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Wheat Market Update - Thursday 29th May 2008
UK /EU Overview
Wheat crops across Europe continue to give no cause for concern, and traders remain optimistic that forthcoming yields will meet expectations. However, quality remains a concern with plenty of sunshine still required for the crop to fulfil current optimism. November LIFFE wheat futures appear to be well supported at current levels (c.£137-140/t), and although a large crop looms, any adverse weather in the UK, EU or globally is likely to spark a price rally given low stock levels
US and World
The market continues to expect and trade a global wheat production figure of c.650 million tonnes. There is some concern building over a continued lack of rainfall in areas of Australia, most particularly NSW, which accounts for approximately a third of total production. Market analysts have already marked down production by 3 million tonnes from 25mt to 22mt, with the concern that we may see a repeat of the previous two seasons of drought affected crops. In the US winter wheat crop ratings have improved slightly, but are still behind the same period last year.
Summary
Optimism grows weekly as crops continue to encounter no major weather concerns. Farmers remain reluctant to sell volumes forward, as they remember how quickly prices rose after harvest last season. Quality outcome is a concern as some farmers have reduced fertiliser applications because of increasing costs. Therefore, the premium for bread-making wheats should remain high. The current situation in Australia needs to be monitored closely over the coming weeks.
Wheat Market Update - Wednesday 14th May 2008
UK /EU Overview
The recent sunshine seen in the UK, following the good moisture of April, has tentatively increased optimism towards the New Crop. Similar conditions seen in much of the EU have resulted in much the same sentiment.
Both new and old crop feed markets have fallen slightly as a reaction. However, the UK supply and demand for 07/08 remains tight with trade remaining quiet for quality wheat.
US and World
Last week’s USDA World Supply and Demand report estimated world wheat production for the forthcoming 2008/09 season at 656 Million tonnes and demand at 642 million tonnes With a relatively slim difference between current forecast production and demand, adverse weather in any of the growing regions could easily swing the balance.
Higher wheat and oilseed crop plantings have come at the likely expense of lower world corn (maize) availability in 2008/09. The USDA are forecasting a slightly smaller world maize crop in the approaching season with rising demand likely to put further pressure on world maize stocks, with the crop only just being planted and is a long way from harvest . Feed ration transfer from Corn to Wheat may therefore account for the anticipated rise in wheat demand.
Summary
The recent good weather has seen a slight fall in wheat markets as confidence of both production and quality increase. However, with last year’s late season crop issues still fresh in the memory, until the crop is actually in the barn there is still plenty of reluctance from farmers to sell forward.
The world needs good production to stabilise stocks and meet demand which continues to edge higher. As wheat values come back into line with other grains it may see further demand as wheat prices are again competitive in feed rations for animal feed.
The good weather is therefore comforting, but uncertainty and volatility will remain in the months ahead.
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