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Wheat Market Update - Friday 28th August 2009
UK and Europe Harvest Overview
The majority of the UK wheat crop has now been harvested, aided by favourable weather conditions in the main Southern and Eastern growing regions. In the Midlands and further North progress has been a little slower due to more frequent rain interruptions, whilst in Scotland regular showers have disrupted harvest completely. Current samples have shown a significant reduction in moisture levels on last year, with little drying required in the Southern and Eastern regions. Meanwhile, yields and protein levels across the country are variable but on average slightly higher than the 2009 crop.
Better-than-expected yields in France and Germany have led the International Grains Council to increase their latest production estimates to 37.4Mt for France and 26.4Mt for Germany, respectively. Total EU-27 production is now pegged at 138.5Mt, against 151.2Mt last year (which includes Durum wheat).
London feed wheat futures have traded higher this week, with a lack of farmer selling, technical short covering and a weakening currency supporting values. It appears that any previous harvest selling pressure has subsided and farmers have now chosen to close the grain stores and concentrate on planting their 2010 crops. They are now likely to sit on stocks until a ‘reasonable’ price becomes available or they are pressured into selling to generate cash flow and pay their fertiliser and chemical bills. Short covering by merchants and a weakening currency have also been supporting values.
US/World Overview
As a generally uneventful Northern Hemisphere harvest draws to a close, attention will turn towards Southern Hemisphere crop conditions and the impending harvest. New reports that Argentina has planted more wheat than originally anticipated is likely to have little impact on prices, although it is seen as bearish rather than bullish, whilst the development of El Nino and its potential impact on the Australian harvest will be closely scrutinised. Overall there doesn’t appear to be any real bullish news going forward although an improving global economic situation and price volatility will continue.
Summary
Fundamentals (large global carry-out stocks and better-than-expected yields) are still extremely bearish and these will always cap any short term bull run. However, we could still experience price increases over the next few weeks as a result of technical trading and a lack of on-farm selling. The only foreseeable bullish threats to global wheat values could be an improving economic situation which could lead to greater demand coupled with unfavourable weather events decreasing Southern Hemisphere production.
Wheat Market Update - Friday 21st August 2009
There seems to be a period of consolidation in the London futures market at present with wheat prices appearing to have stabilised at current values. Wheat prices are, however, unlikely to rise to any significant level due to high wheat production and carry out stocks combined with low consumer demand.
UK and Europe Harvest Overview
The UK harvest is progressing at a reasonable pace aided by favourable weather conditions across the country. Total wheat cutting is now estimated 70-75% complete whilst milling wheat cutting is nearer the 90-95% mark. Harvest is virtually complete in the South-East but there remains more to cut in the Midlands and the North of the UK with initial samples showing a slight increase in quality on last year and better than expected yields. Current UK production is now forecast at 14.8-15Mt, down on last years 17.2Mt crop but up on previous estimates, with carryout stocks around 3Mt.
UK farmers are reluctant to sell at these low prices and are instead opting to fill grain stores and wait to see if prices rise whilst consumers are staying out of the market in the hope that prices diminish further.
Meanwhile, France and Germany have both exceeded initial crop production forecasts with StrategieGrain (an independent grain analyst) increasing their latest production estimates for France by 1.7Mt to 37.3Mt and Germany by 0.85Mt to 26.5Mt. Protein levels are reportedly down in Germany which should keep prices for higher protein wheat supported.
US/World Overview
The Canadian wheat crop has been blighted by bad weather this season and crop progress is currently running 4 weeks behind normal due to cool weather and drought. StatisitcsCanada currently forecast production at 23Mt, down 20% from last year but slightly larger than the USDA’s forecast of 22.5Mt.
Summary
Whilst all bearish news appears to have been priced into the market there is still a lack of bullish news to drive values considerably higher. Large carryout stocks and a lack of adverse weather conditions continues to put pressure on global markets, however, there seems to be some support at current levels.
Wheat Market Update - Friday 14th August 2009
UK and Europe Harvest Overview
The UK wheat harvest is progressing well with approximately 30-35% of the total area cut. The majority of this has taken place in the South and Eastern regions with the South West, Midlands and Lincolnshire being held up by rain. However, the weather outlook for the next few days looks reasonable which should allow some progress to be made although it is stop/start in areas. Reported yields are close to average, and while there are reports of variable proteins; they are looking to be higher than last year. If the weather holds we are looking at a crop with better quality than last year.
Meanwhile, harvest has progressed well on the continent with yields and quality reportedly good in France and Germany with projected final crop sizes for both countries being increased to 38 mmt and 26 mmt respectively.
US/World Overview
The USDA report, released on Wednesday 12th Aug, included no great surprises and any influence it may have had on wheat values was already factored into the market pre release. The outlook for soyabeans was seen as bullish, whilst the corn market looked bearish and wheat is neutral/bearish. According to the USDA global wheat production is now expected to reach 659.3Mt, up 2.8Mt from July estimates, on better harvest prospects in India, China, Ukraine, US and Europe. This has resulted in world wheat stocks reaching 183.6Mt, 28.5% of total world use.
Summary
European harvests have been progressing well over the previous weeks without any quality and yield concerns at present. A bearish sentiment is still prevailing over global markets and the latest production estimates are offering little support to wheat values. However, with world harvests still not complete, global equity and oil markets posting gains and fresh economic data showing encouraging market growth (France and Germany have both published growth statistics of 0.3%) there is the feeling that the market is nearing it’s low point.
Wheat Market Update - Friday 7th August 2009
Overview
A bearish outlook is weighing over UK and European wheat markets at present with values seen lower over the previous week. The latest crop estimates from StrategieGrain (an independent grain analyst) forecast higher than expected yields in Germany and France (France’s harvest is now nearly complete). Although there is a possibility that quality could be slightly down on the previous year. Downward pressure from external markets including corn and soyabeans and a stronger dollar are also having an impact on European wheat futures. Traders will now await the US Dept of Agriculture’s next report. However, it is widely expected to continue to show very large US soyabean and corn production and end of harvest stocks in 2009/10.
The wheat harvest in the UK is progressing slowly with unsettled weather restricting combine activity in most parts of the country, but the outlook for the week ahead looks reasonable, and so may present an opportunity for combines to roll.
Summary
Higher yields, a large carryout stock and harvest pressure have depressed wheat values lately and with ample supply available and most consumers preferring to buy hand-to-mouth there doesn’t appear to be much room for upside price movement in the short term. However, the harvest is far from complete, quality is relatively unknown and, as we have seen before, external markets and fund involvement can quickly influence market direction.
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