Market Report - 3rd February 2012
GRAIN MARKETS - Jonathan Lane, Trading Manager
WHEAT
The Argentine government confirms it will not ban corn/soy exports, responding to talk that it might be due to a harsh drought.
Canadian 2012/13 grain output is seen up 8% at 50.3mln/t – mainly due to a return to drier planting conditions.
Ukraine’s 2012 maize crop could increase 10% to 25mln/t – due to an increase of area compensating damaged winter grains.
Russia could impose a grain export duty from April 2012 – government to set target on 2nd February.
Russian state weather forecaster reports cold snap may have damaged winter wheat in exposed area/low snow cover.
Russian export wheat prices continue to rise as traders become hesitate about buying grain, fearing export duties.
Ukraine 2012 winter grain harvest could fall 42-58% to between 10 and 14mln/t - wheat crop may fall to 12mln/t (22.3mln/t in 2011).
CWB adds the Ukraine to the list of countries that might impose crop export restrictions.
EU wheat touches 7-month high on concerns that bitterly cold weather in Europe may damage crops.
Ukraine’s January grain exports fell 27% to 1.9mln/t compared with December – 11.6mln/t exported so far this season.
Summary
The firmer markets of last week continued for most of this week as weather concerns intensified. Reports of record low temperatures in Russia have raised concerns over potential crop damage, especially in exposed areas or with low snow cover. The production forecast for the Ukraine’s winter grain harvest continues to fall as crops, already stressed by drought, are now hit with extreme cold weather.
The market has its focus on the meeting due today, when the Russian government will determine how much grain could be exported this season before it considers imposing a protective duty to secure supplies within the country. With approximately 20mln/t exported by end of January, and initial limits of 24-25mln/t already declared, the current pace would likely reach the ’target’ by the end of March.
Short-term, the bulls have had enough to move the market higher, although much of the bullish news is already in the market. Medium and long term price movement will depend on the severity of the current weather concerns and the impact upon actual crop production, as current stocks of wheat and coarse grains remain abundant.
OILSEED MARKETS - Willie Wright, Oilseed Trader
Soybean crop prospects have deteriorated further, fuelling fears for soybean production by major producers in the US and South America, with some traders reducing their figures for 2011/12 by 17mln/t.
India could possibly increase their 2011/12 soybean imports by 0.5mln/t due to poor domestic production.
Crude oil has continued to trade sideways whilst watching political tensions in Iran.
Canadian canola prices have rallied sharply in line with other oilseeds markets.
Canadian canola exports are running high along with an increased domestic crush demand.
Rapeseed prices in Europe have rallied to a large premium over soybeans, demonstrating a tight spot market in Europe. We have also seen Feb MATIF rapeseed futures rally to a 30€ premium over May before finally expiring at around 18€ premium. Although, this can be put down to a technical squeeze between longs and shorts prior to delivery, it still demonstrates spot demand.
Poor crush margins along with rapeseed oil prices falling are making European rapeseed look expensive compared to other origins such as Canadian canola.
No real change in macro-economic activity with the Greek debt still the main focus at this time.
