Grain Market Report - 18th January 2013

Wheat

The release of the USDA reports last week, which pegged US stocks and winter wheat plantings lower than expected, has resulted in a sharp upward price rally over the past few days. US corn and wheat stocks were lower than trade estimates, reflecting higher than previous estimated internal demand.

US winter wheat plantings were projected at 41.8mln acres and, although up on last year, were again lower than trade estimates - especially the HRW area, which at 29.1mln acres is down from last season’s 29.8mln.

The onslaught of colder weather entering the US plains has also supported the market, on concerns of potential crop damage on a crop already reported in the worst-ever condition when entering dormancy.

EU markets have followed the firmer global market higher. With the balance sheet for the EU, Russia and the Ukraine already showing a very tight supply and demand, markets have just reacted to the US price movements.

Export business, although still to be concluded, remains routine and is likely to be greeted by cheaper offers from Australia, the US and India, where bumper harvests over the past 3 years will allow exports to reach 6mln t.

Strategie Grains this morning have lowered their 2012/14 EU-27 soft-wheat crop estimate by 1.9mln t to 132.3mln t, citing lower acreage and wet weather at the time of plantings for the decline.

The UK, currently in the first major grip of winter, remains solidly as a net importer. Imports for the season to date (July-November) have reached 1.04mln t, compared with exports estimated at 476,999t. Import estimates are to continue at the current pace and could reach 2.6mln t while, in the meantime, forward sales of UK wheat are few and far between. This could leave the UK with a surplus of wheat higher than previously thought, and of low quality.

In summary, while the weather in the main northern producing areas remains cold and dry (US/FSU) the markets should stay supported. Market bulls will play the ‘reduced US quality supply’ card against the market bears who are hoping for a sharp rebound in overall Global grain production. Short-term the bulls could well be on a winner, although in the long-term, the potential for bumper global wheat and corn crops could help the bears!

Oilseed Rape

This week, Matif May13 rapeseed has gained around 10 euros - ex farm UK prices are around £370 per tonne. We have seen some farmer selling from £360 ex upwards, and the domestic inter-trade market has become more active.

UK forecast plantings are down for rapeseed, with new crop harvested acreage figures ranging down from 5-20%. In Europe, there is a different picture with plantings in Germany and Poland all going very well and France currently has no problems to note.

Last Friday, we had the USDA report and this was bearish for soybeans as was widely predicted with the yield and production figure being increased along with the predicted South American crop size being increased. The soybean market initially sold off but has subsequently gained around 70 cents per bushel without any change in the underlying fundamental picture, some commentators feel the sell-off was a little over done and the market has bounced back accordingly.

Currently, we have no weather problems in South America and demand remains strong for soybeans. Usage rationing is still needed and there are question marks over the South American infrastructure with the new crop supplies being needed to meet demand. The overall market picture remains mixed with strong demand and a big South American crop looming.