Hindsight 2

Over a month has passed since the Russian invasion of Ukraine began. UK wheat has traded at the farm gate within a range of £300-£310 per tonne. The daily movement within this range dependant on the over night news of peace talks or further attacks. At the time of writing on Tuesday morning the price of April/May 2022 wheat in Yorkshire has overnight jumped £5.00 per tonne and broken out of the range. The siege of Mariupol and the accusations regarding the use of chemical weapons, sparked further US and UK concerns and the possibility that the war in Ukraine may escalate bringing wider involvement from others.

Throughout the last month the largest increase in wheat price has come in the new crop market. The gap between November 2022 Liffe wheat and May 2022 Liffe has closed significantly. Early April saw November 2022 Liffe wheat at £258, this morning the same wheat future has traded at £292.

The market is trying to assimilate the long-term effect of the current war on the World Supply and Demand of grains and the resulting price reaction. Once again, the variables in the calculation are many. How long will the conflict continue? How much farming is currently taking place in Ukraine? If there is a Ukrainian Harvest, will it be available or be available for shipping around the World in quantity? Add into this all the usual weather worries around the World and concerns regarding the price of the fuel, chemical and fertiliser required for growing the 2023 harvest crop and it is easy to see why the physical market for new season grain, which is to say the amount being sold at the farm gate or bought by an actual consumer is stagnating.  Fear of being wrong has slowed the willingness to trade for both buyer and seller. It matters not whether you are at the start of your farming/trading career or in your dotage, no one, no matter how old or experienced has seen markets trading at these levels before. Experience and lessons learned the hard way form the basic back drop for a large part of what we do in life, but it is also true that you are never too old to learn.

Where to go from here with farm grain? I will fall back to the closing paragraph in March:

If you have old crop grain in store and have not yet had a £300/tonne sell, what are you waiting for? If you have not sold a couple of loads of new crop, why not? With all things trade, it is about the average and risk management. The price bid now, may be more tomorrow, it may also be less. One thing is for certain, and that is, at some point in the future the unknown will become the known, the rumour will become fact! At that point the Chicago, Paris, London trading screens will turn from green to red. The price of wheat will tumble, and we will all be wishing we had sold more, because the reality of what was going to happen was obvious. It always is with hindsight!