The unsettled weather remains the main topic in the local newspaper shop in the mornings and gradually more doom and gloom is felt as crops start to deteriorate – oilseed rape is losing some seed in the wind and rain and wheat that has been tousled and is beginning to sprout.

Consequently, farmers are cutting their crops at higher moistures than normal, resulting in higher drying charges, combined with more costs trying to get the weathered winter barley straw which has been lying now on the ground for some weeks dry enough to bale.

UK wheat futures continue to be largely driven by the volatility of currency. Recently a further weakening of the pound saw the euro at €1.074:£1, which was a low not seen since 2009, it then recovered now to €1.096:£1. As financial markets are increasingly pricing in the possibility of a no deal Brexit, currency support has, to a degree, shielded domestic wheat prices from what has been a bearish global grain market.

UK November feed wheat futures have fallen to a contract low of £137.50 and are continuing to fall. Having now fallen through the psychological support price of £140 per tonne, our feed wheat futures are being driven by currency values and the prospect for a large domestic wheat crop. As the potential size of the crop has grown, and Brexit looming, the UK wheat price has been increasingly pushed lower.

With good harvest yields, the prospects are for a large wheat crop with talk of production above 15.5m tonnes. So far, only 27% of the UK wheat crop has been harvested and if this unsettled weather continues for some time yet, then these figures could dramatically change. To date, wheat yields in England have been averaging 9.9t/ha and a good proportion yielding over 10t/ha.

With a larger wheat crop expected, the necessity to export feed wheat has grown with the time period for the UK to export to the EU getting shorter by the day. In order to gain export sales to the EU, the UK has to move to a price discount to other exporting countries, such as those around the Black Sea and other EU countries.

The extent to which UK feed wheat will have to be discounted is still up for debate. While a hard Brexit remains a large risk to UK agriculture, in the event of a deal, the pound could likely reverse some of the Brexit effect. For instance, should the pound strengthen back to levels seen earlier in the year of £1:€1.17, then November, 2019, wheat futures may need to fall below £130 to stay export competitive.

Ex-farm volumes of feed wheat for August delivery reached 59,000 tonnes in the week ending August 8, which is a significant rise on previous weeks and this is a signal of large supplies and Brexit pressure for this crop.

The wheat harvest is drawing to a close in the rest of Europe and France was expected to finish in mid-August, and their yields have been higher than expected which has seen an increase in the EU-28 2019 soft wheat crop of 2.3m tonnes to 142.9m tonnes. This is almost 16m tonnes up on last year’s drought affected crop and provides a more than ample supply.

A recent report shows a year-on-year increase in domestic consumption of 7.5m tonnes and wheat exports will need to jump by around 3m tonnes on the year to avoid heavier year end stocks. There is optimism for EU exports following the recent slump in German, French and UK prices, however cheap freight from the Black Sea has allowed Russia and Ukraine to secure 175,000 tonnes and 120,000 tonnes of sales, respectively, to Egypt.

The UK barley harvest is well underway but due to the poor weather there is still some winter barley to cut in Scotland. Yields have been good and early spring barley harvested so far appears to be doing well, with yields and nitrogen levels looking positive at this stage of harvest.

UK export prices were supported at the start of last week by weaker sterling, but a firming currency towards the end of the week reduced competitiveness. In the week ending August 8, spot ex farm purchases reached 63,000 tonnes and is the first time barley purchases have reached that amount on records going back to July, 2000. Cumulative spot purchases of feed barley have reached 235,000 tonnes which is a figure not reached until April last season and this could be a sign of a big old crop carryover, as well as a big new crop.

The general sentiment for UK barley would suggest there is room for prices to move lower and if a tariff is applied after the deadline of October 31 for exports into the EU, there will be a need for barley prices to be at least €16 per tonne lower than EU barley to be competitive.

The USDA’s August world supply and demand report last week resulted in more pressure on cereal prices. A 2% increase in US maize yields and a 9% increase in maize stocks saw futures trading lower and with barley competing with maize in animal feed rations, this pressurised world barley markets further.

The report estimated the US maize drilled area at 36.4m ha and yields much higher than expected – with production estimated at 353.1m tonnes – and this pushed the US Chicago Board of Trade futures trading down and capped by the contract reaching the daily trading limit.

Oilseed rape prices could be set for support following the decision of the EU to impose increased import duties on Indonesian biodiesel, up from 8% to 18%. This could result in a switch in demand to biodiesel from other vegetable oils, however the increased duty is only provisional at this stage while the EU look into whether more definitive measures can be imposed in December.

Support for EU rapeseed oil has grown in recent weeks and rapeseed oil prices have risen to their highest point since November, 2018. The impact on UK prices will depend on sterling, which has strengthened against the euro this past week and reduces the impact of any EU rapeseed led price rises on UK prices.

The UK oilseed rape harvest is struggling with the poor weather conditions but yields have held up, though quality is now suffering. It is interesting to note that UK rapeseed prices over the past 12 months have risen by £24 per tonne, compared to wheat for the same period, which has seen prices drop of £39 per tonne.

EU oilseed rape production this season is currently forecast at 17.5m tonnes and Germany’s winter rapeseed crop will be the smallest for 22 years, which further tightens the EU rapeseed stocks. The tightness in oilseed rape production, combined with the potential for increased vegetable oil demand for biodiesel, could lend further support to EU and UK oilseed rape prices.

One more worry, though. Concern is starting to build about the implications of a no-deal Brexit for fertiliser prices as there will be a 6.5% duty on ammonium nitrate products if the UK leaves without a deal.