world production of wheat and coarse grains such as barley, maize and sorghum was lifted by 23m tonnes to 2.069bn tonnes.

For wheat and maize, the figure was raised by 13m tonnes to 1.03bn tonnes. With a good wheat harvest in the US as well, total world wheat production was raised by 8m tonnes to a record 743m tonnes and will see an increase of 12m tonnes in world stocks to 229m tonnes.

The stronger dollar makes US wheat less competitive on a world export market that is already saturated with large tonnages of wheat around the world.

Despite heavy wheat supplies, wheat quality is not that good in many countries such as Russia and in Europe, especially. Protein levels in the US soft red wheat at 9.1- 9.4 % are the lowest on record going back to 2005 and the proportion of the EU harvest this year making milling grade is expected to come in at 66% which is 5% down year-on-year.

The EU wheat output forecast has been cut by 3.8m tonnes to 145.2m tonnes due to the poor French and German harvest, which represents a 9% reduction year-on-year and will see an exportable surplus of 25.5m tonnes, which will be 8.4m tonnes less than last year.

That said, UK wheat stocks at the end of 2015/16 increased by 34% year-on-year to the highest on records going back to 2007.

Canadian rapeseed production has been estimated lower for 2016 to around 17m tonnes. Canada is by far the world’s largest exporter of rapeseed/canola and the second largest producer behind the EU.

So, given that the EU is estimated to have produced the smallest rapeseed crop since 2012, the EU will be looking to Canada to replenish the EU requirement for rapeseed and the lower Canadian output will affect market prices in both regions.

The strong price gains for UK rapeseed prices recently have come about because the UK has moved to a price premium over other EU markets (given the tightness of domestic supplies) and EU prices themselves have also moved higher relative to world markets.