UK 2012 wheat crop down 13%, Defra figures show
Jonathan Lane, Gleadell’s trading manager, comments on grain markets …
Wheat
Wheat boats to Cairo! Even the sale this week of 180,000t of US SRW wheat, plus a reported sale of 110,000t of US HRW to Egypt has done little to stem the current bearish sentiment overhanging the wheat complex.
Seasonal profit taking, potential of storms bringing needed moisture to the US plains and early forecasts of a rebound in global wheat production next season have all resulted in fund liquidation, pulling CBOT wheat prices back to a 6-month low.
EU markets have followed the US lower, despite the apparent tightness of the balance sheet. Import activity is evident from consumers who need additional cover for the early new year positions and, with US wheat being $20 and $15 cheaper than French and German supplies respectively, the US should tick the boxes!
UK markets have also weakened, apart from the usual Christmas demand flurry forcing up the spot price.
DEFRA have released their final 2012 wheat crop figure at 13.261mln t, down 13% from 2011. Wheat exports fell in October, with only 90,355t exported against imports of 226,874t, leaving the country solidly a net importer.
In summary, as the year ends the bears seem in control of what has been mostly a bull market. The outlook for next season is in marked difference from last year when most of the EU was gripped in deep freeze, and the FSU was suffering from a lack of snow cover. Estimates for global production for 2013/14 are already projecting a sharp rebound in wheat production (apart from the UK) and with US corn acreage expected to increase on the back of potential huge South American crops
The current negative feel to prices is in direct response to a weaker Chicago market and, in turn, weaker Matif prices. As we have said for a while, this market was always liable to a correction – and it has occurred with a bit of a vengeance. The UK is a net importer with some low quality wheat to blend or export.
Oilseed Rape
The Matif rapeseed market has lost around 30 Euro’s this week, the underlying market fundamentals remain unchanged but we’ve had a lack of fresh news to feed any upward momentum. We have also had continued Australian harvest pressure on the Matif as Australian seed is priced into Europe. The Euro has also broken higher against the US dollar pressuring Matif prices.
Soybeans have again been the driver for the oilseeds complex and, with soybeans unable to break through the 15-dollar level the market took on a bearish tone as funds booked profits as the rally stalled. Then followed news that China has cancelled a shipment of beans and the sell-off gained momentum with the technical picture turning negative. Like rapeseed, there hasn't been any change in the fundamentals for beans but, at present, weather in South America is looking okay with just a question mark over Argentina where persistent rains have slightly hampered plantings.
The market expects the USDA to increase the soybean production figure in January and we have a general lack of bullish news, S&D remains tight for beans but this is well known. The technicals have taken on a negative tone and, following the recent up move in beans (1.50 dollars) since mid-November, we are seeing some people booking profits and squaring up positions ahead of the Christmas break.
