Gleadell Market Update

FEED WHEAT: ‘Long-term, the demand for quality wheat will remain constant, and this should support feed wheat levels’    OILSEED RAPE:  ‘It is perhaps time to start pushing those who have pre-Christmas seed to sell to the market”.

FEED WHEAT

• US corn futures break through $5/bushel for the first time in 2 years as yields continue to disappoint in the Eastern corn belt.  Traders believe that yields could improve in the west, however, many are expecting further yield            cuts in next months USDA report.
• Harvest was reported at 18% complete against 11% last week and 10% as the 5-year average.
• Frosts have hit crops in Canadas Alberta region, although wider frosts have been delayed.  Frosts remain a concern as many crops are behind normal growth, leaving them vulnerable to damage that reduces quality.
• The Argentine government sees the 2010/11 wheat crop at 10.0-11.2mln/t in its first official estimate for the new season.
• Russias 2010 grain crop may fall to below 60mln/t report SovEcon.  Devastated by drought, 55mln/t of grain by bunker weight had been harvested by September 22, down 32% from a year ago.
• Agriculture Ministry has cut its forecast for the area sown with winter grains this year to 15mln hectares from an initially target of 18.8mln.
• Egypts GASC purchases 220,000t of US wheat for November 11-20 shipment. Since the start of the 2010/11 season on July 1, GASC has purchased a total of 1.87mln/t of French, US and Canadian wheat.
• The yield rally in corn has supported US wheat, as perceived further cuts in corn production and stocks levels could ignite further wheat demand within the US.
• EU wheat levels have moved off the recent highs, as the strengthening Euro dampened hopes for EU exporters competing against the US for world export markets.

In summary, weather and yield premiums have been factored into the recent price rallies over the past weeks.  Bull markets need constant feeding to move higher and, unless they are fed, this leaves the market vulnerable to profit taking.  Long-term, the demand for quality wheat will remain constant, and this should support feed wheat levels, although most are now predicting another large global wheat area to be planted for the 2011 harvest.

OILSEED RAPE

• Matif rapeseed futures are unchanged on the week, but the weakness in Sterling has taken UK farm gate prices to season highs. Our currency fell versus the Euro as UK mortgage lending fell in August for the second month in a row.  The number of homes sold also fell by 5,000 to 85,000. A report detailing the lack of lending to the manufacturing industry also harmed the pound.
• This strength in the Euro has been helpful for UK farmers, but it has also significantly changed the price comparisons for EU imports. As we have mentioned numerous times in the recent past, the EU is short of rapeseed and needs to import significant volumes of Australian seed.  This had previously been US$20-30 away from trading into Europe but the moves in currency, combined with this latest rally in EU flat prices, means that this gap has narrowed significantly. Given the current parities, the upside to this market for UK farmers maybe just another 10. It is perhaps time to start pushing those who have pre-Christmas seed to sell to come to the market and take their percentage sold up to 75%.
• It is a similar story for new crop. UK values have reached contract highs in the last week and as such rapeseed is probably the best gross margin crop on the farm on this basis it is surely a sell for at least 40% of next years crop.

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

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