There can be little doubt that the bears are winning the day in the grain markets this month.
Prices have been under pressure since the turn of the year, with March futures dropping from £111/t in week one, to £107/t in week two, to just £101 this week - down 10% in a fortnight.
The reason for the fall comes down to two basic factors - supply and currency.
Last week's data from the US department of agriculture came as a series of body blows. Global wheat production was revised upwards by 2m tonnes, and end stocks by 5m tonnes at 196m tonnes - up 61% in just two seasons.
US wheat stocks were also increased by 2m tonnes to 26.6m tonnes - the highest for 20 years - while US maize production was raised by 6m tonnes, and stocks by 2.3m tonnes...
The lift in the maize crop was a particular surprise, given the recent poor harvest conditions, and caused a rush by US investors to liquidate their long holdings. The market dropped by 12%.
This was followed on this side of the Atlantic by revised crop estimates from DEFRA, which raised 2009 UK wheat production by 200,000t to 14.38m tonnes, with a commensurate increase in the export surplus. Combined with lower usage figures (for feed, flour and brewing) prices headed south.
On top of this, sterling has shown the first signs of a sustained improvement against the euro and dollar for several months, undermining the competitiveness of UK grains.
On Tuesday it stood at £1=€1.146, making the pound worth just 87p - the strongest it's been since early September. With inflation at 2.9%, according to figures out today, City observers are predicting an earlier than expected rise in Bank of England base rates. This has added fresh impetus to the recovery of sterling.
Predicting grain prices is never easy, but there now seems little prospect of much recovery in old crop values. Analyst Rabobank sums it up as follows: "Investors who have recently been trying to build a bullish case for the world's grains and oilseeds markets will have to bide their time to see if the weather Gods come to their rescue in 2010.
"Based on revised USDA estimates, it is going to be difficult for prices to shift higher without a major weather event eroding prospective stocks."
That's probably about right, though there is one glimmer of hope. The USDA also signalled a significant downturn in US winter wheat plantings - down 14%. With EU plantings similar to last year's levels and global wheat consumption increasing, there could be some tightening of the market in the second half of the year. Well, that's what the optimist in me says.
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Well well well, you seem to have been right, my wheat predictions have been utterly undermined by my other predictions appearing to be accurate.
Note to self: strong Stirling = reduced UK grain competativeness :(
Anyway, the interest rate/currency situation is at least good news at my work, importing with nearly £ = € isn't exactly helpful.
Still, I hope wheat prices do recover, we cannot continue to have our biggest crop being a loss maker for nearly every farmer in the country, let alone in a potential SFP free/less subsidies post CAP 2013 onwards.
Ah yes, my end of 2009 predictions! Just to remind everyone, I was suggesting feed wheat at £107/t (currently £93/t!), Nitram at £205/t (now £220!) and red diesel at 49p/litre (already 51p/litre).
But just remember, those were predictions for the end of June - so plenty of time for things to come right again!
(£115/t for feed wheat Stop It? Whatever were you thinking of!)