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Wheat Market Update - Friday 16th February 2007
UK & Europe
UK and French futures have firmed over the last two weeks, despite
missing out on recent export business to Tunisia and Jordan, which was
sourced from Black Sea origins.
UK prices have recovered after initially losing ground when the ‘Bird
Flu’ outbreak was reported. With no further outbreaks occurring
confidence returned and values have also been supported by continued
processor buying.
UK export progress has slowed but still looks to be on track with an
estimated 1.5mt shipped by the end of February.
Optimism is quietly growing over potential new crop production yields.
Crops are estimated to be as far as one month ahead in some areas of
France. There remains however a concern that any adverse weather, especially
a severe cold snap, could be extremely detrimental to a crop that is
so well advanced.
Across Europe crops are too advanced, with areas as far east as the
Ukraine at risk should winter return with a vengeance. If this happens
the market could rally sharply with such a low EU carryout stock figure
projected this season.
World Wheat
The USDA raised its 2006/07 global wheat production figure by 1.3mt
to 592mt (620mt 05/06). They also projected wheat acreage to increase
by 5% for harvest 2007.
It is interesting to note that although wheat acreage around the globe
is projected to be higher for harvest 2007, if yields only achieve the
5 year average, producing 600mt, we would see a further drawdown in
stocks as global demand continues to rise (currently c.607mt).
US markets seem to have absorbed most of the bearish news circulating
for now, and Futures seem reluctant to move much lower from current
values on old crop.
Summary
Whilst old crop price activity remains fairly lacklustre, the debate
on likely price direction for new crop continues. Downside in the short
term looks unlikely, and given the precarious carryout stock position,
weather prospects for the developing crop remain the key to future price
direction.
Wheat Market Update - Friday 2nd February 2007
UK & Europe
Prices appear range bound and have lacked fresh market news over the
last two weeks.
Processors have taken advantage of the slightly easier prices, and
have increased their cover in deferred positions. This however has sparked
optimism from farmers still with grain to sell, who remain hopeful that
a demand driven rally is just around the corner.
Merchants continue to highlight a tightening UK supply and demand situation,
which many feel will influence prices at some stage, especially if there
is a delayed harvest.
A return to milder weather once more after a short ‘cold snap’
continues to raise concern over the advanced nature of many European
crops.
World Wheat
The IGC (International Grains Council) raised its 2006/07 wheat production
to 589 million tonnes,
2 million tonnes higher than last month. They also estimated world wheat
acreage to be up 3% for 2007/08 with production increasing to 621 million
tonnes.
Already in Australia some concern is already being expressed over the
continued lack of rainfall being seen in key arable areas. This comes
at a time when farmers are beginning preparations for crop drilling.
Summary
Fresh market news is required to give wheat prices some direction.
Processors susceptibility to a sharp rally have prudently added to their
deferred cover. The timing of further purchases could push values higher.
The size of the UK exportable surplus continues to shrink, albeit at
a slower pace at present. Old and new crop markets remain well supported
against the backdrop of delicately balanced carry out stocks.
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