|
Wheat Market Update - Friday 22nd June 2007
UK & Europe
After hitting contract highs in France and UK last week, this week
has seen the market stall and await fresh news. However the market is
well supported and concerns remain about low world stocks and production
estimates.
UK November futures are currently £112 per tonne.
The market is watching the weather and overall crop conditions to get
some further guidance as to the next price direction. Concerns persist
over Eastern European crops with production estimates continuing to
be forecast lower. France is the latest country to express weather concerns
as rains may well lead to quality issues.
We would expect continuing volatility as the market reacts to new information
as it arrives.
World Wheat
Weather again is the dominating factor as rains continue to delay US
harvest progress. To highlight the market volatility this week we have
seen wheat trade near limit down on Tuesday, only to be followed by
limit up on Wednesday.
The Ukraine has also imposed grain export bans from 1 July to 1 October.
The market is very nervous over any further harvest delays and quality
concerns.
Summary
The market remains well supported when the market looks to show any
signs of weakness. The next bullish news is never too far away. All
harvests need to fulfil their current production estimates and until
we start to see the harvest progress and get the crop in the barn the
downside looks limited.
Wheat Market Update - Tuesday 12th June 2007
UK & Europe
Following the release of the latest USDA report yesterday, wheat futures
in the UK and France reached their highest levels since 2003.
UK November futures have now risen to £110/t which is a rise of
£17 since the middle of May.
The USDA report confirmed expectations for lower production in Eastern
Europe as a consequence of prolonged drought, and additionally added
fuel to the bullish sentiment that has prevailed amongst traders for
several weeks, by further lowering global ending stocks to the lowest
seen for 30 years.
Source: HGCA
World Wheat
As stated above the key feature this week was the release of the updated
USDA report.
US futures followed sharp rises in Europe and have now reached levels
seen previously 10 years ago.
In addition to the reacting figures, the market continues to remain
nervous over any further delays to the winter wheat harvest.
Summary
Will there be a significant break in prices prior to commencement of
the European harvest?
Given the current widely publicised low level of stocks throughout Europe
in the lead up to harvest, the majority are of the opinion that this
would be unlikely.
It will need the increased plantings that we saw last autumn, leading
to increased production and above average yields once harvesting commences,
to create nervousness that prevailing high prices are unsustainable.
Even if this scenario was to occur, arable farmers having sold a large
proportion of their crops may already be reluctant sellers initially.
Wheat Market Update - Friday 1st June 2007
UK & Europe
Concern persists that the impact of reduced wheat production next season
(as a consequence of prolonged drought in Eastern Europe) will lead
to a further tightening in European Supply and Demand.
With the safety net of abundant intervention stocks no longer in place,
the issue above continues to provide concern that higher even prices
may be looming.
UK wheat futures continue to find solid support at recent contract
highs (£103 Nov 07). UK wheat crops have benefited from recent
rainfall, but the outcome of potential damage to yield, following the
drought in April, remains to be seen.
The graph below illustrates the trend seen in UK physical bread wheat
values and underlying futures.
Source: HGCA
World Wheat
US winter wheat harvest in Southern states has been stalled by rainfall.
However in general, crop ratings remain above those seen last season.
US futures traditionally dip leading into harvest however they are
beginning to show signs of reacting to crop concerns being experienced
in Europe.
Australian rainfall appears to have delayed any further concerns for
the time being. Latest crop projections indicate, barring any further
weather concerns, that production should return this season to more
normal levels (c.20-25 million tonnes).
Summary
There remains a growing feeling within Europe that further reductions
in forecast production, as a consequence of any adverse weather between
now and harvest, could spark a demand led rally in both futures and
physical prices.
Whilst it is uncertain that it will be repeated, UK wheat futures are
beginning to demonstrate a pattern last seen in 2003/04 when drought
conditions in Europe led to a peak in futures at c.£115/t. Market
conditions will remain extremely volatile in the lead up to harvest.
|
