Markets Volatile as Currency Adds Pressure

The last seven days have brought a mixed week to the grain markets; weather concerns, the Greek economy and early European harvest results have all persuaded the markets upwards whilst the recent USDA reports and the current strength of the pound against the Euro has added pressure to recent values.

Last week brought the simultaneous release of the quarterly grain stocks report for the US and the latest planting estimates for the US 2015 harvests, both courtesy of the US Department of Agriculture (USDA).

Grain stocks as of the 1st June 2015 in the US are estimated to total 20.5 million tonnes – this is a 28% increase on stocks held on the 1st June 2014 and is the highest volume held for four years. This is much higher than initial trade estimates and has been attributed to the on-going strengthening of the US dollar against various other currencies.

Maize corn stocks are also slightly higher at 112.9 million tonnes – a 15% increase on the previous year.

As for the acreage report, the USDA have estimated the total planted area for the 2015 wheat crop at 22.7 million hectares. This is just 1.3% lower than the area planted for the 2014 harvest but is much larger than recent estimates given the on-going weather concerns there. The estimated maize corn area is also larger than recent estimates at 36 million hectares.

Elsewhere, EU talks are getting underway following the result of Sunday’s vote in Greece as the pound remains strong against the Euro.

Data published by the EU Commission last week for the 2014-2015 trading season (please see the AHDB website for more on this) helps to explain the impact which currency can have on the grain market.

Total EU wheat export licenses issued throughout the 2014-2015 trading season (which ended on the 30th June) totalled 31.3 million tonnes; this is a 12% increase on the 2013-2014 figure and is a new record. As for barley, export licenses totalled 9.1 million tonnes – a staggering 58.6% increase on the previous trading season.

As for the US, wheat export commitments totalled 23.3 million tonnes for the 2014-2015 trading season. This is 26% lower than the previous 2013-2014 and the lowest figure since 2010.

This demonstrates the significant influence of exchange rates on the grain market – the strengthening of the US dollar against the euro over the last 12 months has evidently played a key role in making EU wheat exports more competitively priced within the world market.

Consequently, the current strength of the pound against the Euro limits the value of UK grain regardless of any weather concerns, reduced yield prospects or general stock concerns.


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