Global wheat production 'set to increase by 4%'

Jonathan Lane, Gleadell's trading manager, comments on grain markets:

Wheat

US plains’ winter wheat crop condition continues to improve following heavy snow, providing much-needed moisture.

Ukraine may raise wheat exports to 8-9mln t in 2013/14.

Indian government expected to approve an extra 5mln t of wheat exports – as a priority over other grains.

ABARES forecasts Australian 2013/14 wheat output to rise 13% to 24.9mln t.

FAO sees world 2013/14 wheat output up 4% at 690mln t - the second largest crop on record.

UK wheat harvest at risk due to wet weather preventing a late catch-up in winter sowings.

Russia plans to replenish grain reserves by buying new crop. This may limit their scope for increase in exports.

French wheat crop ratings down on year. 66% of soft wheat reported in good/excellent condition.

Prices continue their downward trend, as improving weather conditions in the US plains enhance the prospects for a rebound in global wheat and corn production.

Global wheat production is set to increase by about 4%, mainly led by an increase in area and a return to ‘normal yields’ in both the EU and FSU. A projected record US corn crop (although none is yet in the ground) and sluggish US domestic/export demand is also seen adding pressure on market values.

EU markets continue to be driven by the Chicago market, although with some adjustments for the fluctuating currencies. Exports pace remains well ahead of last year. This may slow as importers become more relaxed over upcoming domestic harvests and the improving crop outlook.

UK prices have fallen about £5/t on the week following the global trend lower. The bearish trend seems well established at present. Many would argue that a lot of the bearish factors are now in the market, which may limit further losses. The reality of increased 2012 stocks and global 2013 production will push markets lower, however, crops have not yet been delivered, and therefore markets will be vulnerable to weather reports – all the way up until harvest.

Oilseed Rape

A fairly quiet week again as MATIF rapeseed continues to trade in a narrow range with low volatility. The market is currently trendless, unable to break significantly higher or lower.

Crush margins have weakened, Australian seed continues to flow into Europe and farmer selling has slowed. UK ex-farm prices are still at good levels of around £390/t, but some way off the recent highs. The domestic new crop market remains quiet with a lack of farmer selling.

Currency markets continue to add volatility to domestic rapeseed prices with GBP/EUR trading around 1.1560 at the time of writing. The Bank of England kept interest rates unchanged @ 0.5% and rejected calls to inject more stimulus into the economy through quantitative easing. Although sterling looks weak, the Eurozone economy and political make up has continued uncertainty.

The soybean market is also range-bound and continues to test recent highs unable to break higher. The harvest continues to progress in Brazil but some concerns regarding logistics remain. The USDA is due to report on Friday with no major changes expected.