By Doug Niven

When travelling around the countryside, it is good to see how the rain in June has freshened everything up.

Crops are now progressing well towards harvest and hopefully the rain came in time to help crops achieve somewhere near to their potential yield outcome.

However, predictions are for UK wheat, winter barley, spring barley and rapeseed all now to be below their five-year average, with cereal yields cut by 1% since the last estimate in May and rapeseed down by 3.8%. Recent rain will have been beneficial but likely still not enough in time to avoid the further downgrade.

Warmer weather forecasts for later this week should help the crops as harvest gets closer. Some winter barley crops are just 10 days to a fortnight away from the knife.

EU yields for winter cereals and rapeseed have also been cut but by around 2% due to the dry weather and wheat and winter barley are forecast to be 3% below the five-year average and rapeseed yields down by 6%. The EU average spring barley forecast, though, has been increased due to the good growing conditions and is put at 1% above average.

Maize yields have been increased to around 8% above the five-year average due to better growing conditions in Eastern Europe and Spain.

Spain is expecting a big barley crop compared to last year. It’s forecast to be up by 60-70% and also up on the five-year average by 20%. The barley harvest has just started there and also in south-west France, where early yields are ‘average; and quality is so far ‘reasonable’.

Global grain markets have continued to fall following publication of USDA figures showing both the 2019-20 and 2020-21 world wheat end stock forecast. Due to reduced demand 2019-20 season, stocks were raised to 295m tonnes and for 2020-21 season, stocks were revised 6m tonnes higher from the recent May estimate of 316.1m tonnes.

This is due in part to Australia expecting a 26m tonne wheat harvest, which would be an eight-year high and if realised would be a 71% increase on the 15.2m tonne crop produced in 2019-20.

Russia is also expecting a wheat crop of 79.5m tonnes, which is up by 1.5m tonnes due to May moisture pushing things along.

This increase, however, is offset by a US wheat production decrease of 2.2% from 2019-20 and the EU is expecting a cut of 2m tonnes of wheat this year down to 130.9m tonnes, or 11% less than last year.

Dry conditions in the Ukraine are seeing forecasts of a 68m tonne grain crop drop due to drought by up to 30% and their wheat forecast, at 23m tonnes, is down from 28.3m tonnes in 2019 and the French wheat crop is rated at 56% ‘good to excellent’ condition which is the lowest since 2011.

The EU, including the UK is expected to produce a wheat crop of 130.9m tonnes which would be 16m tonnes less than last year. The main reason or the downturn is a reduction in French wheat output of 7.5m tonnes and the UK down by 6.4m tonnes.

That all boils down to the EU is likely to be the world’s leading wheat exporter, ahead of Russia and could export 35m tonnes by the end of this month, but going forward, due to the lower expected wheat production this year, next season’s wheat exports could fall by over 9m tonnes to 26.1m tonnes.

The US wheat harvest is now nearly 20% complete, compared to 7% at this time last year and yields are reported to be better than expected. In Texas, the wheat harvest is now 68% complete which is well ahead of the 38% completed last year at this time and this has seen the Chicago Board of Trade futures coming under pressure and losing 4% of their value and falling to levels not seen since early September last year.

USDA projects that world wheat production will increase by 5m tonnes to a record 777.43m tonnes, which is 9m tonnes up on last year. End-of-year stocks will increase by 6m tonnes to a record 316.09m tonnes which is a 20m tonne increase on last year. It also estimates the global grains stocks-to-use-ratio, excluding China, will be 18.81% and the last time the ratio reached this level in 2016-17 feed wheat futures traded closer to £120 per tonne

UK November, 2020, wheat futures now stand at £164 per tonne, a fall from the £173 recorded at the end of May.

In Paris, September, 2020, wheat futures stand at £180.50 and for May, 2021, £186.50 per tonne. UK wheat futures for November, 2021, currently stand at £150 have been trading for 10 months and have closed in a range between £145.35 to £158.80, which is currently £14 per tonne below the November, 2020, figure.

Barley is still priced at around £30-£34 per tonne discount to wheat and prices have eased similar to wheat prices in recent weeks.

Going forward, the UK will need as much wheat as possible with only a 10.7m tonne harvest this year as there will only be a minimum carry over into the 2021-22 year season. Hopefully, the UK wheat area and production will recover for harvest 2021.

UK wheat demand is uncertain due to Covid-19 but with the expected reduced wheat crop this year, demand is expected to exceed production and higher grain imports will be needed in 2020-21. However a UK barley crop of 8.1m tonnes is expected based on the AHDB Early Bird Survey and historical yields.

Due to the 16.5m tonne UK wheat harvest in 2019-20 and a carryover of wheat into this season, this has contributed to the UK highest wheat stocks in recent records, estimated at 3.4m tonnes and 1.2m tonnes of barley.

Oilseed rape markets have picked due partly due to the temporary closure of the Erith rapeseed crushing plant following an explosion last week and it is not known at this time when it will re-open. The UK delivered rapeseed price for harvest delivery increased by £6 per tonne last week to £338 and in Paris, August, 2020, rapeseed futures stand at £397.75 per tonne.

Above average rainfall for parts of Australia in recent weeks has seen their canola estimated production rise by 40% year-on-year to 3.2m tonnes and in the current year up to the beginning of this month the EU has imported over 880,000 tonnes of rapeseed from Australia and exports could increase with a larger tonnage produced next year and this will help the EU rapeseed import requirement next year.

France has estimated a rapeseed forecast for this year of 3.46m tonnes, marginally up on last year, but the EU rapeseed crop continues to be revised downwards and is now put at a 14-year low which would be a third of the crop produced in 2014.

The UK is forecast to have a rapeseed production of only 1.1m tonnes which would be the lowest for 25 years but the EU projected rapeseed crush volume is also expected to be down due to Covid-19 and the EU import requirement will be close to unchanged in 2020-21.