FEED WHEAT
• Egypt continued its habit of issuing tenders on dips in futures markets – they subsequently bought 225,000mt of US hard wheat – at relatively high prices.
• French wheat exports are moving at a very rapid rate. By Christmas there are reasonable expectations that France will have exported between 7 and 8 million tonnes out of a surplus of 9.5mln/t. In other words, they will have removed their entire surplus by Feb/March 2011 – unless French prices move to make their wheat uncompetitive. UK exports have also started at a healthy rate of knots – with many UK consumers seemingly reluctant to follow recent price rises, or adopting an ostrich-like head in the sand avoidance technique.
• The IGC latest report has lowered world wheat production to 644mln/t – from 651mln/t in July. They also lowered world wheat ending stocks by 8mln/t to 184mln/t.
• This is still the 3rd largest wheat crop ever and ending stocks are 63mln/t above the level seen in 2007.
• The UK wheat harvest is drawing to a close as we finally get a week of good weather. Whilst quality has clearly been impacted, particularly in the south, we are still seeing a lot of samples that will do a milling or quality job, either in the domestic or export markets. This may mean that currently-available milling premiums are worth serious consideration.
• Given the quality we have seen to date, we expect exports from the south coast, and probably from the lower west coast too, will be mainly of feed wheat this season. On the other hand, wheat quality in the east will enable quality wheat exports to provide a constant and attractive market for growers. Indeed, the further north one looks in England the better the quality – with Lincolnshire, Yorkshire and the north west producing generally good quality.
• Rumours abound of another large feed wheat vessel due in Southampton after the current ship eventually finishes loading sometime in September.
OILSEED RAPE
• Soybeans put in a rather disappointing performance this week finishing just 10c up on the week despite sharp gains in wheat, crude oil and equities along with a sharply lower dollar. The market seems to be ignoring these friendly outside influences following concerns that larger-than-expected supplies of South American soybeans would undercut the US into their key export destinations.
• The European rapeseed market continues to be supported. The tightness in the EU balance sheet and the continued decline in the sunflower seed crop are combining to under-pin rapeseed prices. The EU-27 crop is now widely accepted as being under 20mln/t (we are working with 19.7mln/t). The sunflower seed crop is also much smaller than previously hoped and, as a result, the multi-seed processing facilities will now be switching more capacity to rapeseed, especially given the current €40/mt crush margins!
• In conclusion, we still believe that this market may have room to go higher from today’s levels and potentially establish new market highs, but it will remain volatile and can test the resolve on days when the speculators want to bank their profit.
