David Sheppard, managing director
Argentina’s Government sees the 2010/11 wheat harvest rising to 14.7mln/t, up from 14mln/t in January.
Egypt’s GASC purchases 235,000 tonnes (115tmt US/120tmt French) soft wheat for April 20-30 shipment. Total purchases since July 1st are estimated at 5.22mln/t, compared with 5.53mln/t for last season.
China’s drought-stricken wheat area falls as snow and rain brings needed moisture. Also, the expansion of irrigation systems is improving the outlook, with now only 1.1mln hectares seen as severely affected.
India is aiming to increase its wheat output by at least 10% to 90mln/t by 2019/20, encouraging its cultivation in more areas and using higher yielding varieties. Current production is around 80mln/t with domestic consumption of 75-76mln/t, which is set to increase further with a growing population.
National Australia Bank sees 2010/11 wheat production at 24.5mln/t, well below official estimates.
The Ukrainian Farm minister reported the hard frosts across the Ukraine have not affected winter grain crops. UkrAgroConsult reported that snow was protecting crops, which are in one of the best conditions seen in the past years, with 56% in good condition, 38% satisfactory and only 6% in poor condition.
Russia will debate whether to extend its ban on grain exports after July 1st, with officials having said an extension of the ban will depend on the success of this year’s harvest, which is currently forecast at 85mln/t.
The USDA Outlook forum confirms increased planted acreage of corn and soybeans for this year. Average analysts expect the USDA to forecast corn plantings at 91.5mln acres, up from 88.2mln last year, the second highest acreage since 1944. Soybeans are expected to show an increase from 77.4mln last year to 77.85mln. USDA also confirms that the tight supply and demand situation will not be fixed by one big crop.
This week has been dominated by the political unrest in Libya and other North African/ Arab nations, with traders uncertain over further demand, liquidating long positions on all commodities to book profits or move into ’safer havens’.
Chicago wheat is down 70c/bu ($26) on the week, MATIF is down 17€ and LIFFE is down £19 (MAY11 based on last night’s close). Lower prices have attracted buying interest, as major importers remain concerned about tightening supplies of high-quality wheat.
In summary, fundamentals haven’t changed – we haven’t found any extra wheat and demand is still apparent but there has been a big shake out in the market, and some considerable pain borne by long holders. Market fundamentals have recently been dominated by massive fund flows – once this has finished, we may see supply and demand influence market movement. It remains a fact that current prices still reflect good, profitable levels for farmers – and bad prices for all end user sectors.