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Wheat Market Update - Friday 29th September 2006
UK
This week has seen the first production estimate from the NFU indicating
that this year’s crop is c.15mt. The market has somewhat discounted
this figure, as most merchants still believe the figure to be between
14.3 - 14.7mt.
LIFFE futures have reached fresh contract highs today following the
news that the International Grains Council (IGC) lowered its world wheat
production estimate from 593mt to 588mt. This reduction was due to ongoing
drought in Australia and Argentina.
There has also been renewed interest from processors who are once again
looking to buy, after seeing erosion in their cover whilst waiting in
anticipation for lower prices.
Europe
Matif futures have also set new contract highs for similar reasons
to LIFFE. Physical prices have firmed and farmers remain reluctant sellers.
Global Outlook
Australian and Argentinean crop estimates continue to fall as the drought
conditions worsen. Over the last 3 weeks we have seen an estimate for
the Australian crop of 19.5mt from the USDA. At the other extreme an
estimate of between 12 - 15mt has been issued from the Australian Wheat
Board (AWB).
Globally markets continue to focus on lower output and reducing stocks.
This alone will continue to be supportive to prices.
Wheat Market Update - Friday 22nd September 2006
UK
Further wheat crop production estimates have been reported this week,
with merchants and cooperatives getting to grips with quantities the
farmers have harvested, stating an expected range of 14.3-14.7 million
tonnes. Defra also issued their projected wheat planted area for last
Autumn, which using average yields calculates to c.14.40 million tonnes.
Once production figures are finally established the market will focus
on the reduced size of the UK exportable surplus and monthly export
progress. This will be a price driver for UK wheat. With estimates that
400 thousand tonnes may be shipped by the end of September and a reducing
exportable surplus, there is little evidence of bearish price news.
The physical market still lacks liquidity and is following price direction
from LIFFE futures prices. These have rallied again this week following
the previous week’s setback and are just below contract highs.
Europe
Matif futures prices have rallied once again and continue to find support
from firmer US markets. All across Europe demand remains steady and
the level of interest from processors remains supportive to prices.
Global Outlook
As mentioned last week the Australian government lowered their wheat
crop estimate to 16.4 million tonnes (v.25.1 last year). This lower
figure was more in line with the view of most traders, however it could
be lower still if the drought conditions worsen.
US futures reacted by moving sharply higher, as last weeks figure from
the USDA of 19.5 million tonnes for the Australian crop was disregarded.
Summary
It is difficult to justify why prices should ease back much from current
levels. With the Northern European harvest now mainly complete and variable
yields reported in the key producing regions the focus switches to the
Southern Hemisphere crop. Any further reductions in production estimates
will herald further global price rises.
Wheat Market Update - Friday 15th September 2006
UK
The wheat harvest is virtually completed, and now the market awaits
production estimates. At this stage the range would appear to be 14.3
to 14.7mt - the higher estimate being in line with last season. Indifferent
quality has been widely reported this season and merchants are still
gathering samples from farms to complete their evaluations.
Farmers are now focusing on land work and remain reluctant to sell
any significant volume. LIFFE futures have eased a little from contract
highs but there is still fundamental support in the market.
On physical wheat markets there is evidence of increased activity from
processors seeking an opportunity to add cover, which remains supportive
to the market prices and could push prices higher again.
Europe
Some profit taking has been seen this week in MATIF futures market
with prices easing back from contract highs. Underlying supports remains,
and with production figures being lowered within the EU once again this
week, contract prices will struggle to move lower.
Global Outlook
The USDA lowered its worldwide wheat production figure this week by
2 million tonnes to 596mt. Particular focus remains on Australian wheat
production which was lowered by a further 2mt to 19.5mt. However, many
analysts fear that the drought impact has been more severe and that
the actual crop figure will be closer to 16mt.
Summary
This weeks easing in price has been largely due to profit taking on
LIFFE and MATIF futures markets. Producers remain reluctant sellers
and now have land work as their main priority, preparing for the planting
of next years crop.
Physical wheat will remain difficult to acquire, and with processors
looking to extend cover, wheat price values remain well supported and
could move higher.
Wheat Market Update - Friday 8th September 2006
UK
Ideal weather this week has given farmers the opportunity to restart
combines once again. The remaining wheat crop should be cut over the
next few days. Results from recently harvested grain have been disappointing
with lower yields and quality being widely reported.
Farmers are still reluctant sellers, it is a similar story to last
week with merchants and processors struggling to cover nearby requirements.
Prices remain steady with LIFFE futures trading just below contract
highs. Processors who have remained out of the market are now beginning
to provide added support to prices as they seek to cover their needs.
Breadmaking premiums remain steady and significantly up year on year,
which could increase further if farmers continue to hold supplies from
the market.
EU
MATIF futures remain steady with continued rumours of further sales
of French milling wheat to India. Support is also being seen from export
interest to Algeria and Morocco.
Harvest should be completed in Northern Europe over the next few days
but quality has suffered as a result of the prolonged delays due to
wet weather. Solid domestic demand and export interest continues to
be hampered by a relative lack of producer selling.
Summary
This week should finally see most of Northern Europe complete harvesting.
The rain affected harvest has not helped farmers, merchants and processors
build a picture of overall quality and likely long-term price direction.
Globally supply and demand continues to tighten and must be considered
supportive to prices. Next week the USDA issue an update which will
highlight this issue and the focus will switch to how much Southern
Hemisphere crops have suffered from the dry weather.
Wheat Market Update - Friday 1st September 2006
UK
Estimates are that 10-15% of the crop remains to be harvested. Quality
and yield are likely to have been adversely affected by the ongoing
inclement weather patterns. Merchants continue to struggle to buy any
volume from farmers who now believe the wheat harvested before the wet
weather will further appreciate in value as prices continue to rise.
In addition to this the wheat that has been harvested post the rain
needs drying and conditioning before it can be marketed and this will
take some time. LIFFE feed wheat futures have risen £5/t and set
fresh contract highs once again this week and breadmaking wheat premiums
remain firm and have solid support at current levels.
EU
A similar situation as in the UK with merchants struggling to buy from
farmers and processors looking to cover their nearby needs. Poland appears
to have suffered one of the worst harvests within the EU and as a consequence
has been actively buying milling wheat from Germany. France has sold
wheat to India which consequently has pushed MATIF futures to fresh
contract highs. There remains a view that some wheat crops in areas
particularly affected by rainfall will be abandoned. However the scale
of this is uncertain at this time.
Summary
The prolonged harvest in Northern Europe and the uncertain picture
over quality has seen prices rise sharply in recent weeks. US wheat
prices look susceptible to rallying against a background of tightening
World supply and demand, which will become clearer over the next few
weeks. Australia and Argentina are still suffering from long term dryness
and as the market absorbs the impact of this, prices will continue to
be well supported.
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