04 March 2015 | Online since 2003



Global markets ease as US corn and wheat prices down


Jonathan Lane, Gleadell’s trading manager, comments on grain markets:

WHEAT

- USDA reports corn crop harvest at 39% complete - up 13 points on the week and against the 13% average.

- USDA reports US winter wheat plantings at 25% complete, up 14 points on the week.
- US markets fall on harvest pressure and favourable weather prospects for new crop plantings – market awaits USDA stocks data on Friday.
- Egypt’s GASC purchases 300,000t (180,000t French/120,000t Romanian) wheat for 1st-10th December shipment – Russian prices were uncompetitive.
- Australian wheat crop could decline further due to continued dry weather concerns in western Australia.

- Russian grain exports to decline in October due to falling stocks and rising domestic prices – increasing needs of imports.
- AC Toepfer cuts forecast of UK wheat crop to 13.8mln t after bad weather.

Summary

The UK wheat harvest is now all but complete, leaving growers, merchants and end-users alike to assess the quality of the harvest, and to determine where the variable quality ‘suits best’. The downturn in yield will result in a crop smaller than estimated a few weeks ago and, with the expected increase in domestic demand, we are looking at a tightening UK supply and demand scenario.

A significant amount of wheat still needs to be analysed to establish the best destination, in order to reduce the risk of rejection and associated costs. This will require patience by all parties, as laboratories work through the backlog. Nevertheless, it is clear that there is a significant amount of wheat that is below the minimum level of 65kg/hl that some feed consumers will accept wheat down to. At the same time, imports of wheat are continuing to accelerate as millers look to improve their grists and merchants look to blend with UK feed wheat in futures stores with a view to tendering in the next month.

Global markets have eased significantly (UK wheat futures are down £10 from the top), with US corn and wheat prices down $12 and $4 respectively on the week, as harvest pressure and favourable weather relating to new crop plantings weigh on values. Talk of the Chinese economy slowing, and the EU debt crisis again raising its head, added to the negative tone.

Current market sentiment seems to be all ‘US Based’ – harvest progress, plantings, weather. However, looking a bit further afield, Russian wheat offers seem now to have dried up, southern hemisphere wheat prospects are not improving, the EU wheat balance sheet is tight and the UK is facing the possibility of a reduced surplus due to declining crop estimates and increasing demand – is this market going to collapse? – We would suggest not.

OILSEEDS

The US soybean market continues to drive the global oilseeds complex lower, with prices continuing to come under pressure. With harvest pressure in the US and reports of better than expected yields, the USDA is expected to revise US ending stocks figures higher tomorrow, and see managed money funds exiting the market.

Macro-economic factors have weighed heavily on commodity and financial markets this week, with poor economic data being released by countries across the globe. The Eurozone debt crisis is back in the news pressuring the single currency, we have seen riots in Greece and Spain and trade disputes between China and Japan, all providing a negative outlook for investors.

At the time of writing, matif rapeseed has lost €18.75/tonne (£14.90) on the week with prices tracking the soybean market lower. Sterling has also moved higher against the euro this week, which isn’t supportive for domestic prices. UK rapeseed remains expensive, and the domestic crush prices are still offering better value than the export market. All of this has contributed to the current downtrend, even though the long term fundamental outlook remains bullish with tight supply and demand for soybeans which should support rapeseed values longer term.

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