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Wheat Market Update - Friday 22nd May 2009
Improving global weather forecasts and U.S. planting prospects were largely ignored in the early part of this week with strong external markets, currency and continued fund involvement supporting values. However, book squaring and profit taking before the various global holidays may see values move lower.
UK and Europe Harvest Overview
The rainfall received across the UK and Europe at the beginning of the week had little bearish impact on wheat markets and instead attention continued to be on increasing fund interest, external markets and diminishing soyabean stocks in the US.
China’s demand for soyabeans coupled with the ever tighter U.S stocks have pushed the price of soyabeans to an eight month high and encouraged fund activity. Meanwhile, oil and equity markets have been enjoying a sustained upside period over the last few weeks supporting all commodity markets whilst discouraging sellers.
The latest UK customs data saw grain exporters ship 231,945 tonnes wheat in March (against 254,666 tonnes in Feb) with the total for the 08/09 season at 2.83Mt (against 1.17Mt in the same period a year ago). According to Defra stats this still leaves over 1Mt (mainly feed wheat) to export before the end of the season.
UK bread premiums continue to be supported by low availability whilst the incentive to carry over stock into new crop remains.
US/World Overview
Improving weather conditions in the US have allowed farmers to resume spring wheat plantings this week however, progress still remains well behind the norm with only 50% planted this season against 92% at this stage last year.
Meanwhile, the ongoing dispute between Egypt and Russia over a vessel of ‘contaminated’ wheat quarantined in an Egyptian port has yet to be resolved. The Russian federal food quality watchdog has since released a statement assuring its quality.
Summary
Global wheat markets are choosing to ignore the key fundamentals (high carryout stocks and a large harvest) and instead trade on the back of other markets and fund involvement. Weather events are still going to remain important in the run up to harvest and these are still likely to determine any sharp market movements.
Wheat Market Update - Tuesday 12th May 2009
Global wheat markets have rallied over the last two weeks with global weather concerns, U.S. planting delays, new speculative interest and external markets supporting values.
UK and Europe Harvest Overview
A lack of precipitation across much of the UK and Europe has encouraged speculative interest and supported domestic wheat values although rain forecast across parts of the UK, Poland, Hungary and Romania over the next week could ease the anxiety.
Meanwhile, UK bread premiums are continuing to remain robust in the run up to harvest with only small pockets of high specification wheat available. The spread between old and new crop continues to offer farmers the incentive to carry stock into the new season, however, the practicality of doing so may remain an issue for those with limited storage capacity.
US/World Overview
The USDA report, released on 12th May, appeared to be bullish wheat and maize and neutral soya beans. U.S. wheat production is forecast 19% lower in 2009/10, mainly attributed to sharply lower winter wheat yields in the Southern Plains and less intended spring wheat plantings (35% planted against 77% planted this time last year).
Summary
The latest commodity spike is yet another reminder that volatile markets are here to stay. Weather concerns will continue to make the markets anxious in the run up to harvest and more negative news is likely to underpin current values. Meanwhile, speculative interest and external markets will continue to influence day-to-day market movements with increases in oil, currency and equity markets remaining closely related to commodity markets.
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