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Wheat Market Update - Friday 24th October 2008
UK and Europe Harvest Overview
The financial (banks) rescue package seems to have steadied outside markets for the time being, however, the impact of reports that the economy is entering recession needs to be closely monitored.
Commodity markets have calmed but any immediate recovery looks unlikely at present.
LIFFE Feed wheat market futures appear oversold but fundamentals of supply and demand remain the major price driver with the large volumes of feed grain available across the EU following this year’s harvest.
November LIFFE wheat futures are valued at c.£90/t and continue to reflect the large amount of feed wheat available in the UK this crop year. Bread-making premiums remain firm with the continuation of processor and merchant demand supporting them at higher levels.
Adding to the continued weakness of feed wheat futures levels is the impending EU maize crop, which is expected to be c.61 million tonnes, up from 47 million tonnes last year. Farmers have continued to prepare and drill crops for 2009 in near ideal conditions apart from France where more moisture is required.
US/World Overview
US futures have also eased as traders remain concerned that cheaper EU sources may impact on US export sales.
Australian and Argentinean wheat harvests are also approaching and southern hemisphere traders are likely to compete with lower world prices as they enter their harvest months.
Summary
An exceptional turnaround in world wheat prices compared to a year ago continues to be the focus for the market. Quality wheat remains in high demand in the UK and to a large extent continues to negate the collapse seen in LIFFE feed wheat futures values.
The turmoil seen in financial markets has accentuated price movement over the last 6 weeks with the weakness of oil a contributing factor.
Wheat Market Update - Thursday 9th October 2008
UK and Europe Harvest Overview
Across most of Northern Europe the wheat harvest is finally nearing completion to the relief of many growers. The massive volume of wheat that is only of feed quality this season continues to be the key fundamental price driver at present and has continued to push UK LIFFE feed wheat futures lower. UK November futures are circa £93 per tonne, a level last seen back in March 2007.
The weakness of futures markets and the realisation of much increased EU wheat production across Europe continue to focus market attention. However, it is the demand for bread-making wheat and the strength of quality wheat premiums that look set to become as influential in final price calculations over the coming months.
Large parcels of farm grain are not available to market at present due to the need for drying. It is also far from certain that once this process has been completed the grain will meet processor’s quality specifications.
The weakness of outside financial markets across the globe has also impacted on all commodity indices and will continue to fuel uncertainty going forward.
US Overview
US markets have continued to focus their attention on the financial rescue package announced by the government over the weekend. Aside from this there remains concern that lower wheat prices may discourage farmers from planting as much wheat as last season.
Summary
The weakness of financial and commodity markets at present across the globe still remains in evidence. How long and to what extent this commodity selling will continue is uncertain and makes traders very wary going forward.
Farmers are becoming more and more reluctant to sell wheat at below their cost of production.
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