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Wheat Market Update - 26th January 2006
UK & Other EU
• After last week’s strong trading of wheat feed, the market
has once again gone quiet.
• Biscuit and bread premiums continue to disappoint farmers in
nearby positions.
• Old crop LIFFE futures are steady.
• New crop LIFFE November (LWHX) up nearly £1 in past two
sessions on concerns of extreme cold in Russia and Ukraine. This same
weather front has brought sub-zero temperatures to parts of Germany
and Poland this week, but snow cover will likely protect the wheat..
The Ukraines Agricultural Minister’s office says that 26% of their
crop is in “weak” condition and may not survive the cold temperatures.
• The occasional mention of dry conditions in parts of France and
Spain still pops up.
World
• U.S. futures climbing to the high end of range again, while
USD weakens (partial offset).
• U.S. HRW growing areas of Texas and Oklahoma still very dry and
talk of abnormally high abandonment this season.
• Funds have covered a significant portion of their short position
in soft wheat. Soft wheat, however, is thought to be overpriced and
will lag the cash demand for DNS and HRW.
• Argentine crop estimates still in the 11.5 to 12 mmt range (16
mmt yr ago).
Summary
• As highlighted previously, it needs to be recognised that the
wheat market is becoming more sensitive to changing weather patterns.
It is not necessarily a market that will give much of an opportunity
to enter at a very significant discount to current levels as most markets
are priced at the lower end of the range already. Best chances for weakness
will only present once growing conditions are better known, which will
not be clear until late spring or early summer. Conversely, the upside
may be gradual and also limited until the same conviction of a weather
market can be proven (or not) later in the growing season.
Wheat Market Update - Tuesday 10th January 2006
World Market News
• Cash markets are still very quiet post-holiday in the U.K.
• U.S. spring wheat futures are 4% off their recent highs on profit
taking.
• U.S. supply and demand report due out Thursday. Wheat demand
in the near term thought to be lagging.
• Rumors of a sale of 1mmt HRW to Iraq has not been confirmed under
the USDA reporting system, and is now being discounted by the market
as not having occurred.
• Argentine harvest has progressed to 79% harvested vs. 93% yr
ago. Export demand thin for Argentinean ports.
Wheat Market Update - Friday 6th January 2006
UK Market
• Cash markets are quiet as no one has “kick-started”
market post holidays.
• LIFFE futures steady over past 2 weeks.
• Cash market pricing in carrying charges of £1/month.
• Little interest in new crop at this time.
World
• DNS and Canadian wheat prices have been very firm of late (futures
up about 8% in Dec) due to professional fund buying.
• Very dry conditions prevail in the HRW growing areas of Oklahoma
and Texas panhandle. Wheat conditions have dropped there recently while
other HRW states reporting near average conditions. The marketplace
is already beginning to talk about the potential for drought conditions
in the coming year for the U.S. That talk, along with continued fund
interest in owning commodities in general, may set the stage for further
price increases in the coming weeks. Short term the U.S. markets appear
to be overbought. News just out of 1 mmt wheat purchase by Iraq may
be viewed as supportive.
• Egypt purchased 320k mt Australian and Russian wheat for early
February.
• South America is also talking dry conditions for soy areas of
Argentina and Brazil. The Argentine wheat harvest is about 70% complete,
with crop estimates still in the 11.5-12 mmt range.
Other News
• It is worth noting that there is a lot of talk of dry conditions
in significant crop regions of the world currently. Grass fires in the
lower plains of the U.S. and Australia, and general dryness in South
America have been among the bullish factors in recent futures rises,
highlighting the sensitivity of world markets to weather. While still
too early to suggest that EU or U.K. growing regions would have the
same problems, it should be noted that downside risk from current price
levels is rather limited.
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