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Wheat Market Update - Monday 22nd September 2008
UK Harvest Overview
Against the backdrop of turmoil within the financial markets over the last two weeks, farmers have taken advantage of better UK weather and completed harvesting in many areas.
Some areas of northern England (10-15%) and Scotland (50%) still require completion with outstanding wheat likely to be no better than feed quality. The levels of rainfall recorded have meant that this summer now features within the top ten wettest since records began.
Eight weeks ago it was expected that the 2008 harvest would deliver high yields and although quality was unknown, there was an air of optimism. Currently with the harvest almost complete, the pre harvest optimism has turned to disappointment for many arable farmers. Farmers are now potentially faced with bread making wheat being downgraded to feed coupled with large drying costs in order to make their grain marketable.
The disappointment shared by many farmers has also impacted on grain merchants, who have struggled to source and supply volumes of wheat to match against sales made to processors pre harvest.
Bread and biscuit wheat quality premiums have risen sharply and only negated to an extent by falling LIFFE wheat futures, which have reflected the increased volume of feed wheat this season.
Whilst increased wheat production across the EU should keep grain futures markets on the defensive, it is the availability of quality wheat and higher premiums that are likely to be the key price driver over the coming months.
Summary
With a lower quality harvest approaching completion bread making premiums look set to remain firm and at higher levels than seen last season. Bread making quality wheat will continue to see good demand as merchants struggle to cover sales and processors return to the marketplace to add to their forward cover.
Wheat Market Update - Tuesday 9th September 2008
UK Overview
Arable farmers across much of the UK continue to struggle with the unsettled weather which is hampering progress of the harvest. Whilst the South East is almost complete, in some areas of the West and North 50% remains uncut.
Quality has continued to decline in most recently combined wheat, with widespread lower protein now being coupled with falling Hagbergs.
Farmer’s frustration and need to complete their harvesting has seen wheat being cut in excess of 20% moisture, which is further delaying crop marketing/availability due to the requirement for drying. Localised flooding in many areas is also making land inaccessible for combining, and is prompting trade talk of crop abandonment which could impact on the latest UK crop projection of 17mt.
Consequently, price action remains firmly focused in the nearby position, as merchants and processors compete for parcels of wheat that will meet milling wheat specification.
Merchants have also increased bread-making wheat premiums in deferred positions, reflecting their reluctance to take on the ownership of risk if they are unable to supply the contracted quality.
EU Overview
German and French harvests are largely complete and a summary would be ‘big yields but lower quality’.
Quality premiums continue to reflect this and remain wide.
Black Sea wheat prices continue to indicate a large amount of feed wheat quality and, as a consequence UK LIFFE futures have remained weak.
US and World
US Spring wheat harvest progress is put at 85% complete.
US Wheat futures have remained weak, against the backdrop of much increased global production and fears about prospects of a slowing global economy.
Australian production continues to be projected between 22 and 25mt although there continues to be some concern over dryness in areas of West Australia.
Summary
The transparency of falling UK futures and indications of big yields has been negated by the rise and ongoing demand for quality wheat which continues to push up premiums for bread-making and biscuit quality wheat.
With large swathes of UK wheat still to be harvested premiums look set to remain firm and likely to trade at higher levels than were seen last season.
Wheat Market Update - Tuesday 2nd September 2008
UK Overview
Due to poor weather
throughout the month the UK harvest has been very slow with only
approximately 40% complete as we near the end of August. This week has
seen a drier spell and with this continuing into the weekend some good
progress should be made. Early information would indicate very good
yields, but quality is very varied. Early reports of lower proteins have
continued as we get more and more results and it looks certain to be a
lower protein year.
A further consequence of
the harvest delays has been an inflated spot market as millers and
merchants chase supplies. A lot of wheat that has been harvested is wet
and needs to be dried, and farmers are assessing what they have. Until
this quality is known forward sales of bread-making quality wheat will
remain low.
With
large yields and a big crop due (approx 17 mmt) the November 08 LIFFE
market has remained under pressure. The UK will have a large exportable
surplus that needs to compete on the world market and it has stiff
competition.
EU Overview
The same issues that we
are seeing in the UK are relevant in mainland Europe. Germany and France
have both seen very large yields and have been increasing the estimates
of their crop size. However, protein issues have also been prevalent in
Germany and France with quality premiums widening as a consequence.
As well
as increased yields in northern Europe, we have also seen the Black Sea
countries increase their crop sizes, but with much of this wheat being
classified as feed wheat it has put pressure on the UK base price.
US and World
The US winter wheat
harvest is complete and spring wheat 50% harvested. As with the rest of
the world yields have been large but protein variable.
A
positive outlook prevails in relation to Australia. Some beneficial
rains have been seen and the crop is estimated at between 22 to 25
million tonnes. However with almost 4 months until harvest optimism
should remain cautious as the crop will still need favourable weather to
realise its promise.
Summary
The world crop estimate
keeps increasing putting downward pressure on the base price. However
quality issues around the world have resulted in increased premium for
the quality grades.
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