At last, we have had some warm sunny weather which has seen crops jump and potatoes are all rowing up nicely in the drill.

With temperatures around 20°C last week and much the same this week it all bodes well for crops catching up. This follows a cold wet May where 69.1mm of rain was recorded at Lochton, near Coldstream.

This rainfall in the Borders is in contrast with other areas in the UK, where the Met office has stated that May, 2021, was the wettest and coldest this century with 119.5mm of rain in May – the fourth wettest May month since records began in 1862.

Weather issues around the world have caused price volatility and on May 7, November feed wheat futures stood at £192 and have been going up and down since then. On June 8, they were at £178.90 which is a drop of £15/tonne during that period. May, 2022, futures are currently at £182.95, November, 2022, are £168.55 and old crop July, 2021, stands at £201.70 per tonne.

Much of Europe, the Black Sea and central and southern areas of the US all look set for good yielding crops. In contrast, much of the northern US, along with North and South Dakota – primary spring wheat producing states – are being affected by extreme drought and the forecast is to continue to be hot and dry.

The US spring wheat condition is rated at just 43% ‘good to excellent’, compared to 80% at this time last year and the current crop has the worst condition index since 1988.

More rain is also needed in Russia to maintain crop potential and the forecasted wheat yield has been cut back to 80.9m tonnes – in 2020 it was 85.9m tonnes. But, given better weather its 2021 wheat crop could yet reach 90m tonnes.

Russia’s floating wheat export tax began on June 1 and is set at $28.10/tonne and this looks likely to be a permanent feature. It is to protect Russia’s domestic market should global food demand continue to increase, which is certainly the case for wheat for which consumption is rising on average by over 1% per annum.

The floating tax will change again from the June 9, increasing to $29.40/tonne for wheat and $50 for maize.

The Canadian wheat producing regions are also suffering from dry conditions, but this allowed planting to go well and is now 97% complete, well ahead of the five-year average of 92% at this time.

Recent rainfall has helped improve wheat production prospects for the EU-27 which are now expected to produce 126.2m tonnes of wheat this year – well up on last year’s total of 117.2m tonnes. However, increased domestic demand and export estimates leaves stocks falling by 600,000 tonnes on the year down to a tight 10.8m tonnes.

French wheat ratings stand at 80% ‘good to excellent’, compared to only 56% last year which is one reason for the EU wheat tonnage expectation.

Australian farmers have also been drilling wheat in near ideal growing conditions. They have had widespread rain and forecasts are for an 80% chance of higher than average rainfall for New South Wales and South Australia over the next three months.

Western Australia, which is the largest producing state for wheat, is having ‘average’ rainfall and Australia is looking to produce around 29.5m tonnes of wheat, or 2.5m tonnes higher than recent estimates.

The AHDB forecast that GB wheat production will be 14.6m tonnes, which will not be enough to balance the supply and demand for this year. Exports are now estimated at 180,000 tonnes, a so deficit in operating stocks of 303,000 tonnes is estimated.

So going into the new season, the market is short of 300,000 tonnes and that will need to be made up either through a timely UK harvest, or new season imports. With a forecast production of 14.6m tonnes and the tight opening position for 2021-22, UK availability before imports would be 1.35m tonnes short of the 2015-20 average and it would take a miracle for production to reach 15.98m tonnes to hit average levels of supply.

There is a marked year-on-year drop in stocks of both wheat, down 51% and barley, down27%, meanwhile oat stocks are set to rise.

With supplies remaining tight going into next season and future demand for wheat increased once again due to the re-opening of eating places country-wide, it is interesting to note that demand for wheat by the human and industrial sector is only estimated to be down by 5% on pre-pandemic levels.

It is highly likely that we will see increased home-grown wheat use, although this will be dependent on yield and quality.

One area where we will likely see an increased use of either imported, or domestic wheat is for ethanol production and with the discount of maize to wheat very narrow, wheat will be used more in livestock rations as the price of barley compared to wheat is closer than in recent times.

In May, ex-farm barley for August delivery was worth £40.10/tonne less than wheat, but with barley now scarce, the discount has narrowed and will result in more wheat inclusion in rations instead of barley.

