Market update

FEED WHEAT

IGC sees the wheat crop for 2008/09 at 642mmt, up almost 40mmt from this season.

Argentina re-opens corn/wheat registries, effective from today, limiting wheat exports to 2mmt (400,000t per month for the next 5 months).

Australian farmers, boosted by plentiful rains/soaring prices are expecting bumper wheat crops in 2008.

Ukraine considers raising grain export quotas, proposed increase from 1.2mmt to 2.4 mmt.

Old crop prices remain volatile as massive swings in Chicago caused by economic, financial and energy concerns rock the markets. Tightness in supply of high-quality protein wheat continues to support prices, with MGE (Minneapolis Grain Exchange – Hard US Milling Wheat) achieving record levels in recent trading days.

However, EU feed wheat prices continue to be pressured by an over-supply of 'feed-grains' i.e. maize, sorghum and tapioca, and a general lack of buying interest.

OILSEED RAPE

After the turmoil of last week, this week has been relatively quiet. The US soy futures in Chicago have ended higher in three out of the four trading sessions since our report last week highlighting the volatility in this market at the moment, especially when you consider that at one point in the middle of last week soy beans were down 75c/bu and oil was down US$77/mt but have since recovered about two thirds of these loses.

The fall in the value of rapeseed oil and the recovery in seed prices have cut crush margins in the last few days (they are now around Eur30, down from Eur50). There are plenty of nervous long holders around who are more than happy to sell into any rally and whilst the supply and demand for rapeseed still looks tight for both old and new crop we might not see rapeseed prices return to the highs in the short term.

MALTING BARLEY

The problem for the EU market at the moment is that there is at least 100,000 tonnes of Argentinean malting barley set to arrive in the EU and Russia throughout February. This is obviously weighing heavy on the market.

There are also a lot of EU sellers who have unsold barley that they need to find a home for before the end of March. Buyers are well aware of this situation and are withdrawn from the market. New crop prices are also coming under pressure, following the sentiment of the feed markets, along with the forecast for bigger malting barley plantings throughout the EU.