June Grain Markets

Surely this is the low-point of the grain market? Surely dipping into 2 figures in some regions for feed barley is low enough? Of course. But the market has no absolutes. There is no point at which we can say it won’t go beyond. In either direction. The buyer in Saudi has no concern of how much has been spent on the barley he receives just as the farmer does not complain if the market exceeds his budget. That’s commodities.

The market at this time of year is often consumed with technicalities to do with mopping up the last remains of the old crop, preparing the bins and stores for the new crop, examining the quality and tonnage of the first samples ofharvest from the Southern Mediterranean and Southern US States for examples. Further technical complications are created by the futures market merging from old to new crop, in a thinly traded July contract, traders squaring positions or carrying them forward to new crops and so on.

This year in the UK, there are other, bigger issues to grapple with that are affecting the prices of the as-yet unsold old crop as well as the un-harvested new- crop. Firstly, having a large tonnage of unsold grain (3 million tonnes according to the AHDB which is the highest for a generation and possibly much much longer), having got this far without selling, most long-holders will presumably be inclined to hold out further. This might entail storing a proportion of two crops, selling the tonnage with an option to capture potential upward price movement or using a third party store. 

Any grain price movement at this time of year is often led by the quality and tonnage of the very first harvest reports and the reports from the ripening fields in the main grain growing parts of the world. However, the majority of price movements over the last month have been led by speculator’s position changes and changes in currency, thanks to the impending collapse/saving of the Greek economy. The pound is strong, only because the euro is very weak. Wheat price has moved by £5 this month purely because of it. The weakened euro means that German milling wheat is now cheaper than the equivalent UK grain delivered not only to a UK port but to a mill considerably inland from harbour. In fact, according to exporters, UK grain is now as much as £8 dearer than other exporters, particularly from the Black Sea. In the short term, there is still some downside.

The Milling wheat premium has held up remarkably well in the light of an 8% increase of milling wheat in the plated area this year. However, the main winner of market share, Skyfall some think, might struggle to achieve full specification because of generally lower protein levels. The outlook for this is now based on how well the crop is harvested and how much sunshine we have from now on.

Oilseed rape is well valued in the combinable crop matrix. This is as US soy plantings have been delayed and weather conditions there remain uncertain for the crop planted. For those needing to sell something, maybe this is the crop. The pulse premium has come right back from this time last year, although a good yield of clean crop will still generate a competitive gross margin against the others.