At last, we have had some warmer weather with some sunshine but yet again predominantly cloudy in the Eastern borders.

Crops continue to look well and prospects are looking good for this harvest. This appears to be the case across Europe, where the forecast is for an increase in wheat production up to 130m tonnes – 5m tonnes up on last year. The UK is on target for a 15.5m tonne wheat harvest– much like last year, resulting in end stocks at 2.6m tonnes.

This not likely to be the case for other countries as Russia is looking to see production fall from 104m tonnes in 2022 down to 85m tonnes in 2023. Meanwhile, Ukraine is forecast to see production fall from 21m tonnes last year to 16m tonnes this harvest and as a result of the EL Nino weather system, Australian tonnage is set to fall by 10m tonnes.

Persistent drought is forecast to reduce wheat planting in Argentina by 600,000 ha and weather concern in Canada is also looking to result in lower wheat production. In the US, farmers are still having weather issues and in Kansas 68% of the crop is rated as 'poor to very poor', the worst ratings since 1996.

Having said that, tonnage from China, India and the EU will contribute to an increase in the world’s 2023-24 grain balance sheet, with world wheat production expected to rise by 1.5m tonnes up to 789.76m tonnes – but year-end stocks will fall by 2m tonnes to 264.34m tonnes, or the lowest for seven years.

Despite an 11% increase in the US wheat area, the US wheat crop will be just 260,000 tonnes up on the year at 45.16m tonnes due to poor weather causing crop failure in many hard red wheat growing areas.

The main news this past week has been a renewal of the Ukrainian grain export arrangement with Russia from May 18 for a further 60-day period until July 18, but not the 120-day period hoped for. There are outstanding issues which the four countries involved, namely Russia, Ukraine, Turkey and the UN will continue to discuss to try and resolve.

READ MORE: World grain markets remain highly volatile

Wheat futures fell on this news by 3% in value and old crop May, 2023, Liffee feed wheat futures have now dropped by £9.10 over the past two weeks to £178.90. New crop November, 2023, have dropped by £14.55 per tonne to £187.75, with July, 2023, at £181.15.

Apart from weather affecting crops, there are other issues, such as a locust infestation currently affecting Afghanistan which could decimate a quarter of its wheat crop.

Another problem is wheat blast fungus which is threatening the production of food across the globe. It was first identified in Brazil in 1985 and has gradually spread to other countries and in 2016 it destroyed 15,000 ha in Bangladesh, with concerns that it will spread to India and China, the world’s two largest wheat producers.

This represents a significant threat to global food security as scientists fear the fungus could spread to other countries through the importation of infected seeds or through spores travelling in the wind.

Recently, HMRC released the latest UK trade data for the season from last July until March which showed that wheat exports totalled 1.14m tonnes, or up 278% on the same period last season. Barley and oats over the same period totalled 877,400 tonnes and 136,100 tonnes, up 41% and 150% over the same period, respectively – maize imports over this period were 1.72m tonnes, up 8% year-on-year.

World maize production is forecast for a record high at 1219.6m tonnes which is up 69m tonnes, mainly from the US and the EU – the only countries with less maize will be Brazil, down 1m tonnes and Ukraine, down 5m tonnes. Total grains production for 2023-24 is now at an all-time high of 2294m tonnes, up 3.2m tonnes from the last estimate in April due to a larger than expected crops in China and Brazil.

EU weekly wheat exports rose to 26.49m tonnes this past week, or 2.6m tonnes ahead of last year and on target to reach the season estimate of 30m tonnes. This will still see carryover stocks up 4m tonnes on the year at more than 14m tonnes in total.

With the 2023 EU wheat crop expected to rise by 4m tonnes on the year and with ongoing strong export competition from Russia, this will see some stiff competition to win export business this coming year. In April, Russia exported 5m tonnes of wheat and in the first 10 days of May a further 1.322m tonnes were exported, taking its total for the season up to 45.5m tonnes.

In 2022, Poland produced a record wheat crop of 13.4m tonnes on the back of record yields and a larger planted area. Due to issues with the Ukrainian invasion, Polish farmers did not sell their wheat and are now sitting on a large tonnage of unsold wheat and prices have now dropped.

On top of that, it also holds large stocks of imported Ukrainian wheat as well – as do Romania and Bulgaria. With more cheap Ukrainian wheat coming in, in a year when their own export tonnage has been slow to move and due to their large tonnage in stock, prices are under pressure.

It may not feel like harvest is approaching, given the recent dull weather but in Europe harvest is fast approaching and with all the wheat in stock in Eastern Europe there will have to be a robust export campaign. Given large stocks in the UK, too, there is going to be fierce export competition which will put price pressure not only on all markets.

Old and new crop barley prices have followed wheat prices and have come under pressure following the renegotiation of the Black Sea corridor agreement. The price discount of barley against wheat on May 4 stood at £14 per tonne and old crop feed barley remains at a premium to harvest prices, so farmers are currently trying to get their stores empty in time for harvest.

Due to the dry hot weather in Spain, its barley harvest has had poor yields so there is export demand from the UK to Spain for June and July movement, but UK trade is being undercut by cheaper barley from other countries.

Oilseed rape prices continue to fall and are now at their lowest level not seen since the 2020-21 marketing year. There are various reasons for this, one being that oilseed production is expected to grow in both the EU with an increase this year of 964,000 tonnes and in Canada again with an increased production of 1.3m tonnes which partly offset the lower rapeseed production from Australia where yields are forecast lower due to weather conditions.

Global oilseed production is forecast to rise by 43.8m tonnes up to 671.2m tonnes mainly on higher year-on-year soyabean production in South America, Brazil, Argentina and the US.

Also, the EU is estimated to produce a record sunflower seed crop of 11.5m tonnes, up 2.2m tonnes from last year and prospects for new crop rapeseed look good with a European crop close to 20m tonnes.

Another reason for lower rapeseed price is Sweden, which is the highest per-capita biofuel user in Europe. It recently announced that it would soon be reducing its vegetable oil inclusion rates in its biofuel.

The harvest 2023 price for oilseed rape delivered into Erith was quoted last week at £362.50, or £16.50 down on the week and at the same time last year was quoted at £724.50, so it's nearly 50% lower year-on-year. Spot delivered rapeseed into Erith for May, 2023, is quoted at £363.50, well down from the price peak in April, 2022, when spot prices hit £820.