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Wheat Market Update - Tuesday 27th July 2004
Old Crop
Wheat fields are turning colour and we are beginning to hear of some of the first cuttings of new crop. Historically, the earliest available variety is Soisson, and that appears to be the case again this year. The weather forecast appears to be supportive for both ripening and harvesting. Premiums for old crop delivery still exist and are likely to be present for the next 1-2 weeks. Buyers have not been quite as aggressive for the last week and consequently trading volume has slipped.
New Crop
Prices are about unchanged to slightly firmer on the week with premiums continuing to be on the firm side due to a lack of selling by the farmer coupled with harvest quality concerns. Talk of the orange wheat blossom midge has subsided over the past few days, but certainly its presence has not. As mentioned above, the weather forecast appears to be positive in the short term. Aggressive harvest has taken place in southern France and is currently near the Paris area. Southern Germany is still damp, but could see some activity with about 4-5 days of dry, sunny weather. Quality in France has been good but, as predicted, protein is not up to the levels of last year. Yields have been good as well, with some forecasting a French crop now closer to 37.5 mmt. Deferred premiums for U.K. bread-making wheat are seen at standard carrying charges to the autumn.
Futures
Markets appear to be range-bound for the time being. There is ongoing concern about the amount of feedwheat in the EU for the coming harvest. That will likely keep a lid on futures for some time. Until the new crop quality is determined though, there is the potential for bread-making premium to continue to firm and divorce itself from the feedwheat market. Premiums have already firmed to levels that could best be described as higher end of the range over the past few years. If the harvest quality is good, this should help to keep premiums from rising further. If we get a wet harvest and quality suffers, premiums are likely to rally further. Likewise, one must be sensitive to the marketing plans of the farmer who is hesitant to sell as the market prices are disappointing. There is adequate storage to put away a significant part of the harvest, and that may mean that flat price (either through futures or premiums) has to do some work to promote cash selling.
Wheat Market Update - Friday 16th July 2004
Old Crop
Even though LIFFE futures are slightly weaker, old crop
milling wheat has firmed in the face of the continued wet weather pattern.
As protein levels are likely to suffer in the new crop if we continue
with wet weather, this has encouraged sellers of the remaining stocks
of higher protein old crop wheat to ask for higher premiums. In addition,
given that the harvest may be pushed back, millers may face the potential
of having to extend their use of old crop.
It is still too early to tell if this scenario will materialise, but
we are at the point where sunshine, heat, and dryness would be welcomed.
July bread-making wheat prices are currently approaching £100
in the northwest, levels which have not seen in the spot market since
mid-May. Group 3 wheat is being pulled up as well by the strength in
the bread-making varieties.
New Crop
The premiums for new crop wheat are increasing as well
due to the scenario laid out above. Once again, the market leader is
the bread-making varieties. Trading volume is still rather light this
week with the farmer not selling due to a low flat price. Orange blossom
wheat midge is more prevalent this year which is leading some merchants
to emphasise quality concerns.
The French harvest has been slowed owing to adverse weather conditions.
It is estimated that 5% has been cut but it is too early to form an
opinion on quality. World wheat stocks are forecast to increase by about
5 mmt this crop year.
Wheat Market Update - Thursday 8th July 2004
Old Crop
Wheat movement has slowed significantly over the past
week. This can be attributed to both the dwindling supplies and buyer’s
focus on covering the least amount of old crop necessary to get them
through to new crop. Old crop premiums of £5 to £7 exist
for July deliveries (vs. new crop). Early August delivery of old crop
is likely to be at these same levels or slightly above. Only as the
harvest approaches, and the weather picture is more clear, will we get
a better view of how long this inverse may last. The same can be said
for the old crop European market where focus has already shifted to
the harvest that is progressing into southern France.
New Crop
Generally speaking, the farmer has been a reluctant seller
in the market thus far. Cash selling has been dominated up to this point
by merchants thought to be trading from their stocks. With the farmer
able to store a better part of the harvest, it will be interesting to
see just how much selling we see at the beginning of harvest if futures
continue to hang around these levels. There is obviously a lot of disappointment
amongst farmers regarding where the flat price market is today. That,
however, is merely a reflection of the much greater crop forecast for
the coming season not only in the U.K., but in all of Europe. The U.K.
is faced with needing to export an additional 1.5 – 2mmt of feedwheat
this year, but has lost competitive advantage to some of its traditional
destinations due to cheaper Black Sea exports. Some would suggest that
it may not be until later in the year that we can see the U.K. generate
export momentum.
Futures
November LIFFE has found support in the £67 –
68 range, but probably needs some kind of a weather scare (i.e. excessive
moisture) to push it beyond the low 70’s area prior to harvest.
The best reason to be found for a rally through to harvest would be
from a lack of farmers selling. The more likely scenario at this point,
however, would be for a decent harvest to be met by continued sluggish
cash market and a futures level which remains range-bound into late
autumn.
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