Gleadell Market Report

Feed Wheat: “Globally, the demand for quality wheat remains for the January-June positions, and supplies are vanishing fast …”       /   Oilseed Rape: “The rapeseed market has been caught up in the general excitement surrounding commodities …”

FEED WHEAT

• The Canadian Wheat Board raises its grain export target for 2010/11 to 15.7-15.8mln/t, thanks to larger crops than earlier expected. Exports still look to be the smallest for 6 years, and sharply lower than last years 18.8mln/t.
• The Australian wheat harvest in the east slows as rains delay progress. Persistent rain is also raising questions over quality. Western Australian harvest prospects remain poor as recent rain came too late to save parched crops.
• Analysts have revised down Russian grain import needs to 4mln/t, from 6mln/t previously, as rising prices and low supplies force farmers to increase the slaughter on domestic animals.
• Ukrainian farmers have almost completed the 2010 grain harvest, threshing 39.9mln/t of grain from 98% of the sown area.  Analysts report average grain yields of 2.78t/ht, compared with 3t/ht last year. Official grain estimates for 2010 are about 38mln/t, compared with 46mln/t in 2009.
• Egypts GASC purchases 230,000 tonnes (60k/mt Argentine, 110k/mt Australian and 60k/mt French) wheat for January 1-10 shipment.  GASC has now purchased approx 3.1mln/t of French, US, Canadian, Australian and Argentine wheat since July 1^st, compared with total purchases of approx 5.5mln/t last season.
• DEFRA released its initial supply & demand estimates for the 2010/11 season. Within the report, exportable surplus was estimated at just over 1.3mln/t, with closing stocks of 2.0mln/t. The report added with strong domestic and export demand as well as discounted new crop values the market should carry minimum stocks levels at the end of 2010/11 to meet pre-harvest requirements’. Therefore, based on this, the closing stocks level of 2mln/t look high and could end lower, increasing the surplus.
• The talk of lower corn yields being projected in next weeks USDA report, combined with the lowest winter wheat crop ratings since 1991, allowed Chicago markets to move higher last week. Supplies of US corn are extremely tight, with any threat to the supply side being met with increased buying activity. Quality wheat supplies, especially in the north, are dwindling fast and the news of potential quality issues relating to the Australian crop has added support to the markets.
• Globally, the demand for quality wheat remains for the January-June positions, and supplies are vanishing fast. Black Sea export restrictions, an unsustainable export pace from the EU, and concerns relating to new crop FSU and US crops, are enough to keep the bulls happy. However, with the current price discount for new crop, end-users will minimise stocks at the end of the season, especially if crops emerge from the winter in good condition. If this happens, it could well pre-shorten the export year.

OILSEED RAPE

• The global oilseeds complex continues onwards and upwards as strong underlying fundamental demand, combined with a crash in the US$, is maintaining the bullish tone to the market. In the US, the Federal Reserves decision to re-start their quantitative easing programme combined with the unsettling results for the incumbent government in the US mid-term elections has slashed the value of the US$. This has prompted a huge flow of investment money away from equities and into commodities and along with strong domestic and export demand for US soybeans, we continue to see this market moving higher.
• The rapeseed market has been caught up in the general excitement surrounding commodities the firmer Euro/US$ (Euro is up 4c on the week) that should have undermined the Matif has largely been ignored and the Matif is 10 up on the week. That aside, the market still has an issue with its supply.  As we have mentioned in the past, it is going to be very difficult for the market to find enough sustainable seed to meet the demands of the German bio-diesel industry in a market that is already very tight!

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

1)  Prices quoted are indicative only at the time of going to press and subject to location and quality. 2)  Gleadell Agriculture cannot accept liability arising from errors or omissions in this publication. 3)  mln/t = million tonnes, mt = metric tonnes, kg/hl = kilogram per hectolitre, k/mt = thousand tonnes.