Whilst the Americans are away…

Markets have continued to edge higher over the last seven days as feed wheat for November approaches the £160/T ex-farm mark. Movement further forward into the New Year is also marginally improved with movement into next spring somewhere around the £165/T ex-farm position.

Last week’s temporary shutdown of the USA government brought some serious volatility to the market place as trading nervously continued. A lack of daily grain updates and weekly reports (namely US export sales) gave the grain markets a free reign for several trading sessions, hence the lack of direction.

Meanwhile heavy rains have continued to disrupt harvest progress in Russia over the last week. Around 77% of the total grain harvest is now believed to be in the shed – a disappointing improvement on last week’s figure (of 70% complete). Progress is now sharply behind on what we would normally expect for this time of year.

As for the week ahead, the forecast is slightly better and the majority of rainfall is confined to the South; this should make way for combining to restart in the North but will probably further delay winter planting progress in the South (which is a whole other story in itself).

Neighbouring Kazakhstan appears to have made slightly better progress this week with 85% of this year’s total grains harvest now said to be safely in the shed and regardless of this slow progress, yields are proving themselves to be above average. This 85% equates to more than 18M/T of grains – already ahead of last year’s total crop of 14M/T.

Elsewhere, the Ukrainian harvest appears to be drawing to a close but concern over winter planting progress for next year’s harvest has continued. According to the HGCA, as of the 30^th September just 30% of the intended winter wheat area was planted, around 2.2M/Ha (million hectares). By this time last year, 4.6M/Ha worth of cereals were already in the ground.

But should these improved values be taken as a selling opportunity or as a sign of things to come?

As I have said for several weeks now, the global grain trade is anxiously awaiting yield confirmation of this year’s potentially record breaking American maize corn crop. And with the American organisations actively absent; the market is driven on speculation and rumour.

Throw in a nice little weather story from the Black Sea, improved end-user demand and good trade volumes and it is not difficult to see why feed wheat has rallied to £160/T ex-farm.

Once the American’s return and business is resumed as normal, I think it will take a fairly severe weather event for values to maintain this position.