The year has started off relatively mild and dry, with only 14.1mm, or just over half an inch of rain, in January here in the Borders near Coldstream – but it’s a different story elsewhere in the country, especially this past week.

Last weekend, we had the first full day’s rain in February but even that did not amount to a great deal. Winter is passing here with no snow, or any real hard frost so far but as we always say winter is not over until March is past.

Winter sown crops have never looked back and I am told that spring barley is now being sown in the south of England.

As is the norm at present, the threat of conflict between Russia and Ukraine is the first item of news on TV and headlines in the newspaper. This seems to be coming to a head now with politicians flying all over the world trying to avert another war zone which will only end up with needless loss of life.

Price volatility has been driven by this and there’s been many ups and downs, with markets highly sensitive to fresh news.

Russia and Ukraine export some 30m tonnes of wheat annually, and currently the Russian Navy, due to military exercises, are blocking the Ukrainian ports which is halting exports and this could have a far-reaching effect on wheat supplies if this continues. Ukraine has so far this season exported some 17m tonnes of wheat and 16m tonnes of maize, which is 30% more than last season at this time.

The London Liffee feed wheat futures for March, 2022, currently stand at £219.15 per tonne, which is where it was some two weeks ago but for May, 2022, old crop wheat futures currently stand at £222 – 10 days ago they were at £214.

Likewise, for November, 2022, new crop wheat futures currently stand at 210.25 and 10 days previously stood at £194, having been at £202 at the end of December. At that time, May, 2022, futures were at £232 per tonne.

This makes it very difficult for traders and speculators who must try and second guess which way it is all going to go as currency also comes into play as well, especially with speculative trading and panic buying taking place and resulting in fluctuating futures prices.

Earlier this month, the Bank of England raised interest rates from 0.25% to 0.5% due to inflation concerns and this saw sterling strengthen by 0.1% to the US dollar and then weaken again, it also dropped against the euro by 1.0%.

As a result of the strengthening euro, markets reacted with increasing export concerns as a stronger currency often results in exports becoming less price competitive and imports more price competitive.

Another reason for the euro strengthening was as a result of the European Central Bank concerned about inflation and possibly considering an interest rate rise sooner than later, which would cause further price volatility for both grain and oilseeds.

Wheat prices were supported by the news that Canada’s wheat stocks at the end of December stood at only 15.6m tonnes, or 9.5m tonnes less than at this time last year. This was caused by prolonged hot, dry weather causing significant crop losses and resulting in a crop of only 22m tonnes compared to 35m tonnes in 2020.

This loss of tonnage and quality has been one of the main reasons for higher wheat prices and resulted in supporting UK wheat and global wheat prices as well.

The US had weather issues as well, with recent drought conditions affecting the wheat crop but due to a recent large winter storm which brought rain and snow to many of their winter wheat producing states, this will help their production potential where wheat crop ratings had previously been very poor.

EU wheat exports, up to the end of January, stand at 16.64m tonnes, which is just 1m tonnes more than last year but leaves just five months to export the remaining 15.5m tonnes before the end of the season to avoid a large tonnage of end-of-season stocks.

Egypt, the world’s largest wheat importers, recently bought 420,000 tonnes of wheat from the Ukraine, Russia and Romania for March delivery.

The global wheat supply and demand figures remain tight for 2021-22 as the major exporter’s wheat stocks-to-use ratio is now at 12.8%, compared to the five-year average figure of 17.5% and has gone down by 0.5% since last month. This will help wheat prices in the short term and going into the next marketing year.

According to the AHDB’s ‘Early Bird Survey’ of UK wheat plantings this year, there was a 1% increase year-on-year, putting the UK wheat planted area at 1.81m ha. Also, the EU is looking at a wheat planted area similar to last year at 21.7m ha.

The UK current wheat supply and demand outlook is tight and in this current marketing year ex-farm wheat has traded at an all-time high figure of £226.50 per tonne in early December, 2021, but prices have fallen since then and future prices will depend on how other country’s crops, weather and planting figures pan out in the future.

A reduction in maize production in Argentina is an increasing concern due to prolonged periods of hot, dry weather and world maize stocks are expected to be down by 800,000 tonnes from last month to 302.2m tonnes but, could yet be lower. Global wheat end stocks are estimated to be down to 287.2m tonnes.

UK feed barley prices have dropped by £3 this past week as the mild winter means that not as much feed is being used for livestock. Also the discount to wheat is now very low, so less barley is required for feed rations.

Malting barley prices have dropped by £20 per tonne as brewers, maltsters and distillers seem to have enough supplies at present and with old crop malting barley at a significant premium to new crop, they will not want to carry over any surplus into the 2022 harvest.

With spring barley sowing now under way and nitrogen applications started in some areas, there is likely to be an increased demand for fertiliser. UK prices appear to be comparable with the rest of Europe and there has been little or no change from other ammonium nitrate sources following the new terms from CF Fertilisers, which announced new prices for March delivery with a small price increase.

Read more: Reflecting on 'good' weather year – but clouds forming!

But, the threat that Russia might invade Ukraine has sent Brent crude oil price up by 3.3% to $94.44 per barrel. UK fuel prices have risen yet again and in the UK, oilseed rape delivered Erith for harvest 2022 was up £1 to £515 per tonne – Paris rapeseed futures also rose by more, €16.00 to €619.00 per tonne.

UK ex farm oilseed rape eased back by £5 per tonne last week due to the uncertainty over how much rapeseed the UK and EU are going to crush for the remainder of the crop year. But this will depend on whether crush margins improve, which have been low for some time due to the high oilseed prices and increased energy costs for processors.

The UK is looking to plant 359,000ha of oilseed rape this coming year which would be an increase of 17% on last year and with a five-year average yield of 3.3 tonnes per ha, total crop could be 1.2m tonnes – the largest since 2019. That all depends on no cabbage stem flea beetle issues affecting yields.

The EU-27 estimated area for oilseed rape next year is 5.69m ha, up from 5.27m ha last year and this is expected to raise production up to 18.19m tonnes – or 1.25m tonnes up year-on-year and the highest since 2018-19.

The Ukraine is looking to reach 1.15m ha, up 100,000ha from last year and production could reach over 3.3m tonnes if yields match last year’s figure of 2.91 tonnes per ha, currently they hold a 14% share of global oilseed rape exports behind Canada and Australia.

This past week extreme price volatility continued in other oilseeds and the Chicago Board of Trade soyabean market traded within a 70-cent range within a single day – the largest price range that's been seen within a single day in the market place there this year.

The soya crop in South America is still being affected by drought, resulting in supplies being significantly reduced which will see tight old crop supplies.

Brazil is now forecast to produce 125.5m tonnes, 15m tonnes lower than the January estimate with a similar throughout South America due to ongoing hot dry weather.