WINTRY WEATHER has come back again with a vengeance, as most of Scotland had some large falls of snow and sleet this past week.

In the last few days of February, in the Borders, we had snow and 65mm, or 2½ inches of rain to give a total for the month of 108mm, or four inches. It has also been the coldest January and February in the UK – with an average temperature of 0.8°C since the winters of 1947, 1963 and 1979. But, world-wide it has been the warmest winter for over 40 years.

For the UK, this has meant more oil and electricity having to be used for heating and we are now being told of warnings of an oil crunch within five years that will push up food prices and bring transport grinding to a halt.

Never mind five years time! Oil prices have been very volatile in recent years, spiking at $147 per barrel in July, 2008, and falling to $32 just five months later.

At the moment, though, oil is trading at $77 per barrel and it is expected that by by 2015 the highest rate of global oil production will have been reached. Then there will be a decline in availability, which will push the price of oil back up again.

As 97% of the UK transport sector relies on petroleum products and if fuel becomes scarce, then food, which is largely dependant on road transport for delivery, will see large price increases yet again.

As always, markets are influenced by weather and currency so this past week is no different.

Sterling weakened against the euro and the dollar and, currently, €1 is worth 89.6p, compared to 87.5p last week.

Consequently, the Intervention barley price rose £3 on the week to £92.40, giving an £8.50 premium over the UK domestic and export values.

The European barley glut has meant that 3.5m tonnes of EU barley have now been offered into Intervention, as well as 200,000 tonnes of wheat.

The slightly better news is that UK barley exports had reached 490,000 tonnes by the end of December. Along with Intervention, it is now estimated that half of the UK’s 1.8m tonnes surplus has been accounted for.

But, the EU27 countries have a surplus of 25m tonnes of barley and the minimum carry over at the change of the crop year is 7.5m tonnes, so there is still 17.5m tonnes to go somewhere.

With the ongoing bad weather in the UK, spring barley planting is expected to be down 30% in England and 20% in Scotland and could go lower if this wintry weather continues.

But contrast that with Spain, where they will be starting the barley harvest in the next two months – forecasters there are predicting a 9.5m tonnes compared to 7.4m tonnes last year. That’s mainly due to excellent winter rainfall, but it will further reduce the UK barley export tonnage potential.

Last week’s article discussed contract lows for LIFFE wheat futures – which have seen a drop of 10% since the start of this year – but, due to the weaker sterling, the March, 2010, LIFFE feed wheat futures actually rose £2.55 to £95 and for November, 2010, went up by £2 to £103. However, November, 2011, dropped 65p to £128.

EU wheat exports have hit 11.6m tonnes for the year to date, but that’s compared to 14.4m tonnes at this time last year. That leaves wheat stocks for the end of 2009/10 season at an estimated 25.2m tonnes – up from 22.4mt in 2008/09.

Latest estimates on the global wheat tonnage for 2010 is put at 659m tonnes, which is 6m tonnes up on last month, but still down on the 675m tonnes produced in 2009. Demand is put at 640m tonnes, so year-end stocks are set to increase yet again.

The EU biofuel market is a bit of a ‘will it’, ‘won’t it’ with regard to soaking up the grain surplus. But experts agree that the current useage of 4.2bn litres per year could increase to more than 8bn litre by 2013, as the 10% Road Fuel Inclusion target kicks in.

However, the supposed 1.5m-tonnes capacity for wheat at the new ENSUS plant on Teesside appears to be taking longer than thought to get up to speed.

So, a UK wheat surplus of 2m tonnes still seems to be a realistic statistic. Again, Spain, with its potential 4.7m tonne wheat crop, compared to 3.4m tonnes last year, will hinder UK exports.

Also, UK oilseed rape prices fell by £5 per tonne at the end of last week when crude oil prices weakened from $80 per barrel down to $77.

Another factor to affect market prices is that, in 2009, a total of 25 countries grew 134m ha of GM crops, compared to 125m ha in 2008 – with the US accounting for 48% of the total area.

The EU area fell to 94,000 ha, compared to 108,000 ha in 2008 – but that is less than 0.1% of the total area.