Gleadell Market Report

The ongoing uncertainty regarding if and when the Ukraine decide to limit exports, and whether Russia will need to import grain in 2010/11 will keep the markets volatile.

FEED WHEAT

• The Ukrainian Government has stated they will not make a decision over potential limiting of grain exports until at least October.  However, due to newly introduced customs controls, effectively exports from the Ukraine are now a risky game possibly resulting in jail if you break the rules.
• Belarus and Kazakhstan have decided not to follow Russia in banning grain exports, with the Kazakhstan Agriculture Ministry seeing 2010/11 grain exports at 8mln/t.
• Analysts report that Russian grain imports are to soar in 2010/11.  However, this has been denied by officials stating that, stocks and current crop estimates should outweigh domestic demand.
• CWB report Canadian farmers will harvest an estimated 21mln/t of wheat, marking a slight increase from a government report in early July.  StatsCan in a report last week estimated all-wheat production at 22.6mln/t, which many believe does not fully reflect the loss in acreage due to the adverse weather conditions.
• Western Australian wheat crop may fall 33% on planting delays and lack of rain, but the shortfall may be offset by bumper crops in the east of the country, reports the Grain Industry Association of West Australia.
• Toepfer lowered their estimate of the German 2010 grain crop to 44mln/t, down from 49.7mln/t last year.  Their forecast for wheat production is 23.4mln/t, down from 25.2mln/t last year.  Within the report, they also stated that the rainfall in August is not only harming the progress with the harvest but also grain quality and there are great regional differences in German grain quality and further rain would cause additional damage.
• The milling and feed wheat markets are becoming more divorced from each other, as continued rain in Germany and the UK is seen hampering the wheat harvests, with potential further quality and yield losses likely.  Consequently, UK milling premiums have moved up.
• The ongoing uncertainty regarding if and when the Ukraine decide to limit exports, and whether Russia will need to import grain in 2010/11 will keep the markets volatile. The supply of quality wheat is under threat, with the current adverse weather in Western Europe pointing to the possibility of increased supplies of feed quality into a market already awash with feed grains.
• French wheat exports have kicked off at an unsustainable pace at the current rate France will have exported their surplus by Jan/Feb 2011 and will be importing feed wheat into Brittany and other regions.  Indeed, a few cargoes of Danish / German feed wheat have already traded to Brittany UK feed wheat is too expensive at present.
• Egypt is hoovering up French wheat at a rapid rate feed wheat is plentiful and offered freely at present and the UK has some good quality wheat already cut in the far South East, some parts of the Midlands and in East Anglia, Lincolnshire and Yorkshire.  What is left in the field will be at best of variable quality. The central South is behind most other areas due to excessive rain in that region and, with a 60,000 mt vessel reportedly due in Southampton over the weekend, the pressure is on in that region to come up with enough dry wheat.

Oilseed Rape: ‘the outlook for the rapeseed market remains favorable … we simply havent got enough rapeseed in Europe to meet the forecast demand’

OILSEED RAPE

• The CBOT soybean and soy complex has come under pressure during the last week as positive yield outlooks, along with some beneficial rains, helped to pressure prices.  The markets woes were added to be a significant decline in crude oil prices following reports of much higher inventories of both crude and gas oil in the US.
• The declines in the soy market have put pressure on the rapeseed market, but this was just part of the negative tone that the market has experienced in recent days.  Last Fridays StatsCan report surprised the trade who were expecting a lower production forecast number than they actually came out with.  The trade expectation was to see a crop of 10.7mln/t, so the figure of 10.9mln/t resulted in a sharp decline in Winnipeg canola futures and the European rapeseed market followed. Having breached the technical resistance at 370 on the November contract in the morning of Friday 20th the disappointing StatsCan report was all that was needed to really pressurise the market and prices retracted to an 8 week low.

However, despite this setback, the outlook for the rapeseed market remains favourable.  With reduced Sunseed yields, the rapeseed crush in the EU is expected to grow given current crush margins (40 plus) and we simply havent got enough rapeseed in Europe to meet the forecast demand of 22mln/t which the current rate of processing would suggest. What ever happens we either need to ration demand or import more seed and, in our opinion, this we should eventually see higher prices.

For further information contact David Sheppard, managing director, on 01427 421222  david.sheppard@gleadell.co.uk

Jonathan Lane, trading manager, on 01427 421222 or email jonathan.lane@gleadell.co.uk