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Wheat Market Update - Tuesday 22nd July 2008
UK & Europe
The EU wheat harvest is well underway with, as expected, good yields being reported in France and Germany. Protein levels in early crops are however reported as lower or similar to last year, which should not be surprising given the inclement weather experienced during June.
The first cuts of UK wheat could be seen within the next 10 days, weather permitting, however the general view is that we are still 2-3 weeks away from the start of the wheat harvest.
Wheat prices have eased across Europe following continued expectations of big yields and easier US markets.
Black Sea wheat remains the most competitive origin in export markets and for the first few months of the season will remain so.UK/French export levels will need to remain competitive to secure traditional markets into North Africa.
November London International Financial Futures Exchange (LIFFE) wheat futures have drifted back to £137/t following the expectations of increased EU yields and easier French prices.
World Wheat
US winter wheat harvesting is 65% complete and US futures have continued to ease as good yields have been reported. The USDA recently increased their global wheat production figure to 664 million tonnes, compared to last season’s 610mt however with anticipated increases in usage stocks will remain tight.
Canadian and Australian wheat crops have received timely rains but more will be required to relieve parched areas of Western Australia. August and September remain critical months for Australian rainfall and many traders remember how quickly conditions deteriorated last season.
Summary
With harvest well underway in Southern France and Germany early expectations are for big yields. Futures markets have eased back but the next primary focus for price direction is the outcome of quality. Weather across the EU will determine this, however, with early indications of lower proteins being reported bread making premiums here in the UK remain firm.
Wheat Market Update - Tuesday 1st July 2008
UK & Europe
Prospects for an increased EU wheat crop continue to look favourable; however, the concerns over the widespread rainfall/flooding in the US Midwest have driven EU wheat prices sharply higher.
November London International Financial Futures Exchange (LIFFE) wheat futures have risen by circa £14/t from recent lows,and are currently trading in the range of £148-£152/t. Growing confidence that a large European wheat crop will pressure prices lower has been prevailing of late but if the weather situation deteriorates in the US prices could spike sharply higher once again.
Bread making wheat premiums remain firm and will not be tested until we have a better assessment of harvest quality.
World Wheat
Widespread flooding and high rainfall levels have delayed completion of corn plantings and have led to concern that yields will be cut back.
Fuelled by the ongoing strength of crude oil, investors have bought heavily in the corn market and pushed July corn futures to an all time high.With the weather outlook still calling for heavy rain in some areas, it is this that will lead price direction in the short term.
If analysts continue to lower corn production it will provide spill over support to wheat markets.
Summary
The first real signs of how nervous the market remains to any adverse weather globally were seen this week. Price volatility has been extreme once again, with many remembering how a similar situation began a year ago. Over the coming weeks as we approach the main Northern European harvest traders will watch vigilantly the situation in the US.
Presently in the EU conditions remain favourable but the market is indicating that large-scale downward price pressure should not be assumed; especially against the backdrop of low closing stocks and rising global demand.
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