September 2, 2010

Further reports of poor harvests in Britain and across continental Europe have strengthened grain prices again.

While yesterday was a bank holiday for British traders, by mid-morning prices for milling wheat on French futures markets had traded up by EUR4.75 (US$6.06) per tonne. This was on the back of a EUR10.75 (US$13.72) per tonne surge for MATIF French milling wheat last week and a £3.75 (US$5.76) per tonne rise for feed wheat markets in London.

IFA national grain committee chairman Noel Delany said that growers would be significantly better off to opt for drying and storage rather than waiting for a market review from buyers that traditionally have not delivered.

"The bottom of the market for dried barley is EUR172 (US$219.56) to EUR176 (US$224.67) per tonne collected ex-store and EUR184 (US$234.88) to EUR187 (US$238.71) per tonne for wheat. Forward prices for September-October collection are EUR8 (US$10.21) to EUR10 (US$12.77) per tonne higher for both wheat and barley. Even allowing for a drying charge of EUR15 (US$19.15) to EUR18 per tonne (US$22.98) at 20% moisture plus weight loss, it's obvious that these on-account prices are a ploy by two of the bigger buyers to undermine the market and condition growers into accepting a below-the-market price," said Mr Delany.

European harvest production is now reported to be at least 10 million tonnes below last season, while Russian grain imports are likely to reach six million tonnes. Germany, Denmark and Scotland are the latest countries to downgrade their predicted yields.

These developments removed the nervousness that prevailed on markets last week that prices had peaked. There is now increased confidence among farmers that current prices will hold in the short term.

Strengthening grain prices have also fed into a hike in fertiliser prices. CAN increased by more than EUR35 (US$44.70) per tonne over the past two weeks and compounds are reported to be becoming scarce. However, fears that a price spike similar to 2008, when costs doubled, are being played down following the subsequent collapse in demand for fertiliser last year.

With excellent harvesting conditions to hold for the remainder of the week, merchants expect to have the last of this year's crop in by Saturday (Sept 4).

Yields are back on previous years across the country, with spring barley averaging 2.4-2.5t/ac, winter barley2.9-3t/ac, winter wheat 3.6-3.7t/ac, spring wheat 2.6-2.8t/ac, winter oats 2.8-3t/ac and spring oats at 2.4-2.6t/ac.