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Gleadell Market Report

GRAIN MARKETS – David Sheppard, managing director

UK wheat exports accelerated in November to 472,023mt, bringing the season total to 1.66mln/t.  We believe December was also reasonably active and that we will have exported over 2mln/t by the end of January 2011.  This compares with the DEFRA estimate of 1.33mln/t for the full season. Either imports will have to increase dramatically or the carry out will be cut to well under 1mln/t.

The Ukraine and Kazakhstan expect crops to recover in 2011.  90% of the Ukraine crop is estimated as being in good or excellent condition whilst the Kazakh crop is estimated as rising to 16mln/t from 12.2mln/t in 2010.

The first cargoes of Australian feed wheat have been traded into China, and possibly into the EU. Australia normally produces high quality milling wheat, but the recent rains have severely impacted on the quality of a significant proportion of the crop in Queensland, New South Wales and Victoria.  The first trade into China apparently totals 500,000mt at a price level that significantly undercuts US Corn.

The EU Commission are expected to be asked to remove the 12 import levy on wheat imports, and possibly to increase the tonnage available under the quota too.  This is due to high EU prices and the availability of Australian and possibly Canadian feed wheat that EU consumers may need to buy to cover their needs for the end of this season.

Rumours of the Ukraine re-opening for export business, due to their crop condition, have also been evident.

Summary

Record high prices have a habit of stimulating production, stifling demand and sucking in non-traditional supplies.  However, it is true that world grain markets remain tight and it may well be that we have not seen contract highs yet.  But the risk for farmers is that prices do fall (there is no risk in higher prices for farmers) and, of course, the 2007/8 rollercoaster is fresh in all our minds.  The news, if it happens, of a couple of 50,000mt vessels of Australian feed wheat turning up in the UK would probably be the catalyst for some sort of market correction for both old and new crop.  For the moment it’s worth watching the newswires closely.

OILSEED MARKETS –  Jonathan Lane, trading manager

The relentless upward trend for European rapeseed prices paused for breath this week with the May 11 Matif rapeseed futures contract ended down 6.  Profit taking and a lack of buyers undermined the market as rape oil buyers were noticeable only by their absence.  Rumours about bio-fuel processors switching out of rapeseed oil are circulating around the market and this sentiment also added to the break in prices. However, our calculations would suggest that, even at todays high prices, it is still more cost effective for the bio-diesel companies to crush rapeseed and blend vegetable oil that use mineral oil and pay the non-blending penalty by around 100/mt.

Technically, the market remains in a solidly bullish trend and we could expect to see the May contract on the Matif trade above 510 again. However, the market needs additional support from Soy and crude oil to get up and going again. Without this we could see prices drift lower in the short term before the tightness of the European supply situation really starts to bite again and push prices higher.

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

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