Taking into account reduced availability of wheat, before exports and a potential for increased demand, we are likely to see a strong incentive to import. This means that UK prices will need to stay towards the top of the global market.

In the short-term, with a deficit carried into the market, we could see increased volatility depending on the timing of harvest in both the UK and EU.

With the UK having a strong need to import next season, both global grain markets and currency will be important for the UK market. With currency, recent sterling strength against the dollar has made imports cheaper, reducing prices.

Ongoing pandemic recovery, both in terms of global health but also in terms of economic recovery, will be vital to setting the direction of prices.

Barley prices, as with wheat, continue with values up one day and down the next. With the recent warmer weather and more grass available in the fields for livestock, this has reduced demand for barley in feed rations.

Feed barley usage was 52% higher in April, 2021, than in April, 2020, and overall barley usage in the feed sector from last July until April this year was up 42%, compared to the previous season and has resulted again, like wheat, in a tight end of season situation for barley in the UK.

Between January and mid-May this year 19% more feed barley had been moved compared to last year for the same period and this year over these months feed barley prices have increased by £29.40 up to £176.90 per tonne.

This has seen barley usage in feed manufacturing up 41.1% from last season with usage at 5.31m tonnes, which compares to the average over the last five years of 3.808m tonnes due to the significant price discount to wheat.

Barley use for brewers, maltsters and distillers has dropped by 12.6% from last season due to the closure of the hospitality and events industry, but brewers are now working at maximum capacity as the weather improves and lockdowns ease across the UK to cope with the expected upturn in beer demand.

In the AHDB February estimates, the domestic supply balance of barley was cut by 674,000 tonnes to 2.3m tonnes and this was 708,000 tonnes less than last year and is due to increased feed consumption levels.

Barley production for this year is forecast at 7.4m tonnes which would be 900,000 tonnes down from 2020 due to a vastly reduced planted area estimated to be 30% less than last year.

The AHDB Early Bird Survey shows a small 2% increase in the UK oat area for harvest 2021 and if the five-year average yield of 5.4t/ha is used this would see a 2021 oat crop of around 1.16m tonnes. The five-year high yield of 5.9t/ha and five-year low of 4.9t/ha gives a potential production range between 1.05-1.27m tonnes.

As mentioned earlier, more wheat is expected to come back into animal feed rations in place of barley and oats will need to keep competing for animal feed demand to help balance the market and price will be an important part of this competition. Total oat animal feed is expected to reach 384,000 tonnes in 2020-21 and this would be the highest volume dating back to 1999-2000.

In the week ending May 20, the UK average spot ex-farm feed oat price was £131.90/tonne and this is £50.80 below spot feed barley and £69.80 below the spot feed wheat price.

The oats grown for milling are priced differently from feed and export samples and milling oats will have mostly been grown on contract where the price will have been agreed over a year ago in line with wheat futures markets.

A total of 536,000 tonnes of oats are currently expected to be milled by the UK industry this season which would be 3% down on last year but in line with 2018-19.

Stocks at the end of 2020-21 are estimated at 164,000 tonnes which is 54% higher than last year’s low level and the highest since 2013-14. The rise in stocks is due to a drop in exports and the total exportable surplus in 2020-21 is forecast at 40,000 tonnes which is 67% or 120,000 tonnes less than last season.

As is the case with other commodities, volatility continues in the oilseed market with UK domestic prices rising by over £30/tonne last week which is due to current low stocks, current good growing weather and at the same time concerns if the weather deteriorates and yields suffer as a result.

Oilseed rape for November delivery to Erith last week was worth £449/tonne and new crop Paris futures gained more than £30 at the same time.

In March, 41% of UK oilseeds were rated as ‘good to excellent’, compared to 26% last year at that time and now yields of 3.41t/ha are being forecast. This could produce a crop slightly up on last year despite a near 60,000ha drop in planted area.

As of mid-May, EU rapeseed prices have gone up by 54% over the past 12 months to reach 15-year highs but there was a recent period also when prices fell by £40/tonne based on better weather conditions and plummeting crude oil prices, all of which are causing this price volatility.