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Wheat Market Update - Tuesday 18th November 2008
UK and Europe Harvest Overview
European wheat futures markets have traded sharply higher over the last few days with LIFFE wheat values seeing a £5 rise. May 09 is trading at c.£103/t against a previous contract low of £97.50/t.
Weakening Sterling has also boosted trading activity with UK feed wheat becoming increasingly competitive in export markets. Trade talk continues regarding UK feed wheat being exported to the US with exports on target to reach c.2mt by the end of the year.
Despite continued talk of EU recession there is a view to suggest that agricultural commodities have entered a consolidation period and may indeed attract renewed investor interest during 2009.
UK bread making premiums remain firm as demand continues to be seen from both processors and merchants. UK wheat plantings are expected to be lower this season following the protracted harvest, leading to expectations of a circa 15-15.5mt crop for harvest 2009.
US/World Overview
US wheat futures have also risen with traders commenting that a level of speculative money may also be returning to wheat values. This should not be surprising given that technical indicators have suggested for weeks that the market has been over sold. Fundamentals of supply and demand have not changed; however production problems are being seen in Argentina and Australia with both likely to see lower yields due to drought. The significance of this is more of interest than concern following the return to record production seen globally this season.
Summary
Weakening Sterling has sparked the market to life with a rise in futures values signifying physical values may have bottomed for the season.
Whilst fundamentals of supply and demand remain unchanged, export progress remains on target to cope with the UK surplus this year.
Bread making and biscuit wheat premiums remain firm and look more than likely to remain so for the remainder of the season.
Crop development in the coming months for Harvest 2009 must be watched especially as plantings are lower.
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