David Sheppard, Gleadell’s Managing Director, comments on the wheat market.
WHEAT
- USDA expected to raise US corn/wheat supplies in next week’s report - ideal weather is boosting yield projections.
- Ukraine’s farm ministry predicts grain exports to increase to 28mln t in 2013/14, an increase of 5mln t on last season.
- French soft wheat harvest was 30% complete by 30th July. Quality improving as harvest progresses into northern France.
- Kazakhstan raises 2013 grain crop forecast to 16.3mln t (clean weight) – 67% of the sown area is in good condition, 30% satisfactory.
- Egypt continues to purchase ‘cheaper Romanian/Ukrainian supplies’ – total purchased now 1.08mln t – less Russian offered.
- Russian wheat prices fall as export demand eases – concerns over quality/final production and export estimates.
- UK expected to harvest smallest wheat crop since 2001 – trade estimates around 12mln t, down from 13.3mln t last season
After a brief breather last week, markets have continued their downward trend. US wheat and corn markets have fallen $8/t as the likelihood of increased yield/production estimates continue to weigh on prices. Key importers continue to snub US wheat when offered as cheaper suppliers line up to sell. Egypt’s recent international purchases equate to over 1mln t, with Romania and the Ukraine again bagging the recent tenders.
EU markets have also eased with MATIF down €6.50/t on the week. Reports of better proteins as the French soft wheat harvest moves north is seen as boosting total output, with latest estimates placing the crop in excess of 37mln t. However, despite one cheap offer, the general ‘line-up’ of wheat offered to Egypt remains about $10-12/t too expensive on a CIF basis.
In the UK, a long-anticipated fall in production after a poor sowing season could be accompanied by better quality. Early reports of wheat being cut suggest quality is good. The UK is set to produce the smallest wheat harvest since 2001, with growers hopeful that lower quantity will be offset by quality premiums. Prices remain under pressure from the wider global markets, and will not be helped by the recent rise in sterling following the Bank of England’s inflation report.
Jonathan Lane, Gleadell’s Trading Manager, comments on the OSR market
- The Nov 13 MATIF futures contract has traded in a €10 range over the past week. While the downward momentum has paused this week, the question now is can the market fall below the €350/t level and continue to trade lower? The market gets harder to call from here but we feel downside risk still remains.
- The harvest continues in Europe and we see large volumes being offered in deferred months, which is helping to cap any price rises. There is a risk that when the grain harvest starts we could see another wave of selling across Europe as storage space is needed.
In the UK the market is fairly quiet as the trade awaits harvest to get into full swing. The UK farmer remains a reluctant seller of rapeseed at current levels but, with large volumes being offered out of mainland Europe, domestic prices could be capped in the short term.
- In the US good weather continues in the key soybean growing areas and everything currently points towards a large bean harvest. Soybean futures are trading lower.
