Welcome Back…

Unsurprisingly markets are slow to get started this morning and we have so far seen very little end-user interest.

When we finished for the Christmas break on Friday 20^th December, the London LIFFE wheat future for January 2014 was trading somewhere in the region of £164-165/T. As of this morning, January 2014 is currently trading at £160.95/T.

Ex-farm vales for feed wheat currently equate to £160-163/T ex-farm and again physical end-user interest is thin – the trade seems unsure where to pin point ex-farm values in accordance with the screen. Movement further forward looks as though it would offer a £1/T per month carry (putting May collection somewhere in the region of £165/T ex-farm).

Feed barley appears to be struggling to make £135/T ex-farm; movement would have to be negotiated for February/March to achieve this sort of level. As for malting barley, contracts are still available but would need to be negotiated with regard to variety and tonnage – please contact the office for more information.

A similar picture can be painted for new crop trade – the futures screen is technically trading lower and buyers appear reluctant to pin-point a physical value against it. Currently, it looks as though we will struggle to match the Pre-Christmas offer of £150/T ex-farm for as available harvest collection.

Winter crops both here in the UK and across wider Europe are said to be in a good condition thanks to relatively mild temperatures and adequate rainfall. Temperatures are however beginning to turn cold in America with key producing wheat areas Kansas and Nebraska hitting minus 5 degrees over the weekend – hardly ideal for winter wheat plants there. A continuation of these conditions could have a significant impact on markets over the next couple of weeks, particularly if this cold front decides to head west.

Fresh news is typically thin on the ground this morning as the majority of the trade looks towards the end of the week – Friday 10^th January brings the release of this month’s World Agricultural Supply and Demand Estimate’s, courtesy of the US Department of Agriculture (something which typically causes a stir within the New Year trade). We should (in theory) see a more realistic estimate for South American output and also a better insight into American trade.

Ahead of the report and according to Agrimoney.com, sales of US maize corn to China have apparently continued to fall following on from further discoveries of ‘unapproved GM strains’ in a number of cargoes. Currently, rejected cargoes are ‘finding demand in neighbouring countries such as Japan and South Korea’ – this may however cease if they realise the potential for lower values. Again we “should” see some more formal confirmation of this on Friday.

 Dry weather in Argentina initially brought some slight volatility to grain values between Christmas and New Year – heavy thunderstorms have since eased these concerns for both developing soybean and maize corn crops. Wetter weather is also expected for Brazil this week and although soil moisture inadequacy has not been a major issue, rainfall should also benefit crops there.

According to the HGCA, South American crops will play a particularly important part in global trade over the coming months. The currently “strained” trading relationship between America and China due to the ongoing GM debate should see China turning increasingly towards South American supplies – how these crops develop will therefore have a significant influence on price direction over the next few months (and potentially in the farm-sellers favour if the recent storms fail to solve the dry weather). 

Meanwhile, OSR values are generally unchanged from their Pre-Christmas value with spot collection struggling to make £290/T ex-farm (a sharp difference to the £400/T up for grabs this time last year). Currency continues to be in the buyers favour and is doing little to encourage farmer selling. It looks as though it will take a fairly serious weather event in South America to encourage vales into the early £300’s/T for spot collection. Movement into the spring should make £295/T ex-farm.