The bearishness in the wheat market continued into January, with May futures falling to £44 below its peak. Maize was more resilient and towards the end of January rebounded to a six month high on Chicago futures. With Soya under pressure, oilseed rape lost 40 euros per tonne in one week on the French MATIF futures. So, lots of volatility in the last month on everything; but have the fundamentals changed? I don’t think so!

In recent reports the USDA still seem to be overstating the export potential for two key players, the EU and Russia. They have the EU down to export 36 million tonnes of wheat from the 2021 crop; with only 15 million tonnes exported so far, it’s difficult to see where in the EU the wheat will come from. Also, time is running out to physically ship it, if it’s even there. Russia has a similar quantity still to sell and ship, but its taxes and quotas make it more likely that it also won’t reach its target.

In the UK, the big fall in price has not encouraged farmers to sell. The old crop futures have bounced about £7 off the bottom. Consumers still have a lot to buy, even in February. As I’ve said before, even now there is a long way to go until we see the next new crop of wheat, being French in July.

Imported wheat is not really cheaper, so the differential between that and ex-farm prices has just widened. There has been some imported maize from the Ukraine bought in by an ethanol plant, but it was a lot more expensive than wheat. So, my advice remains; you should have sold some at the top of the market already. If you can hold on now to May or June, I would.

Our market reached its peak of peaks last June, when we had run out! Don’t forget it was only a combination of using imports and early barley and wheat which bridged the gap until new crop. That means we have used up an extra month of the 2021 crop, making this a 13-month year in terms of demand, so there is every chance it will run out again. Barley has a slightly shorter fuse, as the French will be combining in June, but while wheat is firm, barley will always be in demand at good money.

Malting barley has weakened as growers are now selling their last bits at excellent money. With an £80 differential to new crop, it’s no longer worth the risk of keeping it in a sound condition; it should be sold and moved now.

New crop has seen hardly any trade. The northern hemisphere crops are all waiting to emerge from dormancy, so until they do, no one can judge how they have survived winter kill or any other issues. It’s really too early to say but, on the face of it, in the UK you could argue for about a 14 million tonne crop; after usual imports that means almost no surplus again!

With a £20 inverse to old crop, I’m not surprised there are few sellers so far. If you stand back and take the global view, the UK and the world have had two consecutive poor to average years of cereal production. We need a better than average 2022 harvest to be able to replenish world stocks; many are at low stock to use ratios. Without the availability (and cost) of nitrogen, I don’t see how the world can possibly achieve this. A classic case in point is India, as it aspires to be a wheat exporter but with China restricting urea supply, how can a marginal land producer like India manage to create an exportable surplus?

The Russian military threat to Ukraine is a clear and present danger. The last time they did something similar, grain prices increased by £20 per tonne. Actually, rather than firing missiles at Kiev, Russia could cause a bigger problem by moving its troops to the south west and restricting Ukraine’s much-needed grain exports!

In the end, if demand continues as it is now, the grain price will remain firm. As Covid-19 restrictions continue to ease, still more demand is likely.