Global Grain Harvest

With the Northern Hemisphere harvest progressing, the prospects for the 2013 crop year are becoming clearer.  A record output is looking increasingly likely, with consequent downwards pressure on prices, even with stocks starting the year at low levels.

The International Grains Council (IGC) published its latest Grain Market Report on the 1^st August.  The figures are summarised in the table below.  It can be seen that, after the weather-affected 2012 season, world grains production looks set to recover strongly. Wheat production is up 5% and maize output rises a massive 10%.  It is the latter crop that is really driving prices.  Maize is the largest crop in terms of volume harvested.  It is also the standard feed grain around the world and other cereals (including wheat) tend to get priced in relation to maize.  The shortfall in the maize market last year saw prices for all crops pushed up.  The converse is happening now – the market is assuming a plentiful supply of maize and a rebuilding of stocks, and this is pulling all grain prices down.

Wheat is the most important crop in the UK and there are some slightly more positive signs in this market.  Although output is predicted to rise, so is consumption, and the year end stock levels are not expected to change greatly.  The stocks in major exporting countries is not forecast to increase much either.  This is important as the level of competition on international markets affects the global price and hence the price received in the UK.  Unfortunately, any tightness in the wheat market is currently being overwhelmed by the general downwards move in all grain prices.   However, the specifics of wheat pricing should mean that there is a floor in the market (perhaps not too far from current levels).  At the time of writing, the UK ex-farm feed price was nearing £150 per tonne – some £30-£40 per tonne lower than just three months ago.