Market Report - 4th May 2012
GRAIN MARKETS - Jonathan Lane, Trading Manager
WHEAT
- The USDA report corn plantings are 53% complete, 28% last week - 27% average, and spring wheat plantings 74% complete, 57% last week - 32% average.
- US wheat tour - record yield potential forecast on Kansas wheat - potential also for early harvest.
- Indian grain output for 2011/12 raised to 252.6mln t – 2012/13 marketing year wheat crop raised to a record 91mln t.
- Russian AgMin keeps 2012 grain crop forecast at 94mln t, export could match the 27mln t forecast for 2011/12.
- Russian wheat prices stable on weak export demand – domestic supplies being covered by state inventories sales.
- EU zone economic concerns are raising their head again. French and Greek elections are looming, Spanish unemployment reaches 1 in 4 and Sterling has firmed versus the Euro.
- Morocco’s wheat harvest falling to 3mln t, including 2mln t of soft wheat.
- IGC cuts forecast for 2012/13 world wheat crop to 676mln t, stocks falling to 206mln t.
- EU weather woes depress prospects for world wheat harvest – increased spring plantings offsetting winter wheat area losses.
- Spain’s 2012 cereals crops again cut to 11.79mln t – soft wheat production projected to decline 28% to 4.275mln t.
Summary
US markets have moved lower over the past week as increased planting activity, good crop ratings and talk of excellent yield potential/early harvests led traders to bank profits.
The markets had been ramped up over the past few weeks on increased talk of tighter US supplies, on demand from China and declines in South American production due to adverse weather.
However, the current bearish crop data, and thoughts that new ’crop supplies’ may be available in the ’old crop year’, have eased concerns.
On new crop prices, there are good reasons why they are at the levels they are - but we have a USDA report on 10th May with many expecting a bearish tone as corn and soy plantings in the US romp ahead in perfect conditions.
Farmers have basically been out of the market on wheat for up to two months, and may end up chasing a market where EU grain is expensive and buyers very wary and largely absent.
Even though there is still a way to go to harvest, the bearish sentiment is likely to continue, and there is certainly no guarantee that the market has to move up again.
OILSEED MARKETS - Willie Wright, Oilseed Trader
- Soybeans touched $15.15 in the July contract earlier in the week, this new high appeared to be enough for some traders with sellers keen to book some profits. The market continues to be well supported with continued crop reductions and increased demand for soybeans coming from China.
The weekly export sales figures for US soybeans came in at 1.4mln t split between old and new crop, much higher than the market had anticipated and, with South American production reducing, buyers are now tapping into the US market.
- Rapeseed prices slipped from their recent highs and more dramatically on old crop with May MATIF futures dropping €14 on expiry. May MATIF had been trading at a €15-€20 premium over the August contract but expired on Monday at a €4 premium causing a little confusion about some old crop values.
The unknown in the old crop rapeseed market is the reduction in crush demand throughout Europe due to extremely poor crush margins, some feel that this figure could be higher than is currently being reported and could help increase end season stock figures in Europe.
Old crop market prices will remain volatile in the short term which is not being helped by Sterling’s strength against the Euro. We are still seeing good buying interest, although the resolve of the sellers looking for £400 ex farm may be tested for a few weeks more!
- New crop rapeseed prices have tracked old crop higher and, with oil world and other analysts reducing the size of the European rapeseed crop to 18.3mln t, which is the lowest level for 6 years, we expect to see the market supported for the time being.
We have also seen reports of China looking to increase rapeseed imports to 2mln t from the previous year, a 70% increase year on year.
