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Wheat Market Update - Friday 25th May 2007
UK and Europe
With a general view that wheat crops across Europe are looking 2 weeks
early at present, old crop prices have eased back a little. New crop
wheat prices remain firm with widespread concerns that EU 27 production
will be lower this season as a consequence of ongoing lack of rainfall
in Eastern Europe, notably Ukraine/Romania/Bulgaria.
The IGC (International Grains Council) recently pegged EU 27 production
at c.124million tonnes, however recently there have been suggestions
that it could currently be lower than 120 million tonnes.
The increase in European wheat futures seen this week should not come
as a real surprise, especially when set against the backdrop of tight
stocks this season. Any further declines in crop projections will undoubtedly
push values higher.
Although wheat plantings were higher this season, until we see the
safe arrival of increased production (which is already being marked
lower in the countries mentioned above), downside potential for prices
looks extremely limited.
World Wheat
US Winter wheat has started to be harvested in Southern states, and
early quality indications are good. Crop conditions in general have
improved and spring wheat plantings are 95% complete. Corn plantings
are also 92% complete and generally in good condition.
US futures have eased back, but will be increasingly reactive to any
weather scares over the next few months.
Summary
Weather maps are becoming increasingly important as we approach harvest
in Northern
Europe, we have already seen an upward price reaction due to the lack
of rainfall in Eastern Europe. More of the same can be expected over
the coming weeks.
Wheat Market Update - Friday 11th May 2007
UK & Europe
Widespread rainfall across Northern Europe this week has been the main
feature driving prices.
After the driest April on record in the UK, the arrival of wet weather
was the trigger for a fall in London new crop wheat futures.
Early last week November futures hit fresh contract highs at £100/t,
and although they have since drifted back to £96/t, solid support
is seen at these levels. The key to price movement between now and harvest
remains the weather and its impact on crop development.
With wheat crops in the UK now widely reported ‘in ear’ (10-14
days earlier than expected), some damage to future yields and quality
as a consequence of the prolonged dry spell will have occurred. It is
however far too early to accurately define any loss in production terms,
but early indications are that we could expect the range for the UK
crop to be 14.5-15.5mt (14.7mt 2006).
World Wheat
Progress for US Corn plantings has been better than expected. This
coupled with reports that frost damage to the winter wheat crop now
appears to be better than once feared, have both contributed to a sharp
decline in US wheat futures.
The USDA crop/carryout report, published later today, will provide
the next short term price direction indicator.
Australia has received much needed pre-planting rainfall, however more
is required to ease concerns that production recover significantly.
Summary
The arrival of much needed rains across key global production areas
has been widely welcomed.
Its arrival was a signal for prices to drift back a little, but provided
a timely reminder of how potentially volatile the market will remain
between now and harvest.
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