Humphrey Feeds weekly feed report - 17th December 2011
Last Fridays veto fireworks were an interesting diversion from the main problem in the EU: Greek debt. On 20-3-12 Greece has to pay back a €14.4bn bond, it cannot afford, and another €20bn is to be repaid later in the year. The current EU bailout fund is only €440m, so the EU cannot help either. It took 10 years to agree the Lisbon Treaty, so if the E-26 wants a new separate treaty – it will have to be done at speeds in excess of Warp factor 10. A view from the City this week: `Britain is as isolated as the passenger who refused to board the Titanic.’
The general unease coalesced into a crisis of confidence mid-week. The Eurozone problems were no nearer a solution, and the €uro was dumped, whilst the £ and $ gained strength. A US advisor recommended that all long positions on gold should be liquidated, so the Commodities Index weakened, followed by a general sale of all agricultural commodities. US exporters are still having a torrid time, as buyers of US material are as scarce as hens teeth, due to cheaper worldwide competition for soya and cereals. US export sale commitments for maize, wheat and soya are approximately 5, 25 and 35% respectively below last year’s levels. The bulls are bleating about potential weather problems in South America, but are being ignored so far. In fact there are reports that some Brazilian soya beans may be ready to harvest next week –a month earlier than usual, possible due to earlier planting. The Australians are about to enter the market with up to 22mt of wheat available to export (total harvest 29mt), and they still have 8mt of old crop in stock! It’ll have to be very price competitive to sell that much tonnage.
The three credit-downgraded banks we referred to last week, have all announced heavy staff culls; Credit Agricole taking less than a week to announce 2000+ staff redundancies, reducing its coverage from 55 countries to 34, and total withdrawal from investment in commodities. It is probably not a coincidence that 120,000t of May wheat futures were traded as one lump on Thursday. Standard Chartered believes that agricultural markets are close to the bottom, and thinks that prices will rise in the New Year, stimulated by the Chinese. As we wind down towards the end of 2011 it is worth reflecting that: spot wheat futures prices at about £141 are the cheapest for 16 months (Jul 2010); and that US soya bean meal at $280/short ton is the cheapest for 17 months (Jun 2010). UK Jan wheat futures are currently £143, GM soya is about £250 delivered to the mill.
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