As far as wheat exports go, Russia punches above its weight, for while it only produces 10% of the world’s wheat, it contributes 17% of global wheat trade. Ukraine is similar; it grows only 4% of the world’s wheat (compared to the EU/UK at 20%) but exports 12%. So, between Russia and Ukraine, they supply 29% of the world’s wheat, which is why, together with the disruption of oil supplies, any threat of conflict or blockade in the Black Sea causes such volatility in world markets.

Those still prepared to offer marine insurance cover are still building in hefty “weapons grade” premiums for any Black Sea shipping business. Alongside this, but for other reasons, some record massive futures positions have been created, as for now this volatility has seemed never ending.

French MATIF wheat futures have hedge funds long of 116,000 contracts, whereas Chicago has funds short of 30,000 wheat contracts! If you add in 30-year high inflation in the USA and Europe, you have a heady cocktail of risks being run by these hedge funds. This is unprecedented and can only add to volatility of commodity prices.

The February USDA report was considered to be the most out of touch with reality that has been seen in the past 50 years. That is saying something, as they have had some very unrealistic efforts during that time. They seem to have completely ignored local agencies in South America that strongly suggest that the USDA production and export forecasts for maize and soya are 20 to 30 million tonnes too high. So, while world wheat has dropped in value, maize and soya have held their values and even increased.

In the UK we are, as I like to say, over halfway through the first half, of the second half of the 2021/22 trading season. So, if you still need to sell for cash flow or space by the end of March or first half of April, the clock is ticking and you need to get on with it.

Given that the wheat market peaked in the middle of November 2021, it has taken a long time to drift down slowly and, with spikes, has given lots of opportunities to improve your average selling price. Like some of my CMG pools, even if the remainder were sold at spot values, the average price would probably still be higher than achieved so far.

The last quarter of the second half (April to July) offers many possibilities for yet more volatility and price increases. Ethanol production in the UK has been disappointing so far. It was expected that both plants would have been operational from the beginning of this year, but only one has and it has been using maize as well as wheat. The other does not intend to start producing until March and will use wheat. So the demand in the UK balance sheet for wheat used in ethanol production has been reduced from1.3 million tonnes to 809,000 tonnes. Despite this, when you factor in known exports to date, the UK has no wheat surplus at the end of June!

As last year, the key test will come when all of the futures stores have been cleared of wheat at the end of May. It will then be a question of what’s left on farms or in end users’ stores to see us through until new crop is available. Last year the expected wheat stock was not there, and neither was the barley, so every ounce was used up, while eager buyers clamoured for the first cargos of French wheat and barley.

No one knows how much wheat has been imported into the UK so far. We know the expected milling must have come in as we didn’t have the quality, but the amount of feed is anyone’s guess. What we do know is that the imported price of wheat and maize are much higher than whatever our ex-farm prices are.

As I have said before, the biggest disappearing trick of all time is UK barley. Feed barley seems not to be there. Old crop malting barley demand has collapsed, so some of that is being flushed out, but where is the half million tonne surplus? Surely it cannot all have been fed on farm?

Until we have a “weather story” on new crop wheat and barley, I’m reluctant to start selling forward, when the differential between old and new crop is so high. Also, what “weather story” there is so far is not good. There are soil moisture deficits and unseasonably high temperatures in the North American Hard Red Winter wheat belt, the Balkans, Black Sea, Russia, Ukraine, Africa and the middle East, and Spain is more or less in drought.

Last but not least, The Russian parliament has placed a document in front of President Putin, requesting that that he officially recognises the Ukrainian regions of Donbas and Luhansk as being Russian. Russia has now made its first move and the markets hold their breath.