|
Wheat Market Update - Friday 27th August 2004
Progress has been poor in advancing the wheat harvest. Numerous articles are appearing in the press and other media regarding the record rainfall in August and consequential cost to the agricultural industry. Estimates regarding the acreage of wheat harvested generally range in the area of 40 - 50% in the south to no more than 25% complete in the north. While it is once again wet in much of the UK today, the forecast is more promising for the next few days. However, given that it will take some time for the wheat to dry out, it may not be until the latter half of next week that the harvest resumes in earnest.
The next topic of discussion will be planting for 2005, where significant delays will reduce the potential crop size next year.
Quality
It certainly can be said that the quality of this year's crop has deteriorated significantly over the past two weeks. Not only is protein lower (as was generally expected), but bigger surprises have been seen in declining Hagberg values and specific weights. The potential crop size has diminished to a level closer to 15mmt from what was once 16mmt. Some fields may be lost altogether whilst others suffer from reduced specific weight.
The availability of feedwheat has increased at the same time. The E.U. and U.K. feedwheat surpluses will be competing with the potentially huge U.S. corn crop this marketing season. This is likely to limit upward price movement for all feed grains and put pressure on co-product prices.
Milling quality wheat continues to divorce itself from the feedwheat based LIFFE market. There is an immediate need for quality milling wheat across most of the U.K. and there are even shortages of feedwheat to load onto vessels for next week sailing. For those reasons, there are unusually high prices being paid for immediate delivery.
Guaranteed quality is commanding a premium through to Oct/Nov delivery in some markets and the longer the adverse weather prevails, the longer these scenarios will exist. Quality will need to be monitored closely as the next run of newly harvested grain is delivered and, added to initial concerns over bread wheat quality, there are now concerns about biscuit wheat quality in the North. Consequently, there is the possibility of a widening in price for milling wheat in the south from that in the north. If it transpires that quality is not available in the north, wheat prices to northern locations will also reflect higher transportation costs as quality wheats are sourced from the south.
In addition to increases in the UK wheat market, higher gluten usage throughout the world this year is putting upward price pressure on this commodity.
As for elsewhere in Europe, it appears that the better part of the E.U. crop is of good quality. There are areas yet to be harvested and some of those have been hit with rains, but there is not nearly the degree of pessimism that surrounds the U.K. crop.
The United States DNS harvest is significantly behind this year due to the cool summer. Early results were good, but recent activity has seen a slight decline in quality and some forecasts are predicting more rain in the short term. World wheat stocks are forecast to be relatively tight at a 20% stocks to use ratio thus remaining below the 30% of previous years.
Wheat Market Update - Monday 23rd August 2004
UK Market
Quality
Better weekend weather (21-22 August) has undoubtedly allowed for some harvesting and the marketplace is anxiously awaiting quality analysis. It is appearing more and more as though the quality in the North of England and all of Scotland will be dramatically below that of the southern third or half of the U.K. Hagberg has most certainly been on the decline and protein is suspected to be down. Media coverage from a local farm in the northwest U.K. today quoted the producer as having lost nearly 20% of his crop. Concerns were also voiced regarding how critical it will be to make sure the crop is dried well before going to storage and then monitored in the coming months. Overnight rain has delayed further harvest and the next couple days do not look good either. With approximately 70-80% of the entire harvest ahead of us, there are many unanswered questions.
Market
Premiums continue to firm substantially. Wheat supply is very tight and there are premiums being paid for immediate delivery. Expect that to hold true for this week as the weather is still poor. The strength in the nearby is spilling into the deferred positions as well where the market is now at its highest prices for the season. Futures took a break on Friday with the LIFFE down £1.50, but the market price for wheat remained unchanged to higher from Thursday's market. Once again, the producer is not correlating his selling ideas to LIFFE movement. He is a flat price seller and not willing to accept values below a certain level. LIFFE will continue to trade in reaction to what is perceived to be happening in the feedwheat market and divorce itself from milling quality on a day-to-day basis.
