The Agriculture and Horticulture and Development Board (AHDB) is reporting that international grain prices are starting to strengthen.
Three factors are in the mix: Mounting tensions in the Black Sea; continuing dry weather in many grain growing areas; and a recent bounce in crude oil prices.
At the tail end of last week, the United States Drought Monitor confirmed a sharp expansion on abnormally dry conditions across America’s mid-west. This is the country’s maize and soyabean growing region.
The report confirmed that storms had done little to halt widespread degradation of conditions in the region, reporting that livestock are already needing additional feed due to reduced forage.
Above-average temperatures are also forecast for the end of June and through July by the US Climate Prediction Centre.
High temperatures when maize crops are silking (reproductive stage) are strongly linked to lower yields.
Grain prices in Europe
Meanwhile, forecasts for EU-27 wheat, barley and maize crops are now falling. This is due to dry weather in northern Europe and Spain.
Lower maize plantings in Poland and Spain are also a factor.
Predictions for the 2023 grain harvest are also on the decline. Spring crops are, very much, much at risk.
The proportion of spring barley rated good / very good has fallen form from 89% to 83%.
While this is still above last year’s 53%, it is now lower than both 2019 and 2021. Most spring barley crops in France are now at the flowering stage.
Maize crop conditions also deteriorated, down from 88% good / very good to 86%, slightly below this stage in 2022.
Water is really needed in France now to help growing crops and ahead of rapeseed planting in August.
Palm oil
Malaysia is also feeling the impact of drought conditions. Water stress there is affecting palm oil trees in the biggest palm oil producing state.
This reduces the fruit yields, and so, in turn, palm oil production.
There is currently an El Nino weather event developing, which often means higher temperatures and lower rainfall for palm oil production areas.
Earlier this month the United States Department of Agriculture (USDA) again forecasted that global grain and oilseeds will be larger than global demand in 2023/2024.
It forecast a surplus for all grain of 33Mt (the largest since 2016/2017) and a surplus of 27Mt for oilseeds (the largest in recent years).
This expectation and relief caused by access to Black Sea supplies despite the war continuing, pushed markets lower. The issue is that the USDA forecasts are based on high yields.
However, if crops don’t achieve these high yields it could shrink, or for grains, even evaporate the gap between global supply and demand.
If confirmed, this would push prices higher.
