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Harvest Update - Tuesday 31st May 2005
UK Crop
Growing conditions continue to be good, however the producer is not
very interested in selling new crop milling quality. Even old crop sales
have substantially dried up. The premiums for new crop are still at
historically high levels as a consequence of last year’s crop.
One would expect a more normal harvest is in store for this Summer,
but then the worst case scenario is exactly as seen last year…a
lot of rain in August.
LIFFE futures are gradually climbing (on consumer buying) and have
today traded over £70 for the November contract. This is a level
that many thought would provide some resistance. It certainly does not
appear as if the resistance is to be led by cash selling.
World Crop
The EU free market awards granted yesterday were for 204k mt at maximum
8 euros. While up from 6.50 euros a week ago, the award level is still
not inspiring new export demand. Additionally, Brussels have granted
200k grain to Portugal from Hungarian stores. No news yet as to when/if
Spain’s request for up to 8 mmt may be addressed.
Generally speaking, weather is the main topic of discussion lately.
Australia is in planting stage and is too dry in many southern areas.
Few seem to be trimming their crop potential just yet, though, with
estimates nearing 23-24 mmt. Parts of the FSU-12 have suffered from
first, too cool, and now too dry. Russia’s total grain estimate
is now said to be 66-70 mmt (down from earlier guesses of 75-80 mmt)
due to dryness. The tail end of the hard winter wheat development in
the U.S. may have suffered due to recent dry conditions as well. However,
the size of the entire wheat crop is still thought to be near 59 mmt,
and a general building of carryover stocks is forecast for 05/06. The
bottom line at this time is larger global stocks in the coming year,
and consequently little enthusiasm for any substantial increase in prices
from current levels. That said, the U.S. futures market in general continues
to show volatility. Earlier this week, prices leapt over 6% in one day
as funds climbed on board short-term weather concerns.
Harvest Update - Friday 13th May 2005
UK Crop
LIFFE futures have rallied about £2 over the past couple of weeks
as users, unable to buy cash wheat, have sought some level of coverage
in futures. New crop is now becoming the primary focus as most old crop
positions are winding down. Sorting out the balance of the old crop
will go hand-in-hand with the growing crop – if no concerns then
old crop may gradually work lower but concerns over quality and/or regional
stock levels will keep inverses in place much longer. The growing crop
continues to look good in the U.K. There is some talk of mildew in Robigus,
but no other major concerns currently.
World Crop
World crop conditions are about the same as last reported. Australia
has had some recent moisture relief, but there is still potential for
them not to meet today’s forecast of a 23 mmt crop. The U.S. wheat
crop is forecast at 1.59 billion bushels, which is a 6% increase over
last year. Rain would still benefit key HRW (Hard Red Winter Wheat)
production areas for another 10-15 days. Meanwhile, the spring crop
is being planted in Canada, albeit they would like to see some warmer
temperatures. The Canadian crop is forecast at 23.5 mmt. European production
is pegged by the USDA at 127.5 mmt. All world crop estimates in place
now suggest more than adequate stocks for the coming year. Getting the
quality right will be determined largely by the weather from here on
in.
EU restitutions this week were a rather non-eventful 312k mt at an
award of up to 6 euros.
Portugal has previously asked for up to 500k mt of feedgrains from
EU stocks due to reduced crop size caused by drought conditions. Now
Spain is claiming a 50% reduction in their cereal harvest, therefore
requesting 6-8mmt of EU intervention stores.
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