By Doug Niven

The weather here in the Borders continues to be better than normal with a milder climate for the time of year, also enough rain for the winter sown crops to grow but strong winds continue on a regular basis.

Europe on the other hand is still having drought conditions which is giving concern for their winter crops and already in south east Europe an area that was meant to be growing oilseed rape is now going to be sown with wheat or some alternative crop. The French rapeseed area for the 2019 harvest is expected to drop by up to 35% due to the drought and would put the planted area approximately 500,000 ha below the 2018-19 sown area. As a result Paris rapeseed futures rose but UK delivered rapeseed prices fell due in part to strengthening sterling and oilseed rape delivered Erith last week was down £3.00 to £334.00 per tonne.

The drought has resulted in many malting barley export vessels from the UK being used instead of the normal freight barges due to the continued low river levels across Europe and this has given UK traders an opportunity to release stocks ahead of the uncertainties surrounding Brexit.

Feed barley values have been under pressure as barley struggles to keep its place in domestic animal feed rations due to the lower price of wheat resulting in more feed wheat being used. Feed barley prices have been supported by stronger global and European prices, as global consumption is forecast to outstrip production for a third consecutive year. Two weeks ago ex-farm bread milling wheat was down £6.60 to £173.70, feed barley was up 10 pence to £164.40, feed barley was down £1.30 to £165.00 which is a difference of £2.00 between the two commodities, earlier this month feed wheat dropped by £3.60 whereas feed barley fell by just £1.00. Last week bread milling wheat was up 60P to £174.30, feed wheat was down £1.30 to £165.00 and feed barley was up 10P to £164.40 so now only 60P difference between feed wheat and feed barley.

Last week May 2019 Liffee feed wheat futures were down £3.20 to £171.30 but recovered slightly earlier this week and for November 2019, down £2.65 to £154.60.

Sterling rose against the euro last week and is at its highest point since the end of April this year and is based on increased optimism surrounding the potential for agreement on a Brexit deal. Weaker sterling increases export competitiveness, meanwhile strengthening sterling increases the competitiveness of imports.

UK consumers of feed and milling wheat appear to have sufficient supplies to see them into 2019 and as prices fall there is little interest in consumer buying as the UK London futures market has now fallen £12.00 in the past month. Even with this fall, the UK remains too uncompetitive to win any export orders and this will have to change as the once tight balance sheet now gives way to an ample supply for the remaining demand following the high maize and wheat imports. Milling wheat supplies look to be more than adequate and even with small premiums over feed there could still be lower prices to come.

Global wheat production has been revised upwards by 9.2M tonnes and global stocks are also up by 8.9M tonnes to 254.4M tonnes but this total is 12.4M tonnes lower than last year.

The US is set for a large hard red spring wheat crop of 16.0M tonnes which would be 53% up on last year’s drought affected crop and would be the second largest crop since the 1992 record. US farmers are looking to plant 20.6M ha of wheat for 2019-20 which would be an increase of 6.7% from last year.

This is not the case in Kansas who are the primary winter wheat state in the US where rainfall in parts of the eastern and central Kansas has seen two to three times the normal October rainfall with up to nine inches being recorded. Kansas was expecting to plant 10% more wheat than last year’s 7.7M acres but to date has reached 76% planted compared to the five -year average of 89%.

Dry weather is still affecting Australian crops and their wheat and barley production is forecast to be down by13% and 17% lower than the previous September report and will also increase the amount of cereals cut for hay, further reducing supply, in contrast Argentinean wheat production is estimated at a record 19.9M tonnes but recent frosts could have reduced that crop potential.

Russia, who are the world’s biggest wheat exporter has played a major part in influencing prices this season as their wheat yields have been reduced by poor weather which saw their wheat crop drop by more than 15M tonnes on last year’s record 85M tonnes. In August there were rumours of a possible Russian export ban which resulted in global wheat futures markets rising to contract highs but so far this ban has not taken place but traders are still concerned that it might happen anytime. It is expected that more than half of their export target of 34M tonnes will be shipped in the next few months and exporters will have to go further inland for their wheat tonnage which will push prices higher but it has also become apparent that there are some quality issues which has seen a jump in US wheat futures.