US old crop values rise $8/t; Shipping delays continue in Brazil
Jonathan Lane, Gleadell’s trading manager, comments on grain markets:
Wheat
- US plains drought conditions improve – Kansas wheat crop rated 29% good/excellent, up 2 percentage points on the week.
- India sells corn to China in a rare deal – on a trial basis.
- India in talks with Egypt over potential wheat exports – 2013 wheat crop expected at 92.3 mln t and the country needs to reduce stocks.
- Ukraine’s 2012/13 grain exports expected to rise to 25.6mln t; wheat export volume raised to 7mln t
- Sovecon puts Russian 2013/14 grain exportable surplus at 16mln t from a grain crop estimated at 83-89 mln t.
- Russia to intervene in its domestic market in Aug-Oct period – the need to replenish stocks is a delicate balancing act vs the available export tonnage.
- Coceral sees the EU-28 2013/14 grain crop up 4% at 286.72mln t; soft wheat up 2.5% at 127.77mln t
Good US export numbers and internal domestic demand has provided some support to the US markets. US old crop values have risen about $8/t (£5/t) on the week, as wheat continues to be priced into feed diets competitively against corn.
This ‘apparent’ demand hike has allowed cash premiums to rise, especially given the tight stocks position, with many analysts believing that the stocks report due out next week could provide a surprise. New crop prospects continue to be monitored, although the US plains still remain in drought as crops move out of dormancy and into the crucial development stage.
EU markets have responded to the firmer US market, with May MATIF rising almost €10/t on the week on good export demand. Reports that the recent 350,000t purchase by Algeria is likely to be of French origin will underpin cash markets. Pressure still affects the euro, heightened by the Cypriot banking debacle.
The UK 2013 wheat crop came under more scrutiny this week following the 25% reduction in official English/Welsh wheat plantings reported as planted by 1st December.
The Scottish figure also showed a drop, in this case of 15% on the year. Continued adverse weather as we enter the official spring period is seen severely hampering farmers from field work and also from starting/completing spring sowings.
The 2013 UK wheat crop is not getting any bigger at present and it is pretty clear that large-scale imports are going to be required next season. Whether we will need to import feed grain or milling wheat is still to be determined.
Global markets seem to be stuck between the bullish elements of good spot export trade (US and EU) and tight inventories against the bearish possibilities of a rebound in global grain production and limited new crop buying interest.
Crops are not yet made, with many not even planted, meaning that any issues over new crop prospects will produce market support. However, if crops deliver their promise the market should move lower. Both scenarios are entirely possible, making crop marketing decisions hard at present.
Oilseed Rape
MATIF rapeseed futures have gained around €10 this week tracking soybeans higher, which bounced after testing technical support levels at the bottom of the recent trading range. The soybean and rapeseed markets remain range bound as the South American harvest continues in Brazil. Shipping delays continue at Brazilian ports and some cargoes have been cancelled, offering some support to the market.
The fundamental picture remains unchanged, with tight old crop supplies versus the expected large South American crop.
- Domestically the market remains quiet with little coming forward from farm. The UK export market has picked up with cargoes trading from the UK into Europe. Crush margins remain poor and there is a lack of crush demand for old crop.
- Following the current Cypriot bailout crisis, sterling has rallied against the euro, which has weakened UK prices. Currency markets remain extremely volatile.
