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Gleadell Market Report

GRAIN MARKETS – David Sheppard, managing director

Markets remained relatively steady this week ahead of the monthly USDA S&D report.  The report remained mostly in line with trade expectations with wheat remaining neutral and corn bullish. Overall, wheat ending stocks were increased reflecting lower exports from Australia and lower feed usage in the EU.
Total US winter wheat plantings were above trade expectations at 40.99 million acres, this is an increase of 3.73 million acres from last season.  The trade is keeping a close eye on the HRW progress as the current strong La Nina pattern can have a negative effect on this crop.
Harvest continues in the southern parts of Australia, with more rain this week further delaying an already delayed harvest.  Quality is varied but yields remain good with bulk handlers taking in record amounts at most NSW and Victorian sites.
Wheat crops in western Europe look like they have managed to come out of the fierce December weather relatively undamaged. However, with warm temperatures seen this month and snow melting, any freezing weather from now on could be harmful.
Indias Farm Secretary has announced that they expect wheat production for this season to reach 82mln/t.  This is 1.3mln/t higher than last years crop and, given the current high stock levels, could see India rejoin the market as an exporter.
In summary, wheat remains firm and due to the bullish world corn S&D and strong wheat export demand from the Middle East and Africa will continue to trade at current levels.

OILSEED MARKETS – Jonathan Lane, trading manager
Yesterdays USDA report was viewed as being very bullish for soybeans after the report cut supply forecasts to precariously low levels. The USDA reduced 2010 ending stocks to absolute minimal levels and this places a huge amount of pressure on 2011 production if the world isnt going to run out of soybeans! This bullish report saw the CBOT soy market trade sharply higher last night as the market attempts to ration demand as well as entice farmers to plant more acres for the 2011 crop.
The rapeseed market followed the US market higher. Soybean oil traded at a one-year contract highs after the report supported the bullish outlook for soybeans and this, in turn, dragged rapeseed oil prices up. Crush margins in European remain good and these higher rape oil prices arent helping the market reduce the pace of processing. We still need to see some significant rationing in demand in the balance of this campaign if the EU isnt going to run out of seed. Given the current supply and demand picture, we can still see prices going higher from todays already high levels.
The new crop situation in Europe is similar. Increases in mandatory inclusions for bio-fuel will mean that demand for rapeseed is not going away. The crops across Europe look average at best and in most cases we are only going to see a production similar to last year. The Ukraine, which is a key importer for the European crushers, is having issues due to the harsh weather and the volume of potential imports are definitely coming under pressure.  This, combined with good forward crush, underpins the bullish new crop for rapeseed.
All of the above points towards higher prices. But we must temper this excitement by stating that markets never go in one direction in a straight line.  There will be down days, the markets will be volatile and for farmers these prices represent a really good gross margin. Whilst we are friendly to the market, taking some cover at these prices cant be wrong thing to do.

GRAIN market information contact David Sheppard, managing director, on 01427 421222

OILSEED market information contact Jonathan Lane, trading manager, on 01427 421222

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