This past week has seen the continuation of dry weather conditions with some odd heavy rain showers, but we have not had a prolonged wet day since March and coupled with that we had Storm Arthur last week that brought gale-force winds but no rain and this just dried things up even further.

However, the rain that fell did some good and got the spring crops growing, but some farmers on light land have been irrigating spring barley and potato irrigation is getting under way this week in earnest.

The ongoing dry weather is affecting crop potential for this harvest and the latest AHDB crop condition reports 26% of winter wheat in the UK is rated as ‘very poor’ or ‘poor’ which compares to 5% in the same condition last year at this time. Also, since the last report in March, when the same condition rating was 18%, it shows that the crop is continuing to suffer from the ongoing dry conditions.

A third of the spring wheat crop is also ‘very poor’ or ‘poor’, which last year was rated at 2% and the current rating of ‘good to excellent’ stands at 22%, way down on the 92% last year.

New crop November, 2020, wheat futures have reacted to this poorer crop potential and also sterling recently falling to its lowest level against both the US dollar and euro since late-March. So futures rose by nearly £5 per tonne to currently stand at £170 and this compares to November, 2021, where wheat futures are at £152.70 per tonne and currently July old crop wheat futures stand at £161.75.

The USDA’s most recent world grain report indicated that world wheat production will increase, given that Australia is due to produce an extra 9m tonnes up to a total of 24m tonnes due to recent rain and an estimated 80% chance of above-average rainfall from June to September. This would result in an increased potential wheat crop up by 40%.

Initially, Russia was expecting an increase of 3.4m tonnes of wheat production this year but again due to drought conditions its total grain production has been cut by 5.3m tonnes and now expects to produce 120m tonnes, which is 1m tonne less than last year.

The USDA report also indicated that the US is also suffering from drought, especially in Kansas, the primary wheat producing state, with their wheat crop rating dropping to 52% ‘good to excellent’, which last year at this time was 66%. The US wheat area is also set to be the lowest on record.

Europe is also in drought and yield estimates for 2020 have been cut from 5.87t/ha down to 5 .72t/ha. This knocks 3.5m tonnes from the EU wheat production down to 132.9m tonnes which would be 13.6m tonnes less than the 2019 harvest figure. The UK wheat total expected to be 10.74m tonnes, would be our lowest wheat production in the last 20 years by more than 840,000 tonnes.

With a reduced wheat crop and ongoing weather concerns, it looks likely that the UK will have a wheat deficit and need to import a tonnage of higher quality wheat from elsewhere, such as Canada, where over recent years the UK has imported around 350,000 tonnes annually. Germany is another source but tonnage depends on the amount of home produced UK wheat which in 2012 and 2013 the UK were in deficit, so we had to import more.

Last week, the UK government released its import tariff schedule which is due to come into force once the UK leaves the EU on December 31, 2020. We are set to adopt a zero rate tariff on high quality wheat – classed as over 13.5%protein, 78kg/hl specific weight and 230 Hagberg falling number – but below that, a tariff of £79 per tonne is proposed and this could cause supply problems after the end of December.

This will likely result in a major tonnage of lower class and feed quality wheat imports before the end of the year and in normal years, when the UK is a nett exporter, imports are likely to be minimal for feed quality wheat. A tariff on feed wheat would drive animal feed compounders away from wheat to maize, where the tariff is at zero.

This means there is likely to be a large tonnage of maize imported into the UK to make up feed rations this winter and the Ukraine is estimating to produce a 39m tonne maize crop, with an estimated 33m tonnes available for export.

Global maize production is forecast at 1186m tonnes which is up 72m tonnes from last year and the US maize production is the main increase with a 406m tonnes crop forecast, due to an increase in planted area of over 7m acres which would be 59m tonnes up on last year. Demand is forecast up by 4m tonnes to 1161m tonnes and a 25m tonne increase in global maize ending stocks at 339m tonnes and US maize stocks will reach a 33-year high of 84.9m tonnes.

US farmers have planted 80% of their maize crop which at this time last year stood at 44% due to excessive rain holding up progress.

But, US maize futures have held even with these large numbers as its ethanol production rose for the third consecutive week to 663,000 barrels per day but still some way to go to reach the total in 2017 of 1.1m barrels per day. The FDA predicts ethanol demand for maize this season will be around 126m tonnes, or 11m tonnes down on last year.

The UK feed barley market firmed last week on the back of the continuing dry weather across many global barley producing countries, especially in the EU and Black Sea regions.

Sterling falling in value also helped and it looks like the unusually large area of UK spring barley is suffering badly in many areas from stress and in need of rain. Some 13% of UK barley is rated as ‘poor or very poor’ according to the latest AHDB report compared to 3% last year, 38% is ‘fair’ compared to 21% and 48% is ‘good or excellent’ compared to 75% in 2019 at this time.

Winter barley shows similar results, where 25% is rated as ‘good or excellent’, compared to 89% last year and 45% earlier this year in March so crops are not doing well without some moisture.

On oilseed rape, 41% of the winter crop was rated as ‘very poor or poor’, which was rated at 19% last year and 37% two months ago in March. Only 20% had been rated as ‘good or excellent’ – last year it was 50% and in March 26%.

That means all UK combinable crops are stressed and yields at harvest could yet be worse than being forecast at the moment – soon it will be too late for rain to help yields for this harvest.

The UK area of winter and spring oilseed rape appears to have reduced due to either non planting, or crop failure and an expected crop of 336ha is nearly 200ha less than last year’s crop area. Oilseed rape prices, though, have risen by £10, due in part to the 2% devaluation of sterling and a €5 gain in European rapeseed futures prices.

As the Covid-19 lockdown eases, fuel use should increase which will help to ease the pressure in the biodiesel sector, which accounts for nearly half of all E U rapeseed oil demand.

With regards to availability there are concerns over future crop prospects and lower planted area and the EU is faced with its lowest supply of rapeseed for 14 years and 5m tonnes less than the record supply of 23.2m tonnes recorded in 2017-18.