Frontier Agriculture
Member
World Markets
US wheat closed with net gain last week, rallying over £12/t. However, it did fall away from the sharp gains early in the week. Funds covered a huge 8.84 million tonnes of their US wheat futures short last week and there were active buyers across all agriculture commodity markets in the third-highest weekly total of contracts ever recorded.
Dry, cold weather persisted across the US wheat belt and crop ratings released at the start of the week showed a big deterioration with Kansas – the biggest wheat producing state. Ratings showed only 14% of its cropped area in good-to-excellent condition which is the lowest recording since records began in 2006. Although crop ratings will be updated again tonight, it seems unlikely it will improve much on last week as 47% of the winter wheat belt is experiencing drought and the forecast remains dry. However, some snow across the US Midwest is a welcome way to replenish some moisture.
Australian wheat futures made their highest close since December last week and the weather in Argentina further supported global grain markets. The main corn-producing areas have been dry since October, receiving only half their normal rainfall coupled with spells of extreme heat. Argentina’s corn crop estimates could be expected to fall as a result but the Buenos Aries Grain Exchange increased the corn crop good-to-excellent area rating to 39% from just 11% two weeks ago. They look set for another dry week in Argentina but are getting good rain and generally much better conditions in Brazil.
Matif lost all of its early gains to close unchanged over the week, with a stronger euro and another week of very poor export figures. EU markets could not continue to follow the US higher. As of the 30th January, the EU had shipped 12.2 million tonnes of soft wheat compared to 15 million tonnes at the same point last year. If this slow pace continues, the EU will ship less than 21 million tonnes, significantly below the USDA target of 27 million tonnes. The aggressive pace of exports from Russia is putting pressure on the EU, who must either compete or face a big stock build. The weather in Russia has been mild, allowing exports to continue unhindered. Russia’s agricultural agency, Sovecon, has stated that it expects its wheat exports this season to reach 36.8 million tonnes, ahead of its previous estimate of 35.5 million tonnes.
UK Markets
London wheat could not hold on to the gain made early last week and closed down £0.40/t on Friday with a net loss of £0.90/t over the week on May 18 which ended at £137.60/t, a new contract low. The spread between old crop and new crop wheat widened out to £4.00/t over the week.
The lack of export business from the South and the closure of the Vivergo ethanol plant in the North is really starting to weigh on old crop wheat values now. The market either has to find a way to price into the export market or carry stocks over into the new season.
Oilseed Rape
It has been a mixed start to the week. There is US dollar strength following a surprise increase in Friday’s US wage inflation report. There is now a greater chance of rain in Argentina, which resulted in Chicago soybeans closing at the lowest level for two weeks. But, while rain may be on the way, this is by no means enough to break the current drought conditions.
The Brazilian harvest is starting to provide evidence of some exceptional yields with some putting the crop at a record 115 million tonnes, up from last year’s record of 114 million tonnes and the USDA’s recent report of 110 million tonnes.
In Europe we still battle high levels of stocks of both rapeseed and rapeseed oil which will continue to weigh on our market. With what looks to be very decent crop prospects in Europe this harvest, the down trend doesn’t appear to be breaking anytime soon.
US wheat closed with net gain last week, rallying over £12/t. However, it did fall away from the sharp gains early in the week. Funds covered a huge 8.84 million tonnes of their US wheat futures short last week and there were active buyers across all agriculture commodity markets in the third-highest weekly total of contracts ever recorded.
Dry, cold weather persisted across the US wheat belt and crop ratings released at the start of the week showed a big deterioration with Kansas – the biggest wheat producing state. Ratings showed only 14% of its cropped area in good-to-excellent condition which is the lowest recording since records began in 2006. Although crop ratings will be updated again tonight, it seems unlikely it will improve much on last week as 47% of the winter wheat belt is experiencing drought and the forecast remains dry. However, some snow across the US Midwest is a welcome way to replenish some moisture.
Australian wheat futures made their highest close since December last week and the weather in Argentina further supported global grain markets. The main corn-producing areas have been dry since October, receiving only half their normal rainfall coupled with spells of extreme heat. Argentina’s corn crop estimates could be expected to fall as a result but the Buenos Aries Grain Exchange increased the corn crop good-to-excellent area rating to 39% from just 11% two weeks ago. They look set for another dry week in Argentina but are getting good rain and generally much better conditions in Brazil.
Matif lost all of its early gains to close unchanged over the week, with a stronger euro and another week of very poor export figures. EU markets could not continue to follow the US higher. As of the 30th January, the EU had shipped 12.2 million tonnes of soft wheat compared to 15 million tonnes at the same point last year. If this slow pace continues, the EU will ship less than 21 million tonnes, significantly below the USDA target of 27 million tonnes. The aggressive pace of exports from Russia is putting pressure on the EU, who must either compete or face a big stock build. The weather in Russia has been mild, allowing exports to continue unhindered. Russia’s agricultural agency, Sovecon, has stated that it expects its wheat exports this season to reach 36.8 million tonnes, ahead of its previous estimate of 35.5 million tonnes.
UK Markets
London wheat could not hold on to the gain made early last week and closed down £0.40/t on Friday with a net loss of £0.90/t over the week on May 18 which ended at £137.60/t, a new contract low. The spread between old crop and new crop wheat widened out to £4.00/t over the week.
The lack of export business from the South and the closure of the Vivergo ethanol plant in the North is really starting to weigh on old crop wheat values now. The market either has to find a way to price into the export market or carry stocks over into the new season.
Oilseed Rape
It has been a mixed start to the week. There is US dollar strength following a surprise increase in Friday’s US wage inflation report. There is now a greater chance of rain in Argentina, which resulted in Chicago soybeans closing at the lowest level for two weeks. But, while rain may be on the way, this is by no means enough to break the current drought conditions.
The Brazilian harvest is starting to provide evidence of some exceptional yields with some putting the crop at a record 115 million tonnes, up from last year’s record of 114 million tonnes and the USDA’s recent report of 110 million tonnes.
In Europe we still battle high levels of stocks of both rapeseed and rapeseed oil which will continue to weigh on our market. With what looks to be very decent crop prospects in Europe this harvest, the down trend doesn’t appear to be breaking anytime soon.