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Wheat Market Update - Wednesday 16th December 2009
UK and Europe Harvest Overview
As we head into the Christmas period the markets continue to languish with dwindling volumes traded. Any sentiment is being drawn from external markets with currency maintaining its significance. UK exports to date are running sharply below last season, approximately down 50% on same period last year.
On the 9th December DEFRA’s report left the 2009/10 production unchanged at 14.181mt and should receive final production estimates from DEFRA on 14th January. Recently we have also seen Stratagie Grains reduce their estimate for the 2010/11 planting area, which could be viewed as bullish for the forthcoming UK crop.
An influential barometer of world grains markets, the Egyptian tenders, are seeing French and German wheat prices begin to align with those of Black Sea origin, but the US remains widely uncompetitive. This is on the back of a growing European exportable surplus, identified most recently by Coceral yesterday estimating EU-27 2009/10 wheat production at 130.8mt.
US/World Overview
Over the last month we have seen the US Dollar gain in strength leading to a negative impact across all commodities which has helped bring American wheat markets off their recent highs. The next point of interest is the growing anticipation of fund rebalancing in January, potentially leading to higher volatility in the markets.
We also see this year’s long running corn and soybean harvest nearing completion and the spectre now moves to the potential implications for current plantings. Total US wheat plantings are estimated to be down 4.1m acres for the 2010/11. The US export market is struggling as prices are significantly above competitors’. In order to meet the USDA export estimates, weekly volumes will have to notably increase.
Summary
Through December London wheat futures have remained range bound with thinly traded volume. We continue to see heavy fundamentals in the world wheat markets but with wheat continuing to be targeted as an investment vehicle/inflationary hedge the short-term remains uncertain.
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