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Wheat Market Update - Friday 27th October 2006
UK
UK prices have now settled into a range, with processors covered until
the end of the year. Farmers are showing little interest in selling
at lower levels.
LIFFE futures have eased back following weaker French and US markets.
Drilled crops have emerged well, with an increase in wheat plantings
expected. Demand will increase next season due primarily to starch and
biofuel production.
Europe
With the Ukraine still limiting wheat exports and India rejecting Russian
wheat, opportunities are appearing for further French wheat sales. However
like LIFFE futures, Matif has also eased back as US markets have stalled.
Brussels has continued to sell intervention wheat back into the internal
market, which has also slightly dampened prices.
Global Outlook
US markets have seen some correction from recent highs, as little fresh
bullish news has appeared. IGC (International Grains Council) has lowered
its world production figure once again to 585mt (588mt last month).
Summary
A setback in global prices has been seen over the last 10 days. Many
traders agree that the market place was due for some correction. However
in the long term, all focus will be on the size of the Southern Hemisphere
harvests, which continue to give cause for extreme concern. Australia’s
wheat crop is now widely estimated to be as low as 10mt.
Wheat Market Update - Monday 16th October 2006
UK
LIFFE futures have remained close to contract highs set at the beginning
of last week. There appears to be agreement by most traders that processors
have good cover up to the end of the year, however, it is important
to note there is a much reduced level of cover in the New Year. Defra
released its UK wheat production figure of 14.7mt which was at the higher
end of recent trade estimates. Aside from the NFU figure of 15.1mt,
most traders now agree a crop figure of c.14.3-14.7mt.
Europe
Egypt purchased 120,000 tonnes of French wheat last week which gave
underlying support to French values. French and UK futures continue
to track movements being seen in US markets.
Global Outlook
US markets have continued to focus on southern hemisphere drought concerns
as Australian crop production estimates continue to fall. Prices have
rallied sharply once again.
Summary
Fund money still views soft commodities as undervalued. With global
production falling, and stocks diminishing, it is difficult to find
a reason why prices should fall back from current levels.
Wheat Market Update - Monday 9th October 2006
UK
Prices have continued to increase and LIFFE futures have set fresh
contract highs with prices increasing another £5/t since last
week. Physical wheat prices have followed and there continue to be reports
of processors procuring at current market levels.
UK supply and demand continues to be a discussion point with many traders
highlighting a much smaller exportable surplus of c.1.5 million tonnes
this season. It is felt that c.500k tonnes had been shipped by the end
of September leaving only c.1 million tonnes for the rest of the season,
which should be easily achieved as long as UK wheat remains competitive.
Europe
MATIF futures have also hit new contract highs once again as the market
continues to follow the ‘bull run‘ currently being seen in
US wheat futures and the global wheat complex. Additional price support
has been seen as a consequence of the Ukraine suspending the issuing
of any grain export licences with no apparent short term resolution
in sight.
Global Outlook
The drought situation in Australia and Argentina appears to be worsening.
The latest indication from the Australian Grains Council is that the
wheat crop could now be as low as 10mt, compared to 25mt last season.
Summary
Forecast global production continues to reduce and so forecast global
stocks continue to be reduced. These two factors alone should be enough
to support global wheat prices for the foreseeable future.
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