Gleadell Market Report - Grain Markets - 27th May 2011
WHEAT
The Ukrainian Agriculture Ministry reported that the country will harvest more than 45mln/t of grain this year up from the 39.2mln/t crop in 2010 which was hit by severe drought. The Ministry has also proposed the Government lifting of export quotas for wheat and barley.
Widespread planting of winter crops is under way in Western Australia following good rains in most wheat growing regions. Rains have also coincided with recent gains in global wheat prices, encouraging farmers to plant, and even expand, wheat area.
China’s CNGOIC, in its first estimate for the 2011 harvest, projected corn output at a record 181.5mln/t, with wheat output set to increase 0.3% to 115.5mln/t.
Iraq expects its wheat harvest to increase to between 2.0-2.5mln/t this year, up from 1.86mln/t last year, with the Agriculture minister seeking that wheat imports are halted until the domestic harvest ends.
HGCA reported that rain was urgently needed for much of west European wheat - with every day that passes the potential for recovery is dwindling.
Drought conditions persist in France, which is seen threatening to increase stress on a crop already forecast to be sharply down on last year’s output.
USDA reported winter wheat crop condition continues to be under stress with only 32% rated good/excellent. USDA reported spring wheat planted at 54% complete, still lagging behind the average pace of 89%. USDA reported corn planted at 79%, up from 63% last week, but still well behind last year and the average of 87%.
Weather conditions continue to underpin the markets. The continued dry spell in key European growing regions, France, Germany and the UK, has analysts trimming crop estimates by the day, as the crop remains under stress, with rain now only seen reducing further losses.
In the US, the current slow pace of corn and spring wheat plantings, and low winter wheat crop ratings, keeps the markets underpinned despite the recent commodity sell-off. The US HRW wheat harvest has commenced in southern states, with the expectations of yields being considerably lower than normal due to the extreme heat. On the flip-side, too much rain in the corn growing areas has analysts questioning whether US farmers will get the projected 92mln acres planted. Given the current waterlogged conditions, the last 5%, or approx 4mln acres, may struggle to get planted, with US farmers switching to soybeans later.
In summary, the US needs a big corn crop and the World needs another big wheat crop, especially quality wheat, and both of these are far from certainties. Weather in the short to medium term will rule, with crop estimates going rapidly south in key European countries. However, planting potential remains favourable in the southern hemisphere, and nobody is certain when, or what, will come out of the Black Sea region regarding exports, so the market will remain volatile and open to bouts of profit-taking when any bearish news appears
OILSEED MARKETS - Jonathan Lane, trading manager
In Europe, weather conditions continue to deteriorate and much-needed precipitation is still lacking. This continues to diminish world rapeseed prospects and the market is concerned as to where it will source imports that the increasingly tight S&D says will be needed. Traders are on edge about threats to output after weather disasters, including a historic drought in Russia fresh in mind. This propelled Matif rapeseed to close higher nine days in a row and to post six consecutive contracts highs.
Additionally, negative political and economic news in Europe stoked worries about the European debt crisis and sent the Euro tumbling below the $1.40 barrier. This has been seen as supportive to the market as euro-denominated commodities become cheaper to investors in outside currencies.
