As I write this, the UK is experiencing one of the hottest, if not the hottest day ever recorded.

So far this month, which is now into its third week, we have only had 6mm of rain to add to the 221mm recorded so far this year to the end of June, so there are now water shortage alerts as well out there for many farmers.

Some winter barley has now been cut and first reports indicate good yields, good nitrogen levels for malting varieties and lots of straw!

But, if this dry weather continues, there could be yield penalties for crops still ripening as there is some time yet before the later crops will be harvested, especially on lighter soils.

In June, most of Scotland had above average temperatures which has carried on into July. Coupled with less rainfall than usual, this has caused some early senescence in crops especially further south in the UK. The next few weeks’ weather will influence yields leading up to harvest.

It is not only the UK that is experiencing this dry hot weather. Others in Europe have seen potential yields suffer and the EU barley crop is now forecast to be down 2.3m tonnes from 2021 at 49.6m tonnes and wheat production could be down by 6.6m tonnes, to 123.3m tonnes. That will add further supply concerns to an already tight supply market.

Around the world, we are seeing abnormally hot weather and minimal rainfall which is adding uncertainty and volatility to commodity markets. Lower yields because of weather and ongoing issues in the Ukraine have partially been offset by increased planted areas in the US and better yields in Canada and Russia.

So, despite a cut in global wheat production, a rise in carry over stocks and a fall in domestic use has led to an increase in end-season stocks. The 2022-23 world wheat end-season stocks are now put at 267.52m tonnes, up from 266.85m tonnes.

Global maize ending stocks are now forecast at 312.94m tonnes, up from 310.45m tonnes forecast in June. Maize consumption is forecast down by 1.04m tonnes and 2022-23 opening stocks have been revised up by 1.36m tonnes.

Nearer to home, AHDB recently released its latest Planting and Variety Survey figures for the UK for this 2022 harvest. The UK wheat area is up by 1% from 2021 to 1.807m ha which would give a total UK wheat production figure of 14.4m tonnes.

Total barley area for harvest 2022 is estimated at 1.103m ha, or 4% down on the year. The UK spring barley area is estimated at 656,000 ha, down 12% year-on-year and the lowest UK spring barley area since 2014. Winter barley area could be 10% higher at 447,000 ha and would see a UK barley production tonnage for this harvest of 6.830m tonnes.

Overall, 59% of the total UK barley area grown are designated malting barley varieties with full approval from the Institute of Brewing and Distilling and it is interesting to note that every single region in the UK has recorded a drop in spring barley area for this coming harvest.

Malting premiums are still high at around £60-£80 per tonne but this will drop if new crop barley samples continue to be of good quality and especially if there are plenty samples for the distillers and maltsters to choose from.

The UK oat area is estimated at 183,000 ha which would be 9% down on last year and production is estimated at 983,000 tonnes, which is down from a record crop in 2021 of 1.123m tonnes. That’s down to levels last seen in 2019 as growers turn back to sowing oilseed rape once again due to higher prices.

The UK oilseed rape area is estimated 9% higher than last year at 336,000 ha and that has a production forecast of 1.111m tonnes.

Milling wheat premiums continue to remain strong even though feed wheat prices have come down from the record highs when the conflict in the Ukraine broke out.

Even though feed prices have come down, they remain well above levels recorded this time last year. As of June 30, milling wheat for November delivery into the North-west of England was at a £66.95/tonne premium to November, 2022, UK feed wheat futures.

At this time last year, the premium of delivered milling wheat into the same area was £32.70/ tonne over the November, 2021, futures contract. It will be interesting to see what happens over the next few weeks as the wheat harvest approaches as this hot dry weather may impact on quality of the crop.

With harvest approaching and some wheat crops being cut in the south and in Europe, Liffee wheat futures have eased over the past few weeks. In the last two weeks, November, 2022, futures dropped by £6 to £260 and for May, 2023, futures were down £8 to £264.60 per tonne.

The UK import/export business in May saw 168,940 tonnes of wheat come into the UK and exports amounted to 100,163 tonnes.

Globally, there have been some large grain purchases taking place and Egypt has bought around 440,000 tonnes of feed wheat, adding to its 815,000 tonnes bought recently. The EU has dominated the sales securing two-thirds of the 1.2m tonnes sold in in recent weeks and interesting to note that not many tonnes have come, as last year, from Russia or Ukraine, thus highlighting the benefit of grain free from taxes, quotas or sanctions.

US wheat futures have fallen sharply as gains of almost 2% against the euro took the dollar towards parity with it. The euro is at its highest level since the end of 20002 which leaves US commodities less competitive in global export markets – one example was a rapid decline for crude oil prices which fell to below $100 per barrel.

Wheat markets came under further pressure following news that Turkey, Russia, Ukraine and the United Nations were close to agreeing a process that would lead to re-establishing Ukraine’s Black Sea exports and a deal was due to be signed very soon.

In the UK, there are some concerns that winter beans have ripened too quickly and some crops have turned black at least three weeks earlier than normally would have been expected. On the plus side there are lots of pods per plant, with three to five beans per pod and with minimal insect damage. Current hot weather, though, will affect spring grown crops and result in yield losses.

Peas are ripening quickly now and will soon be ready to harvest, especially with current high temperatures.

Oilseed rape prices have fallen by almost 25% in the past two months but are still 50% up on where they were at this time last year and prices are now back to where they were last March.

Prices are being affected by government policy on palm oil exports out of Indonesia which supplies 55% of world trade in this commodity which started a downturn in oilseed prices.

There are also concerns about US inflation being at a 40-year high and what might happen to the European economy if Russia stops gas supplies in the coming months which could see a global recession or even depression.

Biofuel remains a factor as well with conflicting mandate policies around the world. The EU appears to want to increase food oil supply, whereas countries in South America and Asia are raising their vegetable oil content in fuel due to fuel shortages.

Overall, the demand for biofuel in 2022 is seen as rising by around 1m tonnes more than at last year’s levels.

Pressure remains on all European ammonium nitrate production facilities, with higher natural gas price levels which has caused domestic prices to move up by £100 per tonne for spot deliveries and prices have now gone up by £240 per tonne since May 12 and prices are set to increase again.

There is little demand currently from farmers for fertiliser as harvest gets underway but with the threat from Russia to cut gas supplies to some European countries, gas prices will continue to rise once current stocks are used up.