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Wheat Market Update - Tuesday 13th June 2006
UK & Europe
With the start of the wheat harvest 6-7 weeks away, farmers are contemplating
when to market their remaining old crop Volumes. Processor demand is
still active with cover required late July/early August as security
against any weather delays. July LIFFE futures have eased back £2/t
since early May, whilst November has risen £2/t.
The prospects for harvest look very good at present with the 'fine
weather' window aiding the maturing crop. With a good root structure
established, wheat crops are able to endure the current 'hot weather'
however some rain Would be welcome during the next 7-10 days.
Farmers are reluctant sellers of new crop at present, and merchant
selling to processors remains cautious ahead of crop quality being known.
With plantings last Autumn down 3-4% expectations are for a crop of
c.14mt
Supply and Demand next season looks tighter as in addition to a smaller
crop we are also faced with
Increasing demand from the Wheat Starch industry, and in subsequent
years the biofuel industry.
Farmers will be posed the question, grow for yield or grow for quality.
The European scene is similar to the UK, ideal conditions have aided
maturing crops the only exception being Spain Where recent extreme heat
has reduced yield expectations with the start of harvest fast approaching.
North America
With the prospect of world ending wheat stocks at 25 year lows in the
background, last weeks USDA report was widely Anticipated. In its latest
report the USDA projected the 'drought hit' US winter wheat crop would
total 1.264 billion bushels, the smallest harvest since 2002.
Sterling has eased back against the Dollar and presently is trading
$1.84 v 1.89 Three weeks ago.
World prices have also been supported by the ongoing IRAQ tender for
1.5mt, and the recent sale to India of 800k of Australian and Russian
origin wheat.
Summary
As we approach the 2006 harvest, prices here in the UK are £12/t
higher than the prevailing month last year for bread wheat, and with
increased demand to be factored in, and still concerns over impending
quality, prices look to have a degree of support at current levels.
Longer term the drawdown in global ending stocks, coupled with rising
demand for 'fuel grains' will be seen as supportive to prices.
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