A colleague asked ProFarmer this week where we thought the wheat price would be at harvest.....good question. The past couple of months has seen a dramatic change in grain market dynamics. Problems with the 2010 nth hemisphere grain harvest have removed the stocks buffer that has accrued over the past couple of years. International wheat prices have quickly moved to build in a risk premium. Expect grain prices to be more sensitive to changes in estimated stock levels. On top of this global economic uncertainty seems to have returned in a big way. Here is a bit of an insight into how ProFarmer analyses the grain market.

Of any of the crops we grow, barley has the most supportive fundamentals. Following the decline in Black Sea crop prospects and losses in the EU, the International Grains Council (IGC) has reduced its 2010/11 world barley crop forecast this month by 6.1mmt, to 124.3mmt. This is down by 24mmt (production losses in EU, Black Sea and Canada, on top of an 8% fall in plantings) from last year and would be the smallest barley crop since 1970. WA is also dragging on Australian export potential. Despite reduced consumption (down 4mmt to 136mmt) world barley stocks at the end of 2010/11 are forecast to fall by nearly one-third, to 27mmt - stocks to use 20%. With problems in all the major producers and question marks about export policy in the Ukraine and Russia it will be difficult to entice much selling.

BY RICHARD SMITH Japan dairy product expansion is being hampered by the prolonged economic recession and stagnant population growth rates, resulting in weak milk consumption, slow recovery in the dairy ingredient market, and soaring stocks of nonfat dry milk (NFDM) and butter. However, reduced prices for cheese will favor cheese import recovery. The government of Japan (GOJ) is still discussing how to actualise the farm policy initiatives called for by the new administration. Finding feasible policy mechanisms to replace the current dairy subsidy programs remains elusive.