DEFRA has reduced its 2017 UK wheat crop estimate by 325,000 metric tons, bringing it closer to Openfield’s estimate of 14.6 million tonnes.

This gives further weight to our view that there is only a surplus of under 100,000 metric tons (mt) to be used or exported between February and June. This is supported by the AHDB figures for wheat and barley used in feed compounding up to the turn of the year.

Record amounts have been compounded: with lower slaughter rates, stock are being kept longer on farm, so consuming more feed. Apart from the acknowledged feed wheat and barley exports to Spain, Eire and other countries, a tonnage is also being shipped to Northern Ireland. It’s off the radar because it’s moving within the UK. But it’s certainly leaving the mainland and is thus removed from our market place.

Despite one of the ethanol plants remaining closed for now (the rumours about reopening soon are conflicting) wheat and barley from the South of England continues to migrate to the far west, the North West and North East of England. So domestic consumption of wheat and barley is supporting this trade. With the acknowledged lack of grain transport – plus its high cost – this migration would not be taking place if there was sufficient feed wheat and barley available in these areas.

The trade is still concentrating on the execution of existing contracts. These are mostly exports, rather than worrying about new business. We have a line up of boats from our southern and western ports going to the Iberian Peninsula and Mediterranean. We are shortly loading our twentieth cargo of southern malting barley. Normally, as the largest exporter of UK malting barley, this would be no big deal.

However, with the terrible harvest weather and growing season, the quality of southern malting barley was badly impaired. So shipping this volume is nothing short of a miracle this year. We will keep our fingers crossed for the second half of the year.

Canola and oilseed have taken a further hit on price since Christmas. This is due to both Canada and Australia just announcing much higher crops than forecast. This alone has turned the world picture from one of having greater demand than estimated supply to the obverse – we now have more oilseed than we need! But, the good news is it’s mostly on the other side of the world. We must now ignore that, and look at the UK and European Union situation.

The UK started with about a break-even harvest – and demand – of 2.1 million tonnes. Crushers made that worse by importing 135,000 mt in July/August. We have exported some since: we will have only 350,000 mt to export.

Really that should be easy between now and July. True the canola boats I mentioned in the January article are coming. It’s rumoured there are six boats of 60,000 mt each. But that’s not as bad as it sounds as they are destined for mainland Europe, not the UK. OK, 360,000 mt sounds like a lot – but not compared to the 2.5 million tonnes the EU needs to import.

It may be a case of who blinks first. Farmers are not selling at current prices. Crushers are having to use their stock – most of which is held in third party stores – off farms. In well tried theory, the UK surplus of circa 350,000 mt should be much cheaper – and closer to its EU end destination – than Canola imports. Sterling is surprisingly strong around an 88p exchange rate. It needs to weaken to 90p or more to increase the price of oilseed.

Feed barley remains too expensive really, compared to wheat. So either barley is too dear, or wheat too cheap. I would sell the barley now. The wheat will do better later. On paper there is still a chunky 678,000 mt of surplus barley to be consumed or shipped feed and malt. That’s quite a lot, with no big feed barley boats sold yet.

While the UK is just about managing its small wheat surplus, in the bigger picture the EU is well behind the curve on exports. Up to January only 51% of its 22.3 million tonnes exportable wheat target had been sold.

The United States Department of Agriculture January report seemed to be neutral to most normal traders. But that did not stop the big international hedge funds from interpreting it as bearish and making further sales of wheat and maize futures. It is now reckoned that these funds are short of about 20 million tonnes of wheat and 25 million tonnes of maize. This is about the size of the annual tradable portion of each crop, so it’s a big punt indeed.