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Wheat Market Update - Friday 23rd April 2010
UK and Europe Harvest Overview
Despite a strengthening pound, London wheat futures continue to be supported amid increasing export demand, a continued lack of farmer selling and technical overspill from U.S. markets. The spot position for wheat remains tight with ports buying to fulfil export sales and consumers looking to reduce short positions. The latest HM Customs & Excise data, released on 21st April, estimates total exports to February at 1.41Mt, down significantly from 2.61Mt last year. However, UK exports sales are likely to be considerably higher during March due to competitive currency and wheat values.
Fundamentally the situation remains bearish and the recent increase in UK and European export competitiveness was needed to decrease high wheat stocks. New crop conditions across Europe remain favourable and we are still on course to harvest a big crop.
Meanwhile, UK farmers are still reluctant to sell their remaining old crop because they are busy applying fertiliser and watching the market increase daily. It will take a downward correction in values to encourage farmers to start selling any significant volume again. Bread wheat premiums remain volatile in the South of the country; however, aggressive buying from consumers and ports continues to support the feed base.
Early crop reports suggest harvest could be delayed by as much as two weeks this year, due to slower growth after an exceptionally cold winter. However, it is very early days and a period of moist and sunny conditions during the yield forming period can quickly encourage growth and erode these delays.
US/World Overview
U.S. markets have become technical with fund short covering pushing values higher. Fund short positions have been reduced over the past week which has created upside support to CBOT wheat values.
U.S. wheat prices continue to be uncompetitive, losing out to the Black Sea and Europe in global trade. The U.S winter wheat crop is still reported to be in good condition.
Summary
Global wheat markets have found some support lately on technical trading, farmer retention and increasing spot demand. Fundamentals are still bearish with ample global wheat availability. Meanwhile, crops are progressing well across the Northern Hemisphere and weather conditions are favourable.
Wheat Market Update - Thursday 1st April 2010
UK and Europe Harvest Overview
Bearish fundamentals continue to limit upside movement on the London futures market with values relatively range bound. The latest USDA report has been viewed as bearish for US wheat, however although the UK market has also dropped back as a consequence our wheat prices have already been heavily discounted and we remain in quite a tight trading range. A weaker Sterling has been benefitting UK export competitiveness which has increased physical demand from ports around the country. Reports of a 50,000t Panamax vessel loading feed wheat destined for the Philippines, the first of the season to Asia, have now been confirmed whilst rumours continue to circulate of further shipments to Latin America, Thailand and Mediterranean destinations. Black Sea wheat still remains cheaper at present but we are starting to hear of some quality concerns and logistical problems recently.
Bread making premiums have remained relatively stable over the previous weeks whilst feed premiums have become more volatile due to increasing demand from Ensus and port locations. Ensus, a new bio ethanol plant on Teesside, is set to consume approximately 1.1Mt a year and should be running at full production in mid April, albeit 12 months behind schedule.
Wheat crops in the UK look to be in reasonable condition at present with no problems reported as yet. Traders will start to concentrate on weather conditions across the Northern Hemisphere. Weather during the spring will be key in determining final yield and quality expectations.
US/World Overview
Chicago wheat futures reached new contract lows yesterday amid a bearish USDA report and technical traders increasing short positions. The USDA put spring wheat planting intentions at 5.63Mha, against 5.37Mha and nearly 0.2Mha above trade estimates. Meanwhile, total wheat stocks came in slightly below trade estimates but were still 24% above last years levels.
These bearish figures and a lack of export competitiveness should weigh heavily on U.S. markets in the coming weeks. U.S. exports are still uncompetitive against Black Sea and European wheat values.
Egypt tendered for 60,000t optional origin wheat after the U.S. markets closed yesterday with the Black Sea and Europe likely to submit the most competitive prices.
Summary
There is a severe lack of bullish news in the market at present and the latest USDA report will add further downward pressure on global markets. The UK and Europe have seen an increase in export competiveness recently due to weaker currencies against the dollar but this could all change if they start to strengthen or U.S. wheat values drop considerably. Crops are in reasonable conditions across the Northern Hemisphere although it is still too early to have a reliable idea of final quality and yield.
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