We are halfway through February and many have been avoiding any bad winter weather issues so far – in January we have had 27.9mm, or just over one inch of rain in the Borders.

We had 589mm in total for 2022 which compares to the AHDB national UK figure of 736.3mm which was near enough to their average total over the past five years and the highest since 2015. For last November, the national average was 159.8 mm which, compared with the 80.6mm recorded at local weather watchers at Lochton, near Coldstream.

Due to the recent dry spell in most parts of the UK, seed drills have been out in Cambridgeshire and on the Lincolnshire Wolds on light land, where drying winds and milder temperatures tempted farmers to make a start to spring sowing.

Global wheat markets have continued to recover since their decline in January and over the past two weeks the liffee feed wheat futures for May, 2023, have risen by £10.70 and now stand at £241.00 per tonne. For new crop wheat July, 2023, futures are up £11.25 to £238.25 and for May, 2024, currently stand at £244.30, up £11.60 per tonne.

The euro has been weak compared to the US dollar with a 2% drop in value from end of January’s 10-month high which makes wheat more price competitive and EU wheat exports are now at nearly 20m tonnes from an overall surplus of 30m tonnes.

The EU will be keen to export the remaining surplus but face strong competition from Russian sources who are $30 per tonne cheaper via the deal to allow wheat out through the Black Sea corridor but this arrangement is up for renewal in March which some think may not continue with the current arrangement.

From the start of July to February 5, 2023, the EU exported just over 19m tonnes of soft wheat which is 7% higher than the same period in 2021-22 and 17% up on 2020-21 levels.

Russia is thought to have produced around 104m tonnes of wheat from last year’s harvest but there are sceptics out there who think the total is at least 10m tonnes less at around 92m tonnes. Russia is thought to have exported 3.7m tonnes of wheat in January, compared to 1.4m tonnes in January 2022 and takes their total exports for this marketing year to 26.2m tonnes. This could leave around 18m tonnes still to be exported between now and June.

Ukraine, again in the same period as Russia, exported 9.9m tonnes of wheat, down from 17.2m tonnes in 2021-22 and over the next few months the war in Ukraine will continue to add volatility to commodity markets, especially as we near the expiry of the already extended export corridor deal on March 21.

World wheat stocks are estimated to be 7.3m tonnes less than last year but Australia’s wheat production is now estimated higher at up to 40m tonnes and India is looking at a record wheat harvest which takes place through March and April.

US farmers increased their wheat planted area for their 2023 harvest by 11% to a total of 36.95m acres but due to 70% of this area suffering from drought going into winter it is still difficult to assess what yield will be achieved until nearer harvest. Their third largest wheat growing state of Oklahoma has seen a sharp fall in crop rating which now stands at only 17% in good to excellent condition, down from a recent 38% in January.

The Ukraine is looking to a reduced tonnage of wheat, again for this coming harvest which could lead to local shortages and reduced exports and similarly Russia is forecasting a 2023 wheat crop down at around 81m tonnes due to crop damage from winter weather issues.

Back in the UK grain production levels will be largely weather dependent over the next few months but looking at the Early Bird Survey for planting and planting intentions for harvest 2023 it shows UK winter wheat planting up 1% from last year and winter barley up 4%, conversely spring barley planting is forecast to reduce by 6% and oats down by 4%.

Total wheat and barley use by brewers, maltsters and distillers reached record highs, based on data used from 1990-91, from last July until December. Barley usage is up 5.5% from the same period last year and 6.2% up on the past five-year average.

Total oats milled for the same period increased by 5.6% which is 2.2% below the previous five-year average and looking forward over the rest of the season, it is expected that oat usage by the human and industrial sector will see a yearly increase estimated at 513,000 tonnes and would be 2% up year-on-year.

Barley prices picked up slightly with short term demand coming from the trade and some longer-term demand coming from feed compounders now that the barley discount to wheat is back to over £20 per tonne. There is very little export demand and likewise malting barley prices have come under pressure and not followed firming feed wheat values.

Demand is also lacking due to a smaller national pig herd, which is down around 11% compared to last year and shows no sign of increasing over the next six months.

Oilseed prices have picked up following the decision by the government in Germany not to propose the removal of all crop-based content in biofuel production immediately but in stages up to 2030 and a weaker sterling versus the euro also helps to strengthen UK ex farm rapeseed prices.

Currently, oilseed rape delivered Erith for spot delivery is quoted at £481 per tonne which is £8 up on the previous week. Previously, rapeseed prices had been on a downward trajectory, in part due to reduced crude oil prices, since autumn and the beginning of the marketing year and prior to this in the second half of the previous marketing year prices reached highs that have never been seen before.

The UK oilseed rape area has been increasing off the back of these high prices as plans to grow more area would have been made when prices were at their peak. The Early Bird Survey indicated that the planted area for 2023 is 416,000ha – the highest area since 2019.

This increased planted area will also happen in Europe as well in 2023-24 and a larger crop will see pressure put on prices and if repeated elsewhere in the world production will grow faster than consumption which would not be good news for growers. Increased demand from China now that it has eased restrictions again following its Covid-19 problems, would help and currently Chinese OSR stocks are at a historical low.

A further downside to oilseed prices is Brazil harvesting their record soyabean crop to produce an extra 27.2m tonnes this year, amounting to a crop over 150m tonnes.

Fertiliser prices depend greatly on the price of gas and gas prices recently in the UK and Europe have remained relatively weak despite some recent cold spells earlier during winter. There have been some indications that it may now be viable for some European fertiliser plants to resume production of ammonium nitrate.

The spot delivered price for AN was £700 per tonne in December and this price is down £41 from November but £68 higher than in December, 2021 – but more than three times the price recorded in December, 2000.

It now appears that the worst of Europe’s gas problems and high prices are behind us but prices are expected to remain high and volatile. Natural gas makes up around 60-80% of fertiliser production costs and it is unlikely that imported fertiliser prices will come down in the short to mid-term.

Sufficient gas storage has helped to ease prices and at the end of December, 83.2% of EU gas storage was filled above the target of 80% set in May but below its peak of 95% in mid-November. At the beginning of January, the UK became the fourth country to officially ban Russian liquefied natural gas imports.

Instead, the UK has been looking to ship more liquefied natural gas from producers such as the US and Qatar and agreeing to double imports of US gas over the next year from 2021 levels. Recently, HSBC cut its 2023 gas price forecast by around 30% and forecast for 2024 by 20% but they suggest that prices will stabilize by 2026 when newly built liquified natural gas facilities are opened in Europe.