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Wheat Market Update - 4th April 2006
UK & Other Europe
• Immediate moisture concerns for the growing crop appear to be
alleviated for now.
• Feed wheat demand from feed compounders is very strong both
in the U.K. and in Europe, where some suggest that 70% of forward month’s
requirements remain open.
• Underlying feed support is also lending support to biscuit values.
• Bread wheat values appear well supported in nearby months. Historically
low nearby premiums for bread and uncertainty of new crop quality mean
that an unusual situation of progressively higher priced bread prices
exists right through new crop.
• LIFFE futures market firming slightly nearby, but are steady
for deferred months.
• Good underlying futures support from current levels; little
perceived as downside (maybe £2?), but upside equally limited
for now in absence of weather concerns or new demand. However, premiums
for both biscuit wheat and bread wheat should be viewed with much more
caution as will be impacted by quality and farmer selling ideas.
• Europe has lately received adequate moisture; however internal
logistics are hampered in areas by high water from rain and snow melt.
• Free market cash awards for export sales have been halted for
several weeks; focus has been on intervention sales.
• Ukrainian harvest estimates range from 9-12 mmt, with most estimates
near 12 mmt wheat (vs. 18.7 yr ago).
• Russian total grain harvest estimated down 10% at 70 mmt.
• Spring planting in Russia and Ukraine to compensate for some
of the worst winter frost losses in 25 years.
North America
• Drought conditions have been relieved in several areas of the
Plains, at least for the time being.
• Overall wheat conditions continue to be at historically low
levels, with Plains HRW areas hardest hit.
• U.S. futures markets are nearly 10% off their recent highs due
to moisture relief and lack of demand at higher levels.
• Recent ‘planted acreage intentions report’ failed
to show much increase in spring wheat acres and may be viewed as supportive
to futures.
• Corn acreage was forecast down nearly 2 mln acres with a shift
taking place to planting soybeans. Corn futures consequently are well
supported which may, in turn, lend some support to wheat.
• Fundamentals of export demand viewed as flat price bearish;
recent Iraq purchases were filled from U.S., Canada, and Germany.
• U.S. HRS premiums unchanged.
Wheat Market Update - 24th April 2006
UK & Other Europe
• Feed wheat demand in both the UK and EU continues to provide
the main impetus behind the cash market. Feed premiums are up nearly
£3 in the last 2 weeks and show no signs of weakness yet.
• Higher feed wheat prices have likewise boosted biscuit wheat
and bread wheat prices for the remainder of old crop.
• New crop bread prices are firm on a continued lack of farmer
selling. The farmer's biggest perceived risk in making new crop sales
now is concern about harvest quality. With the poor quality harvest
of '04 still on their minds, farmers are reluctant to make many forward
sales, barring a further rise in prices. Current new crop prices are
only at or near historical premiums. New crop biscuit wheat prices have
quietly firmed as well.
• While it is too early to know for sure, some farmers continue
to show interest in switching out of bread wheat and into feed or biscuit
as bread premiums are not showing them comparable returns.
• French wheat futures (MATIF) have firmed to 2-month highs, lending
support to London futures (LIFFE).
• UK wheat exports for the 8 months ending February are on course
at 1.7 mmt.
• Much talk about energy crops in the coming years (crops for
bio-ethenol, bio-diesel) and the potential for a dramatic rise in wheat
prices as alternative use to food could sharply reduce any exportable
wheat surplus from the UK.
• Gluten prices have risen sharply for both old and new crop.
An increased use of gluten for feeding the aquaculture market is among
a number of bullish factors being presented.
• High water in Eastern Europe continues to hamper shipping logistics.
Danube recently at 100 year highs.
• EU cash awards at 5 euros for 100k mt wheat in latest week.
Intervention sales of 121k mt.
• Energy costs on the rise again. Oil at $74/bbl.
North America
• Lack of moisture in the Hard Red Winter (HRW) areas and conditions
too wet for planting in the Hard Red Springs (HRS) areas have pushed
U.S. futures up about 7% in recent trading.
• HRS planting progress is 10% vs. 21% year ago (16% 5-year avg).
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