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Wheat Market Update - Friday 27th July 2007
UK & Europe
Continued rainfall across Northern Europe has hampered wheat harvesting
progress this week.
Reports from German farmers that wheat that has been cut is yielding
10-15% lower than expected was the signal for European Futures markets
to hit 11 year highs.
LIFFE November 07 wheat peaked at £135/t this week before limited
profit taking emerged.
Traders continue to be extremely nervous and remain reluctant to offer
physical volumes in deferred positions.
IGC (International Grains Council) cut its European Union wheat crop
estimate by 2.9 million tonnes, to 126.7mt.
During the harvest period the market may look to consolidate initially
at current levels, whilst quality and yield is assessed.
World Wheat
US Futures rose sharply this week; following the news that weekly exports
exceeded 2 million tonnes which was the highest weekly figure seen for
10 years.
Winter wheat harvest is virtually complete, and the focus now switches
to the Spring crop condition, which this week was reported as generally
good.
Summary
The pace of the rise seen in European futures markets over the last
10 days is unprecedented. Fears held for several months that lower yields
would be the catalyst for a sharp rally in prices were realised.
Over the coming weeks as harvest progresses the market will gain direction
from progress reports on quality and yield.
Wheat Market Update - Tuesday 24th July 2007
UK & Europe
Wheat harvesting has begun in areas of France and Germany however;
progress has been hampered by frequent rain showers. Early quality is
reported as mixed but providing more of a concern is that yields are
10% lower than expected. Against the well documented backdrop of low
stocks throughout Europe an early signal to the market that lower yields
are being seen has sparked further rallies in UK and French wheat futures
leading to 11 year contract highs.
UK November 2007 futures prices have increased £12/t since the
beginning of July and represent an increase now approaching £50/t
year on year.
Breadmaking wheat prices delivered to Liverpool for November 2007 have
increased steadily with the premium widening as ongoing quality concerns
keep traders nervous.
Last week the HGCA indicated the Liverpool bread making wheat price
at £164.50/t and today, with futures prices continuing to increase,
this figure is rapidly exceeding £170/t which represents a year
on year increase of over £63/t.
World Wheat
US wheat traders are keeping a close eye on the situation in Europe
as the winter wheat harvest nears completion. Last week export sales
were made to Egypt (300,000t) as US traders cashed in on tight European
supplies. Ongoing sales can be expected whilst the uncertainty over
European availability and quality remain over the next few weeks.
Australian crops (particularly Western Australia) still require more
rain however the condition of the crop is still leading to projections
of a 22-23mt production figure.
Summary
Reports that early wheat yields are lower by 10% have sent shockwaves
leading to renewed buying in futures markets across Europe. Quality
concerns remain but yield loss cannot be replaced and this has led to
fresh contract highs and expectations of more to follow.
Wheat Market Update - Friday 13th July 2007
UK & Europe
Inclement weather across Europe continues to raise concern over the
likely outcome of European wheat quality.
Showery conditions continue to prevail, with no apparent signs of much
needed high pressure in the short to medium term forecasts.
Wheat crops are in increasingly urgent need of warm sunny weather if
they are to fulfil maximum quality potential, current conditions are
certainly not conducive for this at present.
Wheat crops that have been harvested in France have been of mixed quality,
with some lower specific weights being seen.
UK futures continue to reflect traders crop concerns, and once again
set fresh contract highs of £120 for November 2007 yesterday.
Bread-making wheat delivered Liverpool for November 2007 is £57/t
higher year on year.
World Wheat
US winter wheat harvest progress is now at 58%, this compares to 70%
progress at this time last year.
The USDA report issued yesterday provided mixed sentiment to the market.
Reductions in expected production in the US, Canada and the European
Union, were largely offset by an upward revision to World ending stocks
of 4.5 million tonnes to 116.6mt. This was due to increased production
forecasts for China and Australia.
Summary
With no sign yet of better weather for maturing cops in sight, the
market remains well supported at current prices. Milling premiums across
Europe reflect concern surrounding likely wheat quality and production.
Wheat Market Update - Monday 2nd July 2007
UK & Europe
Heavy rainfall in key production areas over the last 10 days has led
to concern that developing crops may suffer resulting in reduced quality
and yield.
While wet weather has affected Western Europe, drought conditions have
persisted in Eastern Europe.
Old crop supplies remain tight, and a delay to the start of harvest
will provide further support to current levels. Fresh contract highs
of £118.50 seen last week in the LIFFE futures price for November
wheat, represent an increase of £43/t from this time last year
and the HGCA quoted bread-making wheat price for November, basis Liverpool,
has increased £ 53/t year on year.
Last week IGC (International Grains Council) lowered its World production
figure by 7 million tonnes to 614mt, mainly due to expected lower production
in Eastern Europe.
The general view remains that there is unlikely to be much downside
to current new crop prices until harvest is well underway, and traders
have a better feel for likely quality and yield.
Source: HGCA
World Wheat
US winter wheat harvesting is behind schedule in many states due to
excessive rainfall and US futures remain extremely volatile. We would
expect this to continue in the short term.
Australian production is still forecast at c.22 million tonnes, which
would represent a much needed increase over last season if weather conditions
remain favourable to the developing crop.
Summary
Adverse weather has pushed back thoughts of an early harvest, and provided
added concerns over likely quality and yield. Volatility will be a key
feature of price movements over coming weeks, but with good support
still evident, even at current levels, firmer wheat prices in the short
term look a distinct possibility.
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