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Wheat Market Update - Thursday 26th April 2008
UK /EU and US Overview
Old crop futures have fallen sharply over the last two weeks, as nearby demand remains thin with processors appearing relaxed about extending their current level of cover. Additional pressure has been seen following the announcement that the Ukrainian government has removed all wheat export restrictions for the rest of the season . Reports from India also suggest that they will no longer require further wheat imports this season as current stocks will suffice until harvest.
Although on paper UK supply and demand figures would suggest that available wheat should at some stage create a tightness in the market before harvest, at present this does not appear to be the case.
The level of cover still required by processors will determine this,as will the quality of the wheat that remains unsold.
Traders still highlight the potential for a volatile end to the season as we approach harvest, especially if we encounter weather delays during August.
New crop conditions globally remain favourable to continued crop development, and this to has pressurised new crop futures prices within the EU and in the US.
Southern US states are only a month away from commencing harvest,and the IGC (International Grains Council) today issued their latest global 2008 wheat production estimate at 645mt, up from 603mt last seaso.
Summary
As has been the case over the last few months,global weather conditions remain the key focus and most dominant price driver in the market.
Prices have eased back,but the picture could so quickly change with global stock levels at such low levels.
Interestingly the whole ‘Food v Fuel’ debate is beginning to receive more attention as we approach the summer months and the approaching harvest.
Wheat Market Update - Friday 11th April 2008
UK Wheat Overview
It feels like the UK market has taken a breather this week, with LIFFE futures price movements and volumes limited alongside a quiet physical market.
Increasing attention is being placed both here and around the world on new crop condition as the market waits for fresh direction.
UK consumers appear to be well covered in the nearby months and sellers with old crop left to sell are busy with spring field work, and are inclined to hold out in the hope that values will improve as the season draws to a close.
Additional new crop sales also appear slow in coming forward, growers having sold what they were prepared to some time ago. Most agree that at this point the UK wheat crop is progressing well.
World Wheat Overview
Two reports released by the USDA this week did little to give any real fresh direction.
The monthly world supply and demand report kept US wheat carry out stocks unchanged which surprised some who were expecting a downward revision.
Meanwhile world production and demand revisions for the current season did little to change the overall situation, with world wheat carry-out stock actually revised 2 million tonnes higher than the previous months estimate to 112.5Mt.
The first US crop condition report was also released which placed 45% of the US winter wheat crop in good to excellent condition, compared with 64% at this time last year. Although not in such good condition as last year it is still early to suggest any serious concern but should be monitored going forward.
Higher plantings and some needed rain has seen Australia increase its production estimate to 23Mt, some 10Mt above current season production, although there are still some 8 months until harvest.
Western Europe and UK wheat conditions remain favourable and are now three months away from harvest and entering the key development phase. Ukraine and the rest of the Black Sea regions are also expecting higher production levels.
Summary
A weather market will undoubtedly ensue in the months leading into harvest; presently wheat crops look in reasonable state, but remember we were saying the same thing at this point last year.
Weather holds the key to 2008 world wheat production surpassing demand and stabilising stocks, or creating further pressure on an already fragile stock level.
This will lead to continued volatility, while the back drop of the Global Credit Crunch will continue to impact currency, trade flows and fund activity adding to the uncertainty in soft commodity markets in addition to the fundamentals.
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