The 2018 harvest is well underway in Europe and in the UK and yields so far for winter barley have been mixed – but probably better than feared following the long spell of hot dry weather.

At an EU28-wide level, the total wheat yield is now forecast 2.4% below the five-year average. Hot and dry conditions have resulted in increased concerns over yield and nitrogen levels across Northern Europe.

Temperatures in northern Germany, Sweden, Denmark and the UK have been significantly above average over the past few months and rainfall has been very low. As a result, France now anticipates no surplus spring malting barley in the EU in 2018-19 – a notable surplus had been expected – and its wheat production is expected to be down by 6.5% to 34.17m tonnes.

Overall world production is now expected to fall 21.7m tonnes from last year’s record and small cuts in consumption will offset some of this, leaving year-end stocks at 260.88m tonnes, which is 12.6m tonnes down on last year. This caused a recent rally in UK wheat futures, with the November, 2018, contract rising £12 per tonne in the past 10 days.

UK wheat production this harvest is unlikely to allow a significant exportable surplus, which means the UK's premium over European and global values will need to be maintained to prevent grain leaving the UK.

This premium reached a maximum on July 9 of £6.22 per tonne, but fell back to £2.65 by July 20. However, as the weather looked set to further cirtial yield, on July 23 the premium jumped back up to £5.59, when UK feed wheat's November, 2018, figures rose by more than the Paris December, 2018, futures.

Earlier this week, Liffe November, 2018, feed wheat futures rose even further and at time of writing stood at £179.25 per tonne – which was a rise of £3.75 from the previous day as the value of sterling continued to weaken.

So, UK wheat prices are continuing to firm despite harvest progressing well across Europe – a factor which usually puts a lid on price rises. It now looks like the UK's expected wheat harvest of 14m tonnes will mean more imports. So, the reductions in the wheat crop from key exporters such as Russia, Germany and France, will continue to push prices higher.

It looks likely that, with 2018-19 wheat crop prices where they are, we will see a bigger area of wheat drilled in the coming autumn. That could mean a return to bigger domestic supplies, especially given that it looks like an easy sowing window, unlike last year's.

Ex-farm UK feed wheat was up £11.40 per tonne to £161.02, feed barley was up £2.50 to £139.70, bread milling wheat was down 10p to £176.40 and oilseed rape delivered Erith was unchanged at £318.50.

There has been some wheat cut in the south of England and the report is that specific weights have been disappointing and straw length short. This will be the case throughout the UK and straw prices are now around £90 for wheat and £100 for winter barley, with haulage costs on top of that.

As the winter barley harvest progresses around the country. yields are mixed. In the Borders region, crops are coming at around 7.9 tonnes/ha, which is down 10% from last year’s 8.64 tonnes/ha, but specific weights are higher than last year. That is probably a result of the high hours of sunshine in recent months – malting quality also looks mixed with plenty of low nitrogens.

The AHDB harvest results information so far for the first winter barley trial yields – which includes the Scottish Borders and four sites in England – indicated that the average treated yield of control varieties at 10.11 tonnes/ha is currently ahead of the five-year average of 9.9 tonnes/ha.

The wheat harvest in the USA is progressing well and is now 65% complete, which is 4% ahead of normal at this time and crop ratings have been increased to 80% good to excellent which is a 43% increase from last year. If realised, the US could produce 3.8m tonnes more wheat than last year at 51m tonnes. Russia is now around 30% complete with yields just below 4.0 tonnes/ha but still forecasts an 18m tonne wheat crop reduction from last year.

Abundant rainfall in southern central and south-east Europe, where many large maize producing areas are located, will have been advantageous for that crop. The yield forecasts for Hungary, Romania and Bulgaria have been revised upwards and French maize yield forecast remains above the five-year average.

Dry weather in the US is causing drought in important maize and soyabean growing states situated in the Mid-west. Missouri, which has the 10th largest maize area of 1.38m ha and the sixth largest soya area of 2.3m ha, has seen drought conditions advance from 'severe' to 'extreme' in some regions over the past two weeks.

In Iowa, the US state with the largest maize area of 5.4m ha and the second largest soya area of 4m ha, the moderate drought has not seen conditions get worse in the past two weeks.

European rapeseed currently remains the most expensive oilseed in the world with a weak sterling and strengthening Matif futures helping UK values this past week.

Helping keep values is up is the fact that Australia's canola (OSR) crop production has been cut by 200,000 tonnes to around 3m tonnes due to drought and Northern European oilseed rape yields continue to disappoint with an estimated EU crop of 20.1m tonnes, which will be down from 21.8m tonnes in 2017.

The UK is in a similar situation as harvest is well underway, with average oilseed rape yields down from last year’s bumper crop but still remaining near running average levels.

The long spell of dry weather that we are currently seeing could cause new season planting issues – due to poor germination – in parts of the country if it persists. as of this week, it was looking likely that we have at least another two weeks of dry, hot weather to come.