THE price of crude oil has recently fallen way back from the record levels posted earlier this year to just short of dollars 60 per barrel giving some hope to farmers that fertiliser, which is heavily reliant on oil, could also become noticeably less expensive in the run-up to the planting of spring crops of grain and potatoes.

 

However, any drop relating to input costs is likely to be more than offset by the continuing slide in most commodity values. There is little spot business currently being conducted in the UK, where feed wheat is now under GBP 90 per tonne on an ex-farm basis compared to GBP 150, or better last November. In Canada high-quality milling wheat available for export from the St Lawrence basin has slipped by dollars 11.61 to dollars 321.15 per tonne.

 

All the principal futures trading centres are also heading towards even lower values. London, as of yesterday, was quoting GBP 110.25 per tonne for November 2009 - down by GBP 2.75. The early indications for 2010 were little better at GBP 121.65 per tonne.

 

Chicago is the world's leading trading centre for all cereals, but there the outlook is equally grim from the farmer's perspective with quotes of dollars 183 per tonne for soft red wheat for next month - down by dollars 20.30. December 2009 is also rated back by dollars 22.69 at dollars 216.12 per tonne.

 

Chicago soya oil is also following the lower trend of crude oil with quotes of dollars 677 per tonne for next month - down by almost dollars 42 on the week. US maize, which is in relatively short supply, has not been immune from the bear market, with the futures for December this year declining by dollars 16.43 to just dollars 133.27 per tonne.

 

But the fact remains that global supplies of grain remain on a knife-edge, with barely 60 days of wheat in store. The Chicago wheat futures may be at its lowest level since May 2007, but any unexpected change in supply patterns could have a dramatic impact on what is clearly a hugely volatile scenario.

 

For example, it appears likely that the wheat crop in Argentina will be appreciably lower than anticipated while yields of rapeseed in Australia seem set to be below earlier forecasts.

 

Meanwhile, here in the UK, beef producers, who have enjoyed a profitable time for most of this year, are being warned that January onwards may prove more difficult as the credit crunch bites still harder and unemployment rises. However, supplies of beef both in the EU and throughout the world remain tight and prices may not fall significantly.

 

Argentina is a major player in world terms as far as beef production is concerned, but the industry appears to be contracting rapidly as a result of the government in Buenos Aries placing bans on exports earlier this year.

 

Malcolm Rodman, a leading beef industry consultant in Argentina, explained the current situation. He said: "Producers were on strike earlier this year preventing exports of beef and grain in protest at government policies which were forcing down prices to unsustainable levels.

 

"Exports are now in theory permitted but they [the government] are being very slow in processing the necessary paperwork."

 

The latest official statistics clearly illustrate Rodman's comments. In the first nine months of this year, Argentine exports amounted to just 168,100 tonnes compared to 215,400 tonnes in the comparable period of 2007. However, trade to the high-value EU market has just about been maintained at 44,000 tonnes.

 

But business with non-EU destinations has suffered, with the total falling from 172,700 tonnes to only 124,100 tonnes. In the longer-term, beef production in Argentina is almost certain to fall still further: farmers, even with a low-cost system of production, are still not making any money. The kill of young female cattle is reported to be running well ahead of usual trends and this is likely to have an impact on global supplies over the next three years.