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Harvest Update - Thursday 30th September 2004
UK Harvest
This week wheat traders attention is focused on the delivery of wheat
against contract rather than making new sales. The immediate needs of
bread-quality wheat buyers is still being supported by merchant short-covering,
this supply problem may continue well into October. The focus of the
market continues to be on the nearby, little interest being shown to
sell deferred positions. The challenge is still for the U.K. to price
its surplus feedwheat into the export market.
World Harvest
Concerns about Canadian harvest delays have ceased as the harvest there
is progressing once again. U.S. DNS is 88% harvested vs. 100% year ago
and the HRW crop is 42% planted. European cash prices are about unchanged,
except for higher protein German E wheat which is gaining slightly on
A wheat. This is most likely due to the worldwide trend of widening
premiums for higher proteins.
Harvest Update - Friday 24th September 2004
UK Harvest
The 2004 harvest is now completed but the problems of the last few
weeks continue to be the focus of today. Quality is the main concern,
and is likely to continue to be so for the balance of the marketing
year. As expected, the damage done by the late August and early September
rains are being seen most prominently in terms of low Hagberg. There
is a marked deterioration in quality as one moves from the south of
the U.K. to the north. Quality wheat continues to move North in general,
and that is reflected in the values being paid in the marketplace for
milling quality. Merchants are still scrambling to deliver against commitments
made earlier in the season and are continuing to purchase wheat for
immediate delivery to meet those obligations. Meanwhile, farmers are
getting back in the field to resume harvest of other crops, or to prepare
for Autumn planting. One might expect sales from farmers to subside
shortly as the wheat is put away for storage. In addition, there have
been some recent wheat cargo loadings at southern U.K. ports which have
provided competitive support to the domestic market as well.
World Harvest
The world wheat situation is, of course variable. The U.S. spring wheat
harvest was reported at 81% in the most recent week versus 100% a year
ago, while planting progress of Hard Red Winters is trending slightly
ahead of the five year average (29% vs 23%). Protein is still seen as
a big problem with the Dark Northern Springs crop, with huge premiums
being asked for 13.5 to 13.8 levels and the Canadian crop is faced with
similar concerns. The German crop is said to be about 1% lower in protein
vs. year ago. Price movement has been steady to slightly weaker recently.
The French cash market is about steady, with some expectations of potential
weakness as the maize harvest gets started.
LIFFE futures are stuck in the low £60’s and are likely
to find it difficult to mount much of a rally due to the large supplies
of feedwheat in the U.K. Expect LIFFE to remain divorced from the milling
wheat cash market. U.S. futures markets appear to be trying to put in
a bottom and may try to move higher over the next couple months. Counteracting
that though, will be the large corn and soy harvest now at hand. Pressure
on these could work to hold back wheat futures, while some commission
houses are looking for a potential $0.20 rally in wheat.
Harvest Update - Friday 10th September 2004
UK Harvest
Continued good weather throughout this week will probably bring harvesting
to its final days by this weekend. The task at hand for the next 2 weeks
is one of assessing the quality. Problems are still concentrated in
the north, but there are pockets of low hagberg being reported even
in the south west. Merchants are struggling to cover not only the milling
quality they sold earlier in the season, but also to supply vessels
showing up in ports. Feed wheat futures are stagnant as are feedwheat
premiums. The strength in bread and biscuit wheat has continued, with
some bread markets showing an increase of £5 since September 1st
and biscuit up £3 to £10. Farmers and merchants alike continue
to be reluctant sellers due to concerns about being able to deliver
milling quality. It is likewise proving difficult to own wheat for forward
delivery until sellers have sorted out their quality problems. Forward
delivery continues to be priced at carrying charges to the nearby. There
is the option of using more imported wheat if the domestic U.K. crop
cannot provide the necessary quality, however that wheat is priced some
£10 above where many of the U.K. milling markets are currently.
World Harvest
European quality is still said to be good. Some shipments of German
wheat are taking place, but a tight freight market is hampering the
supply. French cash markets have been slightly weaker of late, partially
tied to ONIC forecast of the second largest soft wheat harvest of 37.4
mmt. U.S. spring wheat harvest is lagging with 62% cut versus a 5-year
average of 83%. Some strength has been showing in the U.S. market lately
due to strong export demand. Protein premiums have been racing higher
too, with the market nearly a £7 premium for 14% as opposed to
13.5%. In Canada, some forecasts are trimming their crop by 5-10% this
season due to poor weather.
Harvest Update - Friday 3rd September 2004
Harvest Update
Generally dry conditions have enabled farmers to return to harvesting
this week. The focus has been to gather the wheat and assess quality,
rather than sell at this time.
Deliveries from farms have increased, and merchants are beginning to
pick up the pace of shipments against sales made earlier in the season.
The quality continues to be one divided by regions. Generally speaking,
the better wheat is to be found in the south with gradual deterioration
as one progresses north into Scotland. Proteins, on average, are down
marginally from last year’s high levels. Moisture is of course
higher, but it appears that the farmer has been able to get the wheat
dried ahead of deliveries. Hagberg falling numbers (HFM) are suffering
the most. Certain varieties thought to be prone to not holding HFN in
these conditions are showing true to form. There are several reports
of biscuit wheat hovering near or below 100 HFN in the north. Specific
weights are gradually falling in most areas as well.
In summary, it is a case of sorting out quality wheat to make sure
that milling quality specifications are met.
LIFFE contracts have eased slightly this week as the market digests
the impact of the large feedwheat supply. Premiums for milling quality
have remained firm not only in the U.K., but also worldwide. German
milling quality wheat has been supported by the lesser quality U.K.
crop. Demand for French wheat has been strong in light of substantial
sales made earlier in the season and the reluctance of the farmer to
sell. The U.S. and Canadian harvests are facing threats of rain and
even possibly a freeze (Canada) next week.
The weather forecast for most of the U.K. looks to favour continued
harvesting, with only Scotland having the possibility of rain. The market
prices appear as though they will take their direction from the quality
of harvest rather than quantity. Given the trend of declining quality
and continued demand for immediate delivery, one should expect any dips
in prices to be responded to with strong buying interest.
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