Grain markets are often described as volatile due to the fluctuating nature of grain markets. Never in my many years of trading cereals has that word had such significance as it does currently.
The Ukraine crisis has thrown the markets into a state of uncertainty that has led to increases in wheat futures, followed by a swift correction downwards the following day. What will be the next move? That will depend on Putin’s intentions and the reactions created by the rest of the world.
Crop conditions
Weather-wise, Autumn 2021 gave some of the most favourable conditions for sowing crops that we have had for many years. Accordingly, winter barley and wheat crops have established themselves extremely well. This has led to winter cereals being at reasonably advanced stages of growth. Although lots of leaf area can attract disease, the crops are strong and carry great potential to perform this season.
One limiting factor which may hinder these crops is the high cost of nutrients. Fertiliser is currently at a historically high price, which will make farmers consider just how much they can apply to fields.
Markets
This season’s crop
The 2021 harvest was kind for most Scottish arable areas, allowing farmers to collect relatively good quality grain. Although, yield performances were disappointing with barley and wheat crops reaching only average tonnages.
With the malting industry taking a significant proportion of spring barley, there has been a notable tightness of pearling quality barley throughout this season. Currently, the supply of wheat looks more assured, although there is still a concern that quantities could struggle to match demand through to the harvest.
Because of the tightness of availability on cereals over the past few months, prices have been reflecting this with wheat prices recently reaching £250 ex-farm before the Ukraine crisis, they briefly reached £265 as it started, for March move. Feed barley has pushed recently to over £220 ex although this market struggles to find buyers at these prices.
Next season’s crop
With the current crop unlikely to replenish already tight world stocks of cereals, the prices for the new crop 2022 harvest are well supported and will be vulnerable to detrimental weather conditions anywhere in the northern hemisphere where wheat or maize are main crops.
The Ukrainian situation also needs watching closely since Russia and Ukraine have the greatest export tonnages of wheat, and anything which affects their ability to harvest and market crops effectively could cause markets to show even greater volatility. Before the start of the conflict in Ukraine, markets for November 22 were being priced at £215-£220. The price rose sharply to levels around £235 before easing again.
One thing is certain with all these markets. Nobody can be giving any firm advice on what is the right thing to do since there is no telling what to be prepared for from the situation in Ukraine.