David Sheppard, Gleadell’s Managing Director, comments on the wheat market.
WHEAT
- US reports better than expected yield from corn harvest – price remains pressured on likelihood of record crop.
- Coceral sees EU 2013 soft wheat crop at 135.2mln t, up 4.5mln t from previous forecast – corn production cut to 65.39mln t.
- StatsCan confirms projection of record Canadian all-wheat production at 33.03mln t, up from 27.06mln t in 2012.
- US government shutdown prompts investors ‘to cut agricultural commodities exposure’. ? Russia’s agriculture ministry forecasts area sown to winter grains at 13mln hectares, missing official forecast by 19%,
- Ukraine’s agriculture ministry reports 2014 wheat crop could drop by a third to 15mln t due to heavy rains disrupting sowing.
Markets have moved higher over the past week, as concerns remain over delays in winter planting throughout the Black Sea region. Official reports from Russia and the Ukraine forecast the winter grain area will be well below target levels due to heavy rain in the area, although the current dry spell has allowed a marked increase in sowing activity.
Winter wheat area is likely to be lower than initially estimated, although any reduction would be replaced by higher yielding corn.
The current US government ‘shut-down’ over the budget debate has resulted in the suspension of key US information data, leading nervous short-holders to cut their exposure risk. This has also caused the postponement of this week’s much awaited World Agricultural Supply and Demand Estimates report, where USDA was expected to adjust area/yield projections.
EU prices have again firmed, climbing €7/t on the week. The strong pace of EU exports is underpinning the markets, especially with increased talk of Russia and the Ukraine exiting the export trade in order to increase stocks due to the lower 2014 crop prospects. EU exports are running 3mln t ahead of last year, although non-EU French exports are only slightly ahead, due mainly to sales to Algeria. The French farm minister also this week lowered his country’s soft wheat crop estimate to 36.9mln t from 37.0mln t.
UK prices, supported by a weaker currency, have also firmed, up £4/t on the week (May 14 futures). Spot premiums have continued to rise on a general lack of physical grain, although selling activity seems to have increased on the back of firmer prices. The open interest on the Nov 13 futures remains high at 3679 lots, leading to a potential ‘technical squeeze’.
With the US closed, and no agricultural data being released, traders are running blind over harvest progress of key corn and soybean harvests. Reports of better yields keeps corn on the defensive, although a tightening ‘quality balance sheet’ and new crop planting concerns keeps the wheat markets underpinned. Until the US gets up and running expect markets to remain supportive, as nervous market shorts look to cut their exposure.
Jonathan Lane, Gleadell’s Trading Manager, comments on the OSR market
- We continue to hear reports of better than expected yields in soybeans in the US but the harvest has been slightly delayed by wet weather. This has helped rally prices as exporters and crushers wait for seed. We have no USDA report this week due to the US government shutdown.
- MATIF rapeseed has continued to rally this week, moving consistently higher on little fresh news. Crush margins have improved particularly in the pre-Christmas positions, with rape oil firming in the EU. European and UK crushers have used the rally to book seed with the strength in the euro, helping many UK farmers reach target-selling levels of £300/t ex farm. The move in MATIF and the euro presents a good opportunity for farmers to lock in some sales.
