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Wheat Market Update - Friday 26th October 2007
UK & Europe
Volatility has remained in the market this week, with daily swings on
both UK LIFFE and French MATIF Futures markets, following the lead of
the US. Both buyers and sellers remain nervous to any new news.
Overall UK futures have lost ground, the LIFFE May-08 position is down
£8.50 over the week to a close of £161 per tonne yesterday.
Despite the volatility in futures, UK cash values have been slow to
follow, with concern persisting over quality availability for the rest
of the 2007/08 campaign.
Undoubtedly the UK wheat balance sheet will remain tight for the rest
of this campaign, with the first indication of the 2007/08 balance sheet
released by DEFRA next week to include projections for UK exports.
World Wheat
US futures markets have led the decline. Responding principally to
the news that Russia intend to retain its planned export tax at 10%
rather than rumours of higher tax rates of up to 50%, along with a slowing
down of their own US export sales, and some liquidation of positions.
The International Grains Council (IGC) released their October report
which is seen as neutral with only minor revisions. Total 2007/08 global
wheat production increased just 0.5M tonnes to 602Mt from the previous
months estimate. World consumption was revised 2M tonnes lower to 610M
tonnes which followed through to a 2M tonnes increase in ending stocks
at 109M tonnes, still representing a 30 year low.
The IGC sight a decline in animal feed usage in the EU and US for the
slight drop in consumption, however human food consumption is expected
to remain strong.
Summary
The market is currently lacking some direction; the fundamentals remain
tight for the Global Balance Sheet, but have seen little new news. The
next few weeks will see a fuller understanding of Australian and Argentine
wheat harvests.
Attention will also begin to turn to production prospects for the 2008/09
campaign with most northern hemisphere wheat crops now planted.
Wheat Market Update - Friday 12th October 2007
UK & Europe
Extreme volatility has been seen this week across European futures markets.
UK futures fell sharply on Monday on perceptions that Wheat markets
had absorbed all ‘bullish’ news and were overdue for a correction.
Fund profit taking was evident in large volume, but as fundamentals
remain firmly in place, the dip seen was very quickly seen as a buying
opportunity and by the end of this week futures levels have recovered
all of the steep losses seen on Monday.
Defra released its estimate for UK 2007 wheat production earlier this
week at 13.36 million tonnes. This was broadly in line with other industry
estimates.
World Wheat
Today’s USDA monthly supply and demand report once again lowered
Global wheat production by 5.8mt to 600 mt. World wheat ending stocks
were lowered to 107mt from 112mt seen last month.
The figure for ending stocks is the lowest seen since 1948.
Australian wheat production estimates have continued to decline, with
the latest USDA figure at 13.5mt a massive 7.5mt drop in a month.
US Export sales continue at a record pace and are seen as a major underpin
to US prices.
Summary
After the market absorbed the sharp losses seen in Futures markets
earlier this week, fundamentals have regained control.
With Supply and Demand tightness set to remain a key price driver later
in the season, and physical wheat availability likely to remain tight,
the market remains well supported.
Wheat Market Update - Monday 2nd October 2007
UK & Europe
First estimates of UK wheat production were seen last week with one
major merchant indicating a crop size of 13mt. This would appear to
be at the lower end of expectations, but a clear indicator that many
of this seasons yields suffered a 10-15% shortfall.
Market sentiment is indicating that many processors are believed to
be well covered pre Christmas, and coupled with the view that many growers
are prioritising land-work at present, trading activity is quiet.
November 2007 LIFFE futures are currently £177 which is £18
lower than the contract high recorded in early September.
EU Farm ministers have approved the ‘proposal’ to reduce
set-aside to 0% it is forecast that this would increase EU 27 production
by 10million tonnes.
World Wheat
The pace of US wheat exports continues at record levels with India,
and North African countries continuing to add to recent purchases.
The International Grains Council (IGC) lowered their 2007 global production
estimate to 601mt from 590mt in 2006.Usage was put at 612mt verses 609mt
in 2006.
US futures have remained firm, and were supported last week by news
that the USDA reduced US 2007 wheat production by 2%.
Australian wheat production has deteriorated further, and could be
potentially as low as last season at c.10-12mt.
Analysts have indicated that increased wheat plantings around the world
this season will lead to global production rising to 630-700mt for harvest
2008.
Summary
Further confirmation of lower Southern Hemisphere production, coupled
with record US Export sales continue to provide solid support to prices.
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