US crop conditions improve as rain brings moisture

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

Wheat

US crop conditions improve in the US plains as snow/rain brings much needed moisture. IGC increases global wheat and corn stocks for 2012 – 2013 wheat crop projected 4% higher. India's grain mountain grows on expectation of another large wheat crop in 2013.

UK loses its AAA credit rating – initial support for wheat values. Russia’s winter grain crop conditions worse than average – 12% in poor condition. Cold weather seen damaging 9-10% of Ukraine’s winter grain crop, mostly barley.

Prices have continued to drift lower, pressured by bearish production report for 2013 and better weather prospects in South America. In addition, the onslaught of major storm systems into the US plains has brought much relief to drought-stricken winter wheat areas. Lower prices has seen some export business concluded, with recent sales made to Iraq and Iran on top of Chinese purchases

EU exports are still running about 4mln t ahead of last year’s pace, with all-wheat exports reported at 14mln t. However, exports from France are still below projections, and with their traditional export homes either purchasing from other sources, or sitting on adequate stocks awaiting domestic harvests, the likelihood remains that French ending-stocks will be increased rather than reduced.

UK prices have slipped about £2 on the week (futures) although EU and UK prices have been partially supported by a stronger US$. A dry ten days has allowed the last drillings of winter wheat to be completed and spring planting has also started. The focus on weather, both in the UK and worldwide, will be of keen interest from now until harvest and it is clear that the world needs a large maize and wheat crop this year.

Oilseed Rape

Matif rapeseed has moved in a small trading range this week, with little fresh news in the market and a general lack of activity in either the futures or physical market. The Italian election has created further uncertainty in the Eurozone and Sterling rallied against the euro knocking £6-9 off of UK domestic prices. Sterling and the volatility in FX markets remains a key factor in domestic prices, ex farm prices are now around £385.

The soybean market remains range bound and late last week tested the recent highs, but found stiff resistance at these levels as technical traders moved to the sell side.

This week the market has been very quiet with little news to add momentum. Brazilian ports continue to struggle to move beans in sufficient volumes, and renewed Chinese buying interest has helped support prices but the harvest continues and weather remains good.