January is well through now and to date we have escaped any real hard winter conditions here in the Borders.

With no large amount of rain since before Christmas, fields are drying nicely allowing machines onto the land in preparation for spring sowing and spreading nutrients on to winter sown crops that all look well. I also hear that spring sowing has already started in the south of England on the lighter, drier soils.

But, at present, it is currency and not weather issues that is determining commodity prices as the pound against the euro goes from €1.1109 last week to €1.1348 equivalent this week. A lack of fresh information, due to a US federal shutdown which is now in its fifth week, means that markets continue to drift due to the lack of US intel and as a result old crop May, 2019, Liffee feed wheat futures fell this past week again, down £4.15 to £173.10, new crop November futures were also down, again by £4.10 to £155.90. However, before we all get too depressed the November, 2019, futures price is still £14 above the November, 2018, contract at the same time last year and £19 above the five-year average.

With a big drop from old crop futures prices to new crop prices, the market appears to be anticipating a big new crop this coming harvest, with global soft wheat production forecast to be up 8% on the year to 718.5m tonnes.

A strengthening pound has been one of the main drivers in UK futures, but increased cereal production forecasts for this coming year in the EU are starting to be assessed and the extent to which tighter EU grain stocks will be eased as a result will determine the direction of new European crop prices.

According to Strategie Grains, cereal production for harvest 2019-20 is forecast to increase by 11% year on the year after drought damaged this season’s crop. Soft EU wheat production is forecast at 146.4m tonnes, up 15%, with planted area up 5%, barley production is up 11% to 61.8m tonnes and maize production is forecast up 4% to 64.2m tonnes, which will be the largest area since 2015.

Harvest might still be a long way off, however conditions in most of the Northern Hemisphere are currently good. Should this continue and production forecasts realised, an increased supply into next season would pressure EU new crop prices.

In the Black Sea region, wheat crops in Ukraine are reported in good condition, with ample snow cover limiting possibility of winterkill but this is not the case in Eastern Europe.

Plus, there are still weather issues in Brazil where ongoing dry weather could potentially reduce soyabean yields and in Argentina heavy rain has affected up to 300,000 ha of the crop but since sowing, the weather has generally been beneficial for maize yields and January is a key period for grain filling. The next few weeks will determine much of the final maize yield.

Chinese imports of soya fell by 40% in December, 2018, largely as a result of ongoing US-China trade issues. China imported 5.7m tonnes of soybeans in December, 2018 – the lowest for that month since 2011.

Strong UK wheat prices are now easing and milling wheat premiums are now lower given clarity from the current UK balance sheet, which indicates that there is a wheat surplus of 650,000 tonnes and with limited export opportunities to date. Current old crop prices, which are £20.00 above harvest prices, are now looking very tempting.

Ex-farm UK bread milling wheat was down last week by £2.80 to £178.50, compared to feed wheat, down £1.50 to £171.90 and feed barley was up 40p to £164.90. Old crop wheat prices have a weaker feel about them are there are sufficient worldwide supplies on offer to fill remaining world tenders and a domestic market that looks to be in surplus.

It is interesting to note that feed wheat delivered East Anglia is worth £173, delivered Yorkshire £176.50 and delivered Scotland £181 – and the latter two regions saw the price drop by £5 per tonne last week and by £3 in East Anglia.

Old crop feed barley has slipped due to a lack of further demand from the export market and a dry December and January in livestock areas has seen supply outweigh demand this past week. Due to a decent price discount to wheat compounders planning feed rations will probably use more barley and the dry summer in the UK required more animal feed to replace grass, but that's countered by less demand from the biofuel sector, following the closure of both Vivergo and Ensus.

The success of the Scotch whisky trade has provided an excellent and growing market for Scottish grain farmers and the continued growth in malt production, with 10 new distilleries set to open in 2019 and 40 to be operational by 2021, has led to Scottish malting barley having a £16 per tonne premium over English, although it is more suited to brewing. However, the current rate of growth in the whisky sector is likely to continue, regardless of the Brexit deal.

GB grower held potato stocks at the end of November 2018 are estimated at 2.97m tonnes and this is the lowest during this point in the season since 2016-17 and 300,000 tonnes above stocks in the same period in 2012. A lower than average rate of drawdown is due, in part, to large carryover stocks from last season allowing packhouses to utilise competitively priced old crop supplies well into September.

And, specifications have also been altered to reduce waste in order to get the most out of this year’ smaller crop.

Trade has remained slow this past week, with limited demand for chipping and packing supplies. The quality of samples in controlled temperature stores are reportedly holding up reasonably well, with little deterioration seen so far but ambient stores are having to move supplies as the warmer than normal winter weather is causing potato stocks to break down.

UK delivered rapeseed prices were pushed lower last week due to the stronger sterling and the uncertainty of Brexit, oilseed rape delivered Erith was down £6 on the week to £332.50. As with grain markets, oilseeds are also lacking information following the US federal shutdown and traders are waiting for information on the volume of US soya exported.

This past week, due to the dry weather, spring bean drilling in England is well underway in the drier regions and the outlook for the new crop price looks promising. Feed bean values for November, 2019, are trading at £185-£190 per tonne and it is likely that there will be big premiums for human consumption beans.

Sterling is not the only currency facing issues, with the dollar struggling under President Trump’s administration, the slide in the economy in China and the French riots causing civil disobedience affecting all these different currencies.

It's all shaping up to be an interesting few months.