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Wheat Market Update - Tuesday 24th March 2009
UK and Europe Harvest Overview
European markets are struggling to find a reason to rally at present with falling demand and rising stocks contributing to a bearish outlook. Meanwhile, the weakening dollar value is decreasing European wheat’s competitiveness on the global market and is likely to limit third country exports between now and the end of the season.
UK bread premiums remain firm amid light farmer selling and low availability of good quality wheat. Approximately 15-20% of wheat remains unsold and there appears to be no indication bread premiums will change on old crop in the run up to harvest.
Coceral, a European grain committee, have released their first EU-27 ‘09/10 crop forecasts on 19 March with total wheat production estimated at 128.30Mt, against 140.96Mt in ‘08/09. Their UK wheat production estimates are set at 14.90Mt, a reduction of 2.53Mt from the previous year, due to lower plantings (1.84Mha in ‘08/09 vs. 2.08Mha in ‘09/10) and a reduction in yield potential.
US/World Overview
U.S. commodity markets extended gains last week amid inflationary concerns over the treasuries latest $1 trillion injection into the banking system, weather concerns in the southern plains winter wheat belt and a reduction in the dollar value. However, news of significant precipitation towards the end of the week over the southern plains is likely to ease crop concerns and may diminish market support.
Demand for U.S. wheat remains fairly light and values still appear uncompetitive compared with the Black Sea region.
Summary
There appears to be little market direction at present with no real European fundamentals to trade on. European crops look to be in a good state and wheat stocks are set to be replenished this season. Unfavourable weather conditions in the Northern Hemisphere in the run up to harvest are likely to offer the only support for any sustained rally.
Wheat Market Update - Monday 2nd March 2009
UK and Europe Harvest Overview
Wheat markets across Europe have generally been quiet over the last 2 weeks with little fresh news reported. Prices have drifted lower primarily taking their lead from concerns about the struggling global economy and weaker oil/equity markets.
Export interest has been seen from North Africa, however, cheaper Russian wheat continues to be preferred to EU origins and this in turn continues to stifle prices from moving higher within the EU.
UK bread making premiums remain firm and merchants remain frustrated in their search for quality parcels of wheat on farm.
New crop futures levels remain well supported. News this week from Defra that England’s planted wheat area was down 14% compared to the previous season will certainly be seen as adding further long term support. The 14% drop indicated by Defra, would lower UK production by 2 million tonnes compared to this season’s 17.2 mt crop.
US/World Overview
The IGC (International Grains Council) this week lowered its 2009-10 world wheat production estimate to 649mt (688mt 2008-09).
US markets have also drifted following the pattern seen in the EU. There remain some weather concerns over crops in the US Central and Southern plains with very little moisture seen in the forecast for the next 10 days. At present the weakness of the global economy continues to be the key price driver.
Summary
Old crop values lack fresh market news to give price direction in the short term. Longer term new crop markets will continue to react to any weather related news stories which are more likely to be supportive to wheat prices until global crops are more established.
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