Last week, I alluded to the fact that native grain prices have fallen from their harvest highs and this is hitting the value of grain in store, whether it is owned by a co-op, a merchant or a grower.

Global harvest expectations last year centred around a tightness in supply for all grains and especially for barley and wheat. The situation was broadly similar in the EU, with wheat and barley production back significantly but maize production up slightly despite significant problems early in the season.

At harvest time, there was still an expectation that supply of all cereals would be tight as wheat supply was lower across much of the EU and central Europe.

This resulted in strong demand for the available supply and prices for wheat and barley saw a welcome boost on the back of the tight supply.

However, as the harvest progressed into maize the situation changed. US maize production came in at largely the same output as the previous year (366Mt v 371Mt), other production regions were broadly similar and overall global maize production ended up fractionally higher.

The net effect was a significant disparity in price levels between maize versus wheat and barley, which traded around €35/t higher. This resulted in many mills and feeders taking every option to minimise or displace the use of native grains in rations.

This could even result in grain carryover into next harvest following a year which saw one of the smallest grain harvests and the biggest feed demand

This has continued with the result that major users now have large stocks of imported feeds in stores all over the country, leaving it very difficult for growers and merchants to move native grains.

The milling industry had predicted a greater demand for spring feed than actually occurred so far and they now have large stocks, largely of maize, which could well continue to displace native wheat and barley in the coming months. This could even result in grain carryover into next harvest following a year which saw one of the smallest grain harvests and the biggest feed demand. But perhaps the winter is not over yet.

Devalued

This is what has happened to date. Because there is no guideline as to what Irish means, imports continue unabated, but not just in Ireland. If wheat and barley were to be used in rations against maize, price would have to fall substantially, and it did. Imported maize had been in the €180/t to €185/t bracket for much of the past six months. It only passed the €200/t mark for a few weeks in early August.

Dry feed wheat is now trading about €15/t under its harvest peak of €225/t

During much of this time, barley sat around or above €220/t but the price pressure (selling pressure) of the past few weeks has pulled this crop back to below the €190/t mark. Feed wheat had also been in the same price range during that period and it too has weakened. Dry feed wheat is now trading about €15/t under its harvest peak of €225/t.

This is a painful situation for growers who store their own grain and even more painful for the merchant trade who bought this grain and who now see it devalued in their stores. It represents a huge loss for merchants who purchased grain at harvest.

However, it is important to state that most private merchants who produce feed continued to use native grains in rations, even if at a reduced rate. This is an important element of authenticity for their businesses but it is not valued in the market because of the current indifference to ingredient provenance.

Next harvest

These price movements are important for market sentiment and harvest outlook. Even with wheat at €210 and barley at around €190/t currently, forward prices for both crops for harvest are currently valued around €185/t and €175/t respectively. These prices, if they persist, would significantly reduce green harvest prices from the levels we had last year. They would equally murder grower incomes. And for those who took a big hit from last harvest, they are unlikely to be able to add much support to prices.