The market has spent the past few seasons being only one crop away from a problem, but the bumper yields of 2015 mean that buffer is now extended to two seasons.

Prices make it worthwhile for growers to sell forward and store the grain, with this carry being worth more than the finance cost of doing so.

This is illustrated by offers for November 2016 feed wheat at £115/t to £118/t ex-farm being worth £8/t to £9/t more than the May 2016 price.

That carry is something farmers should take advantage of, even through to the 2017 crop, says Openfield’s head of sales and trading David Doyle.

See also: Outlook 2016: Challenge of establishing 445ha in tight timeframe

Supply, demand, currency, weather and politics will be the main market movers for the 2016 harvest, which will see a similar UK wheat area as in 2015. US growers may plant their lowest wheat area for 47 years, growing more corn and soya beans instead.

US interest rate rises are expected anytime now and through the spring of next year will affect the value of the dollar, in turn influencing prices in other grain exporting countries.

Markets will also be affected by Argentina’s new government’s plans to cut export taxes, bringing more wheat to the market when US and EU exports are already well behind schedule.

The general oversupply of grain makes it all the more important to be able to move when short-lived price rallies arise, say traders.

Jonathan Lane, trading director of Gleadell Agriculture, says the 2016 outlook remains bearish, after a very challenging year.

“Whilst we accept that current prices represent a poor, or in some cases negative, farmgate income, there remains a very real possibility that things could get worse,” he says. “Unless we see a significant issue with a developing crop or a major geopolitical event, it is difficult to see what is going to drive prices higher.”

As well as simply flat selling a proportion of their forecast production, he urges growers to manage risk with pools, minimum price contracts and consumer-backed buybacks.

The EU’s 2016 wheat crop area is thought to be about 23.9m ha, roughly 1% lower than in 2015. So far, conditions for winter cereal development are satisfactory.

“In east Europe conditions are mostly good, but some concerns persist about dryness in some parts, especially in the Ukraine and parts of southern Russia,” says Mr Lane. “There were some delays to winter plantings too which had caused some worries about potential damage from early frosts. This is something to watch.”

GrainCo managing director Gary Bright sees little to boost a sluggish export trade, given the surplus available on both wheat and barley. The only new demand which may emerge is in the ethanol sector, he says.

Export markets which are US dollar dominated have helped barley maintain its value over the past two or three seasons, though obviously not at levels of which farmers approve. UK barley has gained valuable ground in Saudi Arabia and Japan, for example, traditionally markets where Australia would be the first choice supplier. Lower shipping costs have helped, driven down by low oil prices and slower Chinese demand.

“Better links are being forged on the barley side all the time but you have to understand and appreciate what the competition is,” says Mr Doyle. “Without that international market [beyond the EU], barley markets could fall.” Several UK exporters now have the ability to load the 60,000t-plus Panamax-type vessels which are essential to secure the long distance business.

Market background

Defra expects UK human and industrial use of cereals will fall by 8% compared with last season.

Good quality means flour mills will need less wheat as they are able to extract a higher percentage of flour, points out AHDB Cereals and Oilseeds. Brewing, malting, starch, bioethanol and distilling usage are all down so far this year.

The cereals bright spot is oats, with a record volume expected to be milled this including 4% more for human and industrial use.

The use of cereal for compound feed manufacture production is forecast to fall by about 2%.

There will be higher demand for pig and poultry feed, while mild weather and good quality forage may mean lower use of compound feed by cattle and sheep producers.