Gleadell Market Report

GRAIN MARKETS – David Sheppard, managing director

Argentinas Government sees the 2010/11 wheat harvest rising to 14.7mln/t, up from 14mln/t in January.

Egypts GASC purchases 235,000 tonnes (115tmt US/120tmt French) soft wheat for April 20-30 shipment. Total purchases since July 1st are estimated at 5.22mln/t, compared with 5.53mln/t for last season.

Chinas drought-stricken wheat area falls as snow and rain brings needed moisture. Also, the expansion of irrigation systems is improving the outlook, with now only 1.1mln hectares seen as severely affected.

India is aiming to increase its wheat output by at least 10% to 90mln/t by 2019/20, encouraging its cultivation in more areas and using higher yielding varieties. Current production is around 80mln/t with domestic consumption of 75-76mln/t, which is set to increase further with a growing population.

National Australia Bank sees 2010/11 wheat production at 24.5mln/t, well below official estimates.

The Ukrainian Farm minister reported the hard frosts across the Ukraine have not affected winter grain crops.  UkrAgroConsult reported that snow was protecting crops, which are in one of the best conditions seen in the past years, with 56% in good condition, 38% satisfactory and only 6% in poor condition.

Russia will debate whether to extend its ban on grain exports after July 1st, with officials having said an extension of the ban will depend on the success of this years harvest, which is currently forecast at 85mln/t.

The USDA Outlook forum confirms increased planted acreage of corn and soybeans for this year.  Average analysts expect the USDA to forecast corn plantings at 91.5mln acres, up from 88.2mln last year, the second highest acreage since 1944. Soybeans are expected to show an increase from 77.4mln last year to 77.85mln. USDA also confirms that the tight supply and demand situation will not be fixed by one big crop.

This week has been dominated by the political unrest in Libya and other North African/ Arab nations, with traders uncertain over further demand, liquidating long positions on all commodities to book profits or move into safer havens.  Chicago wheat is down 70c/bu ($26) on the week, MATIF is down 17 and LIFFE is down 19 (MAY11 based on last nights close). Lower prices have attracted buying interest, as major importers remain concerned about tightening supplies of high-quality wheat.

In summary, fundamentals havent changed we havent found any extra wheat and demand is still apparent but there has been a big shake out in the market, and some considerable pain borne by long holders.  Market fundamentals have recently been dominated by massive fund flows once this has finished, we may see supply and demand influence market movement. It remains a fact that current prices still reflect good, profitable levels for farmers and bad prices for all end user sectors.

The market has been subjected to another round of speculator madness as funds bailed out of their positions as the unrest in the Middle East undermined confidence in their soft commodity longs.

US soybean futures slumped 50c on the week on anxiety about the unrest in the Middle East and the subsequent concerns about its effect on demand.

Protests and violence throughout North Africa and the Middle East have propelled crude-oil prices to well over US$100/barrel, and that is fuelling a worry that the recovering global economy could falter.

In Europe, the rapeseed market is down 8 on the week, but this doesnt really tell the whole story – and yesterday the European market yesterday was, frankly, quite mad.  The Matif rapeseed market opened with some small gains before crashing to 26 lower – however, this was not the end of it! The market then recovered back to 10 down, fell back to 15 down before rallying all the way back up to close up 2! It was a crazy, scary day and one we dont wish to happen again for a very long time these types of moves are just not healthy.

After this big shake out, we would hope that the market ought to refocus on the fundamentals. The sharp rally in oil and gasoline combined with the fall in rapeseed prices now means that bio-diesel margins are very, very healthy again. The European S&D remains tight and it is a similar picture for new crop. Prices should start to stabilise now, providing the funds have decided that they have sold enough if not, we could be in for another round of madness! However, farmers shouldnt complain too much, as they enjoyed the benefit of the non-Ag money on the way up – the trick is remembering to get off the ride before the music stops!

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

OILSEED market information contact Jonathan Lane, trading manager, on 01427 421222   jonathan.lane@gleadell.co.uk

1.  Gleadell Agriculture currently has offices in Full Sutton (Yorkshire), Hemswell (Lincolnshire),  Swaffham  (Norfolk), Lyndon (Rutland), Warminster (Wiltshire) and Bilsborrow (Lancashire).

2.  Gleadell Agriculture Ltd is equally owned by Toepfer International – based in Hamburg, who trade in all agricultural products globally; and InVivo – based in Paris, who trade agricultural products on the international markets and operate major grain storage and handling facilities.

3.  Prices quoted are indicative only at the time of going to press and subject to location and quality.

4.  Gleadell Agriculture cannot accept liability arising from errors or omissions in this publication.

5.  mln/t = million tonnes, mt = metric tonnes, kg/hl = kilogram per hectolitre, k/mt = thousand tonnes.