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Wheat Market Update - Friday 30th July 2010
UK and Europe Harvest Overview
Continuing fears that the EU and former Soviet Union wheat crops have been ravaged by the drought conditions is currently driving global markets higher, with fresh bad news stories appearing almost daily.
The French harvest is progressing well in all regions, albeit with expectations of reduced yields of 5 to 10 percent compared to last year. A similar scenario is anticipated with the German crop, about which the position should become clearer in the coming weeks as more of the crop is harvested.
Yields will also be significantly reduced in the UK with some forecasts suggesting the final crop figure could be some 2 million tonnes less than originally expected. Early quality assessments, however, are encouraging but with less than 5 percent of the wheat crop harvested it is too early to be regarded as a clear representation of the entire crop.
US/World Overview
Conversely to the European crop, the US is experiencing good growing and harvesting conditions, resulting in the USDA continually revising their crop yield expectations upwards. The latest expectation for the 2010/11 crop has now increased to a level comparable to last year, somewhat astonishing when considering the smallest area planted for the last 97 years. Due to the larger than expected US crop it is anticipated the US will now be more competitive on the forthcoming export market.
Recent reports relating to the key exporting Southern Hemisphere nations of Argentina and Australia have been relatively positive. While some weather issues have been experienced in Australia, yields are currently still anticipated to be similar to last year. Argentina’s crop is expected to be significantly better than last year when the crop was severely depleted.
Summary
The market continues to be incredibly volatile and is expected to remain so for some weeks yet until such time as the European and former Soviet Union crops are accounted for.
Wheat Market Update - Friday 9th July 2010
UK and Europe Harvest Overview
Since the middle of last week European wheat prices have reversed their recent downward trend, rebounding significantly in a very short period of time. At the time of writing we have seen an increase of £17.00/tonne in just over a week, reaching their highest level for almost 12 months.
There have been a number of factors that have come together at once to fuel this rally. The USDA report on the 30th June surprised market participants by cutting planted acreage for corn and also reducing stock levels that resulted in corn prices increasing due to the reduced supply situation. Wheat prices naturally followed corn upwards given that both are used for animal feed. The main driver, however, has been the weather across Northern Europe and Russia with the prolonged heat wave leading to serious concerns over the potential yields of the forthcoming crop. Rainfall has been well below average with crops starting to look stressed. These worries have been supported further by the poor performance of early barley cuttings in France, which could indicate that poor wheat crop yields will follow. As well as Northern Europe similar drought conditions have been affecting the black sea region with the Russian Agriculture Ministry also reducing their production estimates.
US/World Overview
The US is enjoying a good growing season with crops progressing well and no concerns, with stocks projected to rise. However with the corn supply situation looking tighter and with problems elsewhere around Europe they have been given hope of an increased potential for exports which has resulted in prices increasing.
There is a further USDA Report on the 9th July which will produce figures on US yield and estimated world production figures. It will be interesting to see how much of the production concerns they build into their report and the market reaction.
Summary
We have moved into a weather market and with no definitive information about crop quality and size likely to reveal itself until harvest results start to come through there seems less chance of a correction in the short term with sentiment pushing prices upwards. This level of volatility does bring with it speculation. This has made the market very nervous as to whether it is already over-priced and due to fall back or whether this speculation will push it on further.
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