The weather continues to dominate markets and since June 20, we have had no rain and for the year to date at the end of June we had 320mm or 12.6 inches. Earlier in the year we had the long spells of rain and snow followed by the Beast from the East and in March we had 93.1 mm which was the wettest March month since 1903 according to John Aitchison’s Lochton rainfall records that go back to that year.

In May we had 13.3 mm and June had 34 mm which included 22 mm falling in one 12 hour spell during one night.

This dry weather is similar around the world and is affecting yields which in turn is pushing up prices.

German grain production has been forecast at 41.0 Mt which if confirmed, would be 9% smaller than 2017 and the smallest since 2007 and again this is due to the hot and dry weather. They also have a smaller planted area of winter crops with wheat down by 6% from last year, barley down 1% and rapeseed down 3%. The smaller German grain crops will reduce export availability in 2018-19 and from a UK point of view, Germany accounted for 26% of UK wheat imports between 2012-13 and 2016-17. Conversely with a fall in German rapeseed output, this could lead to a higher import requirement for 2018-19.

The GB wheat area is down 2% from last year and winter barley is down 7%, oats up 2%, but spring barley is up 4% which is mostly in Scotland and Northern England. Oilseed rape in Scotland and England is up 9%, but even though the area is up year-on-year it is still low in comparison to recent history. The continued trend for a declining wheat area, combined with lower stocks, and the current dry conditions could leave the 2018-19 domestic supply tight once more, resulting in higher prices.

Global grain production has been estimated 12 Mt lower than was projected in late May following adverse weather in Russia and the UK. Global grain output is now pegged at a three-year low, as bigger production of maize and sorghum only partially compensates for poorer wheat and barley crops. Global demand has also been cut since May but is still projected 21Mt higher than 2017-18 and results in a marked decline in global stock forecasts.

Following the start of harvest in Russia, where yields are down by 9% from last year, albeit with less than 10% cut so far, yields are down at around 3.82 T/Ha and with France and Germany experiencing lower yields the markets have panicked this past week and seen Liffee feed wheat futures up by £13.00 /T over the last week alone and at time of writing stands at £172.25 for November 2018. At £169.00 per tonne last week the November 2018 contract was the highest new crop price recorded at this stage ahead of harvest since 2012 and Oilseed rape rose by approximately £10.00 per tonne over the same period. This all due to the EU commission cutting production forecasts and ongoing challenging weather due to high pressure continuing to dominate across northern Europe with above average temperatures and limited rainfall.

In the UK the Met Office reported that June 2018 was one of the UK’s top five warmest Junes from records dating back to 1910, with limited rainfall in many areas. With these conditions forecast to continue for at least another week concern for UK crops is likely to increase.

Harvest is just getting underway in the south of England, but it is too early to draw conclusions from early cut fields as there has been some variability in yields and quality at this very early stage. The ongoing dry and hot weather is ripening crops more quickly than normal and in Russia they had cut 2.5 million Ha by the 2nd July compared to 300,000 Ha last year at the same time when harvest was delayed by rain. The Ukraine harvest is around 2-3 weeks ahead of normal and recent rain has helped soil moisture levels, but the rain is too late to benefit winter crops which are partly or fully ripe in most of the country.

UK ex farm feed barley prices have continued to average around £145.00 through May and June after rising through most of the season, in part supported by strong demand from the animal feed sector. With the current hot and dry weather which is causing concern for arable yields, it is also impacting grass growth. This not only has implications for the current feeding needs of livestock but also potentially forage production and could mean an increased need to supplement feed in winter, especially as cereal straw length is going to be short which reduces tonnage and again will see the price of straw remain high for livestock requirements throughout the winter to come.

European malting barley prices have moved up considerably this past week with uncertainty from growers about yield and quality in several key malting areas of Europe, including the UK. A number of large European Brewers are looking to enter the market and take cover, thereby driving prices higher.

The demand for the important whisky industry in Scotland is about one million tonnes of malting barley but Scotland can only produce about 750,000 tonnes itself with the rest coming from England or elsewhere.