We are now officially back to pre-Russian war prices! So it’s a case of war, what war? 

The main residual factor is the ‘grain corridor’ in the Black Sea. This should remain open until March. So far it’s been successful in enabling the cheap Ukrainian and Russian grain to be exported to the world, but it’s not helped the price evolution in the market place. 

There are plenty of big tenders for wheat to all the usual suspects and they are priced against the Black Sea, still the cheapest origin in the world. However, in most cases the big global trading houses that regularly take this business onto their books are then turning to the UK as the next cheapest source of wheat to lay off some of their execution risk. 

While it’s more expensive than Black Sea, it means these traders can back fill some of their tender business with UK wheat, as it’s guaranteed to be available to ship anyway and there are no surcharges for marine insurance. Also, some of the tender business will be for shipment beyond March. Russia could still close the corridor again in March, so having wheat purchased from the UK for April, May and June is a good insurance against Russia taking this action. So, while this demand continues we still have aspirations of getting through our wheat surplus before harvest, to provide a boost to price in later months. 

No one accurately knows how much Ukrainian wheat has been exported or how much is left. They, like some other exporters, could well be down to bare boards well before harvest. The USDA stock report in January was almost ‘bullish’ for a change. They conceded that three years of average at best world wheat crops have eroded stocks, with maize, wheat and soya all being less than expected. 

For instance, world maize stocks, if you exclude China (which would never make any surplus available to the West) amount to only 31 days of demand. That is dangerously low by any standard. The low wheat stock was partially offset by the bigger than expected crop in Australia, but irrespective of its crop size Australia does not have the export infrastructure or additional capacity to export more than it usually does.

The USDA did return to type by ignoring the much speculated about production issues in South America. At the very least this will mean lower carry out stocks at the end of the season. 

The next major factor is the massive positions that the big hedge funds have taken in the Chicago futures. They have built up short positions on wheat and long positions in maize which amount to millions of tonnes of futures contracts. Recently the trend has been to crystalise their position to being more short of wheat on all international futures markets. One day they will have to buy back that short position and some think that market has already bottomed out. So, if their position squaring happens to coincide with something like Russia deciding not to re-open the grain corridor, there would be fireworks. 

It seems that over half of the wheat allowed out via the grain corridor has ended up in Europe and Turkey. This has not pleased President Putin.

New crop prices have followed the old crop prices down. They are now at levels which can only be justified if world wheat production rebounds to levels not seen for four years. 

The Argentine drought is the worst for 60 years and this will impact their old crop stocks and new crop prospects. Apart from not knowing how much old crop is left in Ukraine, we have no idea what they have been able to plant in the winter, or will in the spring, but it must be less than last year. There have been temperatures of minus 25 degrees in Ukraine and Russia, with no snow cover, so some winter kill is certain. 

As long as the UK is able to continue its pace of wheat export sales, we should clear our surplus in the next six months. It will be seven months before any new crop wheat is available. 

At last China is showing signs of recovery, as its pork consumption is at a two-year high. There are enough latent bullish possibilities to justify holding onto wheat at least until Easter. Milling premiums are higher by up to £65 per tonne and so, as I have said many times, there is no excuse for not selling milling wheat, especially if you have other commodities unsold.

Winston Churchill said: “The inherent vice of capitalism is the unequal sharing of blessings. The inherent vice of socialism is the equal sharing of miseries”. The people of Russia, and unfortunately Ukraine, are certainly sharing plenty of misery just now.