Week Beginning 15th May 2015

  • The London LIFFE wheat future for May 17 is this morning unchanged from Friday’s position at £149.60/T.
  • The London LIFFE wheat future for November 17 has opened £1.50/T lower at £141.50/T. This time last week the future opened at £140.45/T.
  • The pound is currently valued at 1.179 against the Euro.
  • The difference between the old and new crop wheat futures is beginning to narrow – the amount which separates the two is the smallest since the start of the year.

Old crop feed wheat for spot collection is extremely difficult to value this morning. Some bids are significantly lower than Friday’s offers despite no change to the old crop wheat futures. Perhaps end-user demand is slipping since the arrival of the Dutch feed wheat vessel into the Humber? The North/South price divide has also narrowed over the last week – is the “Northern Premium” coming to an end?

As for new crop values, feed wheat for as available collection of the combine is still offered at £135.00/T ex-farm despite this morning’s price dip. Over the course of last week, £140.00/T ex-farm was apparently being offered for anywhere from September to January. This morning £140.00/T ex-farm can be secured for November/December collection.

 

Last week’s monthly Supply and Demand Estimates from the US Department of Agriculture brought some slight alterations to last month’s estimates – lower production alongside higher demand resulted in lower closing stocks for most grains. Whilst this may seem bullish, the supply/demand situation is finely balanced and the numbers were mostly as the trade expected. However, with a ‘finely balanced’ situation forecast, there will be a heavy focus on any weather issues in key producing regions; in an abundant season, there is room for production issues. In a finely balanced year, any supply issues could have a significant impact on the market.

It also important to remember that although the global wheat production for the upcoming 2017/2018 trading season is lower than initial forecasts, it is still the highest figure on record at 737.8 million tonnes.

 

According to the latest data published by the EU commission, cumulative EU wheat exports so far this season are 19% lower than at the same point in the season last year. As of the 10th May, total season exports so far totalled 21.2 million tonnes compared to the 26.3 million tonnes exported in the same period last season.

AHDB have added that “this is a sharp turnaround from the pace that was recorded during the first six months of the season when weekly shipments were higher than last season’s pace, despite a smaller crop in the first place. However, since late December, the pace of EU wheat exports have reflected the tight supply and demand situation we have found ourselves in this season”.

Looking ahead to next season, dry conditions throughout the EU, particularly in key producing areas such as central France are already a cause for concern. Will we see exports fall even further this season and how will this affect UK values given the current strengthening of the pound?

 

Elsewhere, both old and new crop OSR values are unchanged this week despite ongoing weather concerns of drought and frost.

Old crop values are currently valued in the region of £320.00/T ex-farm as the crushers continue to buy hand to mouth and movement is becoming increasingly thin as we head towards the end of the season.

As for new crop values, OSR for as available collection off the combine at harvest should just about make £295.00/T ex-farm and doubts over this year’s crop is holding farm-sellers back. The recent wetter weather is certainly welcome but many reports are already reporting that it may be “too little too late”. Personally I think it is too early to tell – we have seen some excellent crops produced in similarly dry years.

According to United Oilseeds, the latest estimates have forecast EU OSR production at 21 million tonnes – this is only 600,000 tonnes higher than this season’s crop and is firmly below the five year average. As a result, the EU will again depend on significant imports from Australia, Canada and the Ukraine to compensate but these areas appear to be having problems of their own at the moment; Australia could be faced with a drought and wet conditions over in Canada could delay planting. It will be worth monitoring this as the new season gets underway.


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