Humphrey Feeds weekly feed report - 19th September
November wheat futures declined over the week from last Fridays close of £168.50; with closing values of Mon-Thu, £167.40, £165.25, £164.75, £161.25. After losing £7.25 over the week, Friday appears to be an up day so far. Both US and UK price movements mirrored maize, as it fell from about $7.5/b to $7.0/b over the week. US wheat and maize are priced within cents of each other, which is logical because the more agile feed and biofuel companies should be able to switch between maize and wheat fairly easily, to ensure no interruptions to supply and to optimise input costs in the future. Although this week’s USDA report reduced its estimates for maize production, to general amazement, it also reduced demand for the second time in two months. So the carryout is 672mb instead of 300mb, or minus 260mb if they had not reduced August’s figures. Effectively the USDA is massaging the data to give consumers time to make contractual arrangements. Despite the bullish nature of the news, it would appear that funds have taken the view that there are no short-term profits to be made on the US running out of maize in the next month (to harvest time), so are liquidating to invest their funds elsewhere.
The spectre of a Greek default continues to haunt the markets, and the funds will no doubt be positioning to take advantage of any crises, which probably confirms that monies are starting to ’leak’ from commodities.
The USDA expects global wheat production for 2011/12 to hit 678mt (648mt in 2010/11). The increase is due to better production from Russia at 56 (42), Kazakhstan 16 (10), Ukraine of 22 (17) North Africa of 19 (16), India at 86 (81). Global wheat use was revised up to 677mt (feed is 130mt). Closing stocks are estimated to be 195mt.
In June last year wheat was £100/t, it hit £210 in the early part of 2011; and is now trading around £160. So the question taxing all feedmill buyers, is where is the bottom? What will the new ’base’ price of wheat be? £125, £150? A recent report by the OECD suggests that the world price of wheat in 2020 will be £152. £152?? Where did they pluck that from? The Hitchhiker’s Guide to the Galaxy? [The answer to the Ultimate Question of Life, the Universe, and Everything is, of course; 42]. To more practical matters, how much wheat does the UK have this year? The HGCA’s final UK harvest report estimates 13.5 to 13.86mt. DEFRA confirms HGCA’s planted wheat area at 1.8mh, which is 1% higher than last year. The NFU confirms the acreages and estimates that yields are down 1.5%, rather than the 20% it forecast in June, which would result in 13.83mt of wheat. Finally there will be a new wheat consumer this harvest year - after falling out with their contractors, the Vivergo bioethanol plant has appointed new contractors, construction has resumed and the 1.2mt/annum wheat buyer is expected to start-up in spring next year.
As regular readers will note, we hate talking about the weather, simply because the fears are generally greater than the fact. However we would be failing if we did not mention La Niňa – the naughty weather girl – who can cause drought to growing crops in Argentina, Brazil and the US, and can cause floods in Australia.
Soya beans have been oscillating between $12.5 and $14/b since April, and is currently trading at $13.5/b. Soya seems becalmed at the moment, with GM-soya at £285 delivered to the mill, and GM-Free at a £40/t premium.
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