Lower prices spark international buying for US wheat
David Sheppard, Gleadell’s Managing Director, comments on the wheat market
- USDA reports US corn/wheat stocks higher than expected – corn plantings seen at the highest level since 1936
- Russia’s Ag Ministry narrows 2013 grain crop forecast to 90-92mln t from 90-95mln t previously – 71mln t in 2012
- Egypt’s wheat imports to fall 8-10% in 2013 due to increased domestic harvest and adequate stocks
- ‘Adverse market conditions’ close Ensus plant again, without any idea of when operations might restart
- USDA reports 34% of the US winter wheat crop in good/excellent condition – worse starting rating since 2002
- French grain yields risk 5-6% if cold snap continues – slow growing crops could delay harvest/lose yield potential
- Ukraine resumes spring grain sowings delayed by snowfall/heavy rainfall – potential yield reduction of 10-15%.
Markets fell sharply on the bearish US stocks/plantings reports late last week, as stocks were reported higher than expected. US 2013 plantings were in line with trade predictions, and weather permitting could produce record US corn and soybean crops, although wheat production is predicted to decline slightly from 2012.
Lower US prices sparked some international buying activity for US wheat. US origin remains the cheapest wheat in the world and, with funds holding a short position, good export demand and concerns over dryness in the US, levels have tried to recover during this week.
EU markets continue to firm, albeit after following the US markets lower. The brisk export pace out of Europe this season has seen stocks fall to relatively low levels, and given the current cold snap delaying growth and leading to possible harvest delays and yield losses, the current season may be prolonged with already tighter-than-normal supplies.
Within the UK the main news has been over the closure of the Ensus plant. Citing ‘adverse market conditions’ and without any idea yet of when it might restart, the closure not only limits the scope for UK farmers to contract low specific weight wheat, but increases the potential UK surplus for 2012/13. However, this increased stock will be needed given the 2013/14 balance sheet.
Jonathan Lane, Gleadell’s Trading Manager, comments on the OSR market
The week started off on a negative tone following Friday’s USDA prospective plantings and quarterly stocks report, which showed an increase in soybean and corn stocks and large intended plantings figures. The increase in stocks was unexpected and the markets sold off sharply.
EU crush margins remain poor for old crop and with little coming forward from farm, the market is very quiet both domestically and in Europe. The export market remains an option for UK merchants with European trading houses looking to replace Australian seed, which traded into China with UK seed. The new crop market is equally quiet with farmers reluctant to sell forward at present.
Sterling remains firm against the euro following the Cypriot bank deposit tax. Currency markets remain extremely volatile and, although we have our own economic problems in the UK, it appears the market currently feels we have less uncertainty than the Eurozone following the Cypriot banking crisis.
