Even late harvests yield a crop. The harvest timing has mirrored that of 2004 and in that year we obtained yields of 7.8 t/ha. Most observers of the 2008 harvest are suggesting far better yields this year, perhaps well over 8t/ha. So, regardless of individual and regional difficulties, the harvest seems to be better than the rain over the last four weeks would have suggested. Good news, but the loss of quality that has been incurred coincides with problems in other countries, especially Ukraine. So we have seen rising milling wheat premiums against a background of falling grain prices. This will have important implications for trade and prices during the coming year.

This year’s smaller US maize crop, faced with rising ethanol production might have reduced US exports of world feedgrain supplies. The large tonnage of feedgrains in Ukraine could equally pose problems of disposal and weaker prices: It has already been priced into markets as far away as Korea. It is now possible that these two issues might be self-resolving. Markets adjust and, as we saw last year, they do not always follow expectations. Thus, the mixed bag that is the 2008 world grain crop has increased availability modestly but with challenges on the quality front. That is why farmers have been urged to keep varieties segregated wherever possible. Different parcels may well have different values.

Longer term, forward wheat prices are telling the market to have confidence and grow. But in the face of weakening prices and uncertainty about input costs, farmers are worried about being over exposed. This may lower plantings below market needs. But leaving land fallow is, in most cases, a false economy, forgoing cash income against fixed costs. It is unlikely that the market can stabilise in order to provide security of production and supplies. The market must therefore get used to these volatile times and adjust their modus operandi.