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Wheat Market Update - Friday 28th July 2006
UK & Europe
As the harvest has progressed through to the north of France and into
the main production areas around the Paris basin, reported quality is
only fair to good, and so prices are holding high with a lack of interest
from sellers. The market remains volatile as reports of the size and
quality of the harvest come in. Both the MATIF and LIFFE futures, for
the November position, reached contract highs at the end of last week.
During the past month, fears of a harvest much reduced in size as a
consequence of the extreme heat, has increased prices by in excess of
£10 per tonne. The price increases we are experiencing in wheat
are now further supported due to concern over the EU Maize crop, which
is reported to be suffering from the intense heat that Europe is experiencing.
If a smaller than expected maize crop comes to fruition then grain prices
could move higher still.
The German harvest has now started and early reports again focus on
lower than expected yields but, similarly to France, quality is considered
to be fair to good. As in France, the producers and merchants are not
willing sellers and supplies of grains to the market remain tight, with
most merchant sellers still talking of higher prices being required
before any volume offers come to the market.
The UK harvest has started much earlier than expected with the crop
being brought on by the extreme hot weather experienced during July.
It is too early to give a detailed critique of the UK crop, but so far
the reports about the small amount of wheat that has been cut are that
quality is variable and yields are disappointing.
Other Key Wheat Producing Regions
The story in the rest of the major growing regions is one of small
amounts of rain easing the fears of recent weeks. Early reports of the
North American hard wheat harvest are of better than anticipated yields
and good levels of protein but still a smaller crop than last year.
Summary
Harvest has started earlier than expected in Europe and yields are
extremely variable caused by the recent heat wave. World supply and
demand has tightened further over the past month, with the crop size
being reduced in several of the key major exporting regions. Having
reached contract highs, futures values are easing slightly but the price
for physical grain is holding firm. Fund activity, future yield and
quality analysis will need to be watched with care and any further slippage
of yield or deterioration in quality could well see the market reach
new contract highs.
Wheat Market Update - Tuesday 18th July 2006
UK & Europe
French wheat yields continue to be reported as lower than expected,
some areas are now reporting by as much as 10% below expectations. Matif
(French Futures Exchange) wheat futures moved sharply higher yesterday,
and UK wheat futures followed increasing in price by £2-3/tonne.
The HGCA published wheat area planting data last week showing increases
in plantings, however, fears that UK wheat yields will be lower than
expected has fuelled concerns of a smaller crop and UK wheat prices
have increased as a result. Weather remains the key price driver as
we approach harvest, and further increases in new crop wheat prices
are likely if yields do turn out to be lower than expected when the
wheat harvest begins in the UK.
Other Key Wheat Producing Regions
Hot dry weather continues to prevail in the Northern Plains of the
USA raising further concerns over impact on yield. Crop damage is widely
expected and with the early wheat areas just starting to be harvested
in South Dakota, it will be some time before the overall yield loss
in the Spring wheat is determined. US futures values continue to find
buying support at close to recent contract highs.
Recent reports from Australia have pegged the Australian wheat crop
some 25% lower than first estimated. The news which was reported last
week came as a surprise to traders and forecasted the crop down at just
18 million tonnes (down from 24 million tonnes) because of drought conditions
in key wheat production areas.
Summary
The global and European wheat supply and demand is tight with ending
stocks forecast to be the lowest for 25 years, recent news on smaller
wheat crops in key wheat producing regions will only make supply tighter.
If early wheat harvested in the UK follows a similar pattern to the
French crop with lower yields seen then further upward price movement
is likely.
Recent News Articles
To view recent new articles connected to ADM and the
current wheat market, please click on the links below;
Wheat Market Update - Friday 7th July 2006
UK & Europe
The recent 'heat wave' across Europe has coincided with the start of
harvest in Spain/France. Early cut durum wheat has been reported as
slightly lower proteins but it is too early to predict any pattern As
yet. Wheat on lighter land in the UK and Northern Europe has shown some
'heat stress' however those on heavy land appear to be holding up at
present. With most traders talking about likely positive and negative
impacts on yield as a result of recent weather, the range of crop estimates
is wider and now stands at 14-15mt. A figure closer to 15mt would increase
our exportable surplus, and UK feed wheat would need to remain competitive
with cheaper other EU sources for most of the season. New crop UK bread
wheat offers remain some £12 per tonne higher year on year.
North America
US winter wheat harvest is now 65% complete, however all the market
focus has now switched to the spring crop, which is experiencing extremely
hot weather at a time of crop development when future yields are determined.
Some of the damage caused is now irreversible and the market has confirmed
this by pushing futures prices sharply higher. Some price correction
may occur if better crop development weather is seen, however current
forecasts do not indicate that this looks likely.
Summary
Weather patterns across Europe and North America will continue to be
the key to future price direction in coming weeks. Crops in Europe are
entering a critical period of development with both yield and quality
likely to be affected by any extreme weather patterns.
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