The last few months have seen extraordinary gyrations in grain prices. The quality wheat market has been especially affected as Canadian prices doubled between November and February before falling back in the first week of March.

Looking forward, most expectations are for continuing volatility associated with uncertainties about the forthcoming harvest, amplified by the activities of investment funds. Index-linked funds are estimated to hold £200bn of commodity stocks today, up from £15bn in 2002. Funds are believed to hold up to 40% of wheat futures open positions in certain US markets.

In the UK, the open position on the LIFFE wheat market has doubled over the last 12 months, while farmers have sold a lesser amount. This investment activity is likely to generate more volatility for traditional buyers and sellers.

There is some good news. In the UK and elsewhere, wheat plantings are up. Current estimates suggest a global wheat crop of 645 million tonnes in 2008, 7.5% higher than in 2007. A similar increase is forecast for the UK, but there has been a shift away from better quality varieties.

As a result, new crop prices are currently lower, but should harvests around the world fail to meet expectations - even if there is a good crop in the UK - all bets are off.