International grain markets have strengthened in the past week in response to falling harvest output expectations. Current developments are now described as a weather market, but its final consequences are less than certain.
Even with reduced production, substantial availability deficits do not appear likely at this point due to high carryover stocks, but localised difficulties may occur.
Grain markets took a significant climb in the past week against the growing realisation that production in 2010 will not meet earlier production estimates.
However, the inevitability of lower production comes at a cost to producers in parts of the world where either frost, wet or drought is causing difficulties for growers.
Harvesting is now underway in parts of the world, much of which is earlier than normal. Early indications from the US supported a substantial wheat harvest there, even though the quality is below average.
However, wet weather further north in the US is easing yield expectations and increasing mycotoxin risk, with associated consequences for the food market.
Wheat harvesting
Wheat harvesting has also begun in southern and central Europe, and the earlier harvest is forcing expectations of reduced yields. Early reports from Ukraine would suggest this to be true.
The summer drought will have played a big part in the early harvest, but floods in other areas like Poland have also had a negative impact on production potential. Harvest expectations are being reduced for other EU countries, but official estimates are slower to show the trends than the market.
While the price drive may not continue indefinitely, it should lead to higher price levels than those of the past two years.
The severe rains in Canada have reduced the acreage of many crops, and may further reduce yield and quality, spurring fears for milling wheat availability.
This adds to a situation created by the low proteins in the early part of the US harvest on the south, plus the fact that the spring wheat areas in the north west and north central states were also subjected to high rainfall amounts in recent weeks.
Ireland is a feed grain producer and we should not get caught up in any euphoria that may be generated by milling wheat price movements. The supply side for feed grains will be tighter, with US corn carryover and output expectations lowered and crops at a critical stage.
Planting of barley is reduced in Canada, Central Europe and the EU. Any further news of reduced output expectations may well continue to add to price volatility and lower the price gap with wheat.
However, we must be aware that there are still large stocks of grain in stores around the world, which may act to keep a lid on price increases. But as long as the current sentiment is one of supply uncertainty, we can expect volatility to continue.
Excessive expectations of price could again result in farmers unwilling to sell at prices that could fall again after harvest.
British wheat
Some commentators believe the British wheat harvest will be back by at least 10%, despite the similar increase in acreage. This is as a result of moisture stress at different times in the season, which was exacerbated by damaged soils from the previous year. Overall demand for wheat will also be higher from the new bioethanol plants.
Spring barley planting is down, and this may have consequences for malting barley supply in the future.
The grain supply from Central Europe is also likely to be affected by winter kill, followed by excess heat, with floods also a problem in places. Harvest has begun more than 10 days earlier.
Yields from Ukrainian crops are reported to be down, and VAT on exports is expected to reduce the attractiveness of grain from this source.
The wheat harvest in Russia has already been reduced by over four million tonnes to 57.5 million tonnes, and overall grain production estimates have been reduced to around 82 million tonnes from an estimated 110 million tonnes earlier in the year.
Recent global wheat harvest estimates produced by Rabobank show a 3% reduction in output compared with last year. This may prove to be an underestimate of the production drop. The EU wheat harvest is also being reduced, with less than 142 million tonnes now predicted.
It is important to note that even with currently reduced production figures, the 2010 crop is still estimated to be the third biggest-ever global crop.
Oat prospects
The oat market has also been thrown into a turmoil following planting problems in Canada in particular.
However, the consequences are uncertain. Canada Statistics put the intended planting acreage at 3.99 million acres, but current estimates suggest between 2.8 and 3.5 million acres have been planted.
This has since been subjected to significant damage, especially in Saskatchewan and Manitoba.
Oilseeds
European oilseed rape prices firmed over the past two weeks as a result of firmer energy prices and reduced planting in Canada.
MATIF futures increased by €7.50/t last week to €328/t for November. Delivered prices in Britain increased by £14.50/t (€17.42/t) for harvest to £261/t (€313/t), and up £15.50/t (€18.61/t) for
November at £270.50/t (€324.92/t).
The November 2010 price in Winnipeg increased by CAD$24.60/t (€18.50/t) to CAD$420/t (€316/t).
farmersjournal.ie