We entered the beginning of the 20/21 season with the idea of a thaw in China-US relations and a wave of tensions between China and Australia. Optimism about the state of crops in the Northern Hemisphere melted before our eyes as the harvest approached, and the bulls found support in everything from quarantine to a drop in production. As early as late May 2020, wheat futures bounced off an eight-month low as concerns over the health of the European Union's harvest exacerbated the impact of worsening conditions in the Black Sea region. Rains were required in many regions to stem the decline in production.

Over a large area of the country and Central Europe, spring precipitation is insufficient to replenish the soil level. Daytime temperatures were also above average. Crop development slowed down significantly, and their condition was worse than in 2019. The forecast for relatively drier than average conditions in many parts of France, Germany and Poland - some of the main EU wheat producers - was stressful. A similar situation with a lack of rain was observed in Romania and Bulgaria.

In other words, the global wheat balance at that time became more dependent on the Southern Hemisphere. Winter crops in Australia and Argentina have become a problem. But looking ahead, it did not help - global inflation and the threat of disruption to supply chains pushed markets up. Corn was too expensive and needed more than the market expected. Wheat began to be used in feed. All the jokers were in the hands of the wheat producers. On top of that, freight began to rise.

The USDA has cut both acreage and potential yields. Prices continued to rise. Winter crops 20/21 in the Black Sea developed well. Siberia and neighboring agricultural regions of Kazakhstan. And it was not possible to restore the potential of winter wheat everywhere.

In August 2020, Brazil's wheat production could hit a record this season, while neighbor and main supplier Argentina struggles to maintain yielding potential as dry winters and lack of moisture in anticipation of soil weakened production forecasts.

Traders are counting on Australia to stem the downward trend in global wheat production in 2020/21. The huge potential of the Australian wheat crop has become a lever for lowering world prices for this grain.

The European harvest period made it clear that this year's production in the Union was mixed this year, as the growing season was dry for various producers and exporters. The resulting harvest is below average means grain exports from the EU will be much lower in the 2020/21 marketing year.

The steady flow of grain cargoes to China has been phenomenal as Beijing sought to rebuild strategic stocks ahead of a new 5-year cycle and responded to rising domestic demand driven by a stronger economy and the recovery in pigs following the African swine fever outbreak. This looks like a bumper crop for Canadian farmers in 2020. India looked good too. But the bulls cannot be stopped. At that moment, the global corn balance is rife with questions and uncertainties, and this will be a decisive factor in the development of international grain markets as autumn approaches in the Northern Hemisphere.

World wheat prices were rising, catching both traders and consumers by surprise. With a fairly large harvest in Russia, the market expected supply pressure to drive prices down. But the opposite has happened, as dry conditions in the Black Sea region made planting difficult, prompting local producers to tighten control over newly harvested grain. The winter cropping areas of Ukraine, Russia and Kazakhstan were very arid and of growing concern. Delaying sowing increases the risk of poor establishment of crops and difficulty getting through the winter.

Farmers around the world have become more informed and discerning sellers. They have government support and money to build grain elevators. They can keep the crop for a long time. We call this "sitting on the harvest." This negates the harvest pressure we are accustomed to. And the main consumers were waiting for the pressure of the harvest. Imports were lower than usual at this time of year and the unexpected rally caught buyers off guard. And everyone came to the market to meet their immediate needs.

Russia has clearly demonstrated the idea of restoring stocks in the new season. Potential exports are lower than proportionally would have been expected for a harvest of 82 million metric tons. The Ministry of Agriculture said that grain exports will not be subject to quotas from July to December this year, but quotas are possible from January to June next year to contain the rise in prices on the domestic market.

At the end of October, world wheat prices continued to rise - there was demand and sowing was in difficult conditions - this meant the possibility of a decrease in production next year, as sowing conditions in some exporting countries of the northern hemisphere were not optimal. China continued to import grain at a record pace, expanding its origins as much as possible to replenish stocks and rebuild the pig herd.

And while everyone seemed to be ready to come to terms, a drought reared its head in Brazil. The corn crop was melting like ice cream in the sun. A new round of rising corn prices and Chinese pigs pushed wheat up. And Russia, preparing for the elections, has strengthened non-market regulation - it announced that in addition to quotas, they will use duties. First - a fixed amount, and then - they remembered that once there was an experience of a floating rate. This incorrect calculation formula completely confused everyone, and the only thing that became clear was that it is dangerous to take risks and go short.

In early spring, the global wheat balance is getting tighter every day, the health of winter crops in the northern hemisphere has become critical to assessing world supply in the new season - everyone worried about how crops weathered the cold winter.

Everything began to accelerate, and events were ahead of the news. The container ship that got stuck in the Suez Canal finally showed us how weak we are. We can conquer space and print hearts in 3D, but one big boat has jeopardized all world trade. And all this against the background of the fact that people are tired of quarantine. And Russia also raised an old conflict with the United States and accused their ministry of manipulating forecasts. Everybody watched the detective series “So how much wheat will be in Russia next season”. And they sailed on a wave of floating duty. We came to the end of the season with a widespread of forecasts in Russia, when local analysts reduced their readings almost every day, trying to guess the figure, and the authorities persistently insisted that there would be a big harvest, in spite of the American ministry. And in the United States, there were not the most optimistic moods. To top it all - with rains in Ukraine and the EU - this reduced the quality of the supply. And the demand has not gone anywhere.

Season 21/22 was called the supercycle. It was not only grain and oil that rose in price. All commodities supported by inflation and huge amounts of money poured into the economy, freight - all renewed highs daily. There was no harvest pressure or a collapse against the backdrop of a halt in purchases by China. Record harvests in some regions made up for Canada's losses and Russia's unjustified hopes. However, this season's drought has affected North Africa and many Asian countries. Against the backdrop of Russian restrictions and poor quality in the EU and Ukraine, demand from Turkey, Pakistan and other countries pushed prices up to near-record highs - more than today, wheat cost only in 2008. The desire to secure supplies became more and more evident. And this despite the fact that there is plenty of corn. Food wheat, as we predicted at the beginning of the season.

Now we have price support in our piggy bank:

• Expensive fertilizers. Very expensive. Failure to bring them in is to lose yield.

• Dry weather in the Northern Hemisphere - the area is lower than last year.

• Huge harvest of Australia - we are already talking about 37MMT. But, as in Ukraine, and in the EU - because of the rains, a lot of fodder grain is expected. Such a proposal will obviously bring down the prices for corn, in contrast to the last season, while it seems unrealistic to see a lot.

• The next quotas in Russia - according to last year's scenario, and the likelihood of toughening the duty

• Threat of restriction in Ukraine

• Expensive freight

If it is possible to minimize the risk of inflation, then overheated markets and oils will quickly be handed over. And if China will not return to the market. If...