Wheat Market Update - Thursday 19th August 2004
UK Market
Old Crop
The availability of old crop wheat supply has come to an end. Given
the harvest time weather delays of the past 10 days, wheat supplies
are limited to what new crop has been cut and already stored.
New Crop
Bad weather is the big factor here. Harvest is just starting to resume
in some areas of the Midlands after the heavy rains of nearly two weeks
ago. Meanwhile, continued intermittent showers and brief downpours across
the country have kept a lid on harvest elsewhere. Unfortunately the
forecast looks wet into next week as well. The nearby price of wheat
has risen close to £4 to £5 this week due to lack of availability.
Deferred values have risen by a similar amount. Premiums for milling
wheat are firming due to concerns about quality. Protein, Hagberg, and
specific weight all merit watching. Farmer selling of new crop wheat
has slowed along with the harvest, but that does not mean milling wheat
sales will resume substantially when harvest restarts. Feedwheat selling,
though, may pick up especially if the overall wheat quality is poor.
Europe / USA
The French harvest is in its last days and the quality has been perceived
as generally good. Here too, the market has been firming with nearby
values now nearly a two euro premium to September. German harvest is
about 20% complete, the bulk of which has occurred in the south. Northern
areas are a little wet yet and the crop not quite ripe. Quality is thought
to be good for wheat harvested early. DNS harvest in the U.S. is running
behind, compared to this time last year, due to the cool weather affecting
maturation, only about 20% is harvested currently.
Wheat Market Update - Monday 16th August 2004
European Harvest
What a difference a week makes; everything was looking
well Friday 6th August, the weekend was good for combining in the East
Anglian region and then came Monday and the rain, water, water everywhere.
Between 10 and 15% of the crop has been brought to harvest, and thus
far yields have been acceptable and Hagbergs and proteins likewise.
However, we are now in the realms of a before and after harvest, with
reports of sprouting coming from the Wash to the Borders. With bad weather
bringing fears of a poor quality crop, the futures have dropped by,
basis November, £2.25 per tonne over the week. This fall in the
futures market for feed wheat is not being reflected in the price for
the quality wheat needed for milling, with crop quality being unknown
at this stage there is a risk premium in the market price. We are seeing
a weaker futures market but a firmer milling wheat market.
There is more news to come with the UK crop, not all of which is yet
even fully ripe. On the continent, harvest is well under way, about
50% of the crop having been combined thus far; France is looking at
a crop of some 37 million tonnes, a 20% increase on last year, and Germany
expecting to harvest 23.5 million tonnes. Harvest 2004 in Europe looks
to be big, but quality at the end of the day will be determined by the
weather.
Wheat Market Update - Friday 6th August 2004
European Harvest
Old and new crop values have now blurred into one, unless
you are either a distressed seller or a very reluctant spot buyer; with
the onset of the wheat harvest just around the corner, the trade is
watching weather maps each day to check on the possibility of more thunder
storms. Having said that, some wheat has been combined, in places as
varied, geographically, as Essex, Cornwall and Shropshire. These early
wheats have shown some promise, with good hagbergs, and reasonable protein
levels and specific weights; to continue this trend we need good weather
for the next two or three weeks.
With every body waiting for the combines to roll, the market remains
moribund; futures prices are £1.50 per tonne firmer over the course
of the week, prices for physical wheat moving up by the same amount
for both feed and biscuit and remaining unchanged as far as bread wheat
is concerned. However, the farmer is still a reluctant seller and very
little grain is changing hands.
Across mainland Europe, harvest has been hastened by much improved
weather, the French harvest now finished in most areas up to Paris.
Analysis still indicates good yields and more than reasonable quality.
The same can be said for what little wheat has been combined in Germany;
better than expected yields and quality, but there still remains a lot
of wheat to be harvested.
|
