David Sheppard, Gleadell’s Managing Director, comments on the wheat market
Wheat
- USDA reports corn crop is 91% planted against 100% last year and 95% as five-year average.
- Black Sea region (Russia/Ukraine/Kazakhstan) wheat crops are expected to increase 43% to 90mln t – exports up 30% to 32mn t.
- IGC projects grain stocks are to end 2013-14 at a four-year high of 367mln t, mainly due to a record 2013 global corn crop.
- Egypt’s GASC reports the country has five months worth of wheat stocks – increasing domestic purchases.
- USDA reports 32% of the US winter wheat crop is in good/excellent condition – poor/very poor reported at 43%, up 1 point.
- USDA reports spring wheat is 80% planted against 100% last year and 92% as five-year average.
- Informa cuts its US winter wheat production estimate – HRW wheat output is the smallest crop since 2006.
Global markets are relatively unchanged from last week, although new crop corn prices have eased $10/t. Although US plantings still show 9% left unplanted (8.75mln acres), the market eased on the fact that plantings had progressed, with improving weather conditions supporting yield.
However, wetter weather in the northern US states has increased the risk that not all corn and spring wheat will be planted, with analysts looking at a planting loss of 2-3mln acres and 1-2mln acres respectively.
European markets have remained flat, even though we have seen some export business concluded in the past week with Iran, Iraq and Saudi Arabia all in the market covering early harvest requirements.
Recent heavy rainfall in parts of Germany has resulted in talk of potential crop loss and damage. The EU’s cereals management committee voted last week not to extend zero import duties for wheat and barley quotas beyond the end of the current season. Could this be a possible sign of confidence over 2013/14 crop prospects?
The UK market, like the EU market, has traded in a narrow range over the past week. Demand for wheat is limited, especially for spot, with the only buying interest being for July around the country.
The UK balance sheets would suggest large wheat stocks are left, although these are mostly held by merchants or located in store or ports (imported grain), with less held directly on farm. With weather conditions improving, limited demand and harvests set to commence soon in the EU, old crop values could soon lose their premiums over new crop, and longholders should consider selling.
Jonathan Lane, Gleadell’s Trading Manager, comments on the OSR market
The UK and European old crop markets are now all but finished, with little activity in the broker markets and small volumes coming off farm. The new crop market remains equally slow, with a lack of farmer selling and the crush uninterested in new crop at current levels. In Europe where crops are looking good, farmers have been equally reluctant to sell, but we expect market activity to pick up significantly over the next 2-3 weeks.
MATIF rapeseed moved lower towards the end of the week following canola and soybeans, which came under pressure having had a fairly significant rally over the past week or so. The soybean market in particular remains volatile.
Wet weather continues to delay soybean plantings in the US, which has helped the new crop soybean contract rally. We feel that soybean acreage will ultimately be increased and the additional soil moisture should aid conditions. The soybean market is now very much about the weather!
Following some positive economic data this week sterling has firmed against the euro weakening domestic prices; £1 buys €1.175 at the time of writing.
