Gleadell Market Report

GRAIN MARKETS – David Sheppard, managing director

WHEAT 

High global prices could spur Argentine farmers to plant more wheat when 2011/12 plantings start later this month, and output could increase by 20% to 18mln/t.

Kazakhstans Agriculture Ministry has cut its wheat export forecast for the current marketing year to 5.5mln/t, suggesting that the country will be in tight supply until the new crop.

SovEcon sees the area sown to wheat in Russia for the 2011 harvest at 25.9-26.4 million hectares, down from 26.5 million in 2010, which may raise the wheat crop to 48.5-50.8mln/t if there is no drought.

Ukraine will expand its grain sowing area by about 3% to 15.6 million hectares in 2011.

Chinese Agiculture Ministry reports that precipitation in Chinas northern wheat producing area has eased the drought conditions and is very favourable for the crops growth.

Australian wheat exports are set to face stiffer competition as Pakistan, which resumed exports after three years, pours grain into the market and offers competitive prices to millers in Asia, the Middle East and Africa.

French farm office AgriMer raises its forecast for French Non-EU soft wheat exports in the 2010/11 season to a new record of 12.8mln/t. The upward revision in exports led the office to reduce its forecast for soft wheat stocks at the end of the season to 2.2mln/t, from 2.3mln/t a month ago, and would be 36% lower from 2009/10.

Strategie Grains cuts its forecast for the 2010 EU-27 soft wheat crop by 3.6mln/t, to 131.5mln/t, mainly due to the impact of drought in the western bloc countries. A prolonged dry spell has parched fields in the EUs top three wheat producers, France, Germany and Britain fuelling expectations that wheat yields will be reduced.

We hear rumours that the Ensus bioethanol plant is to be mothballed for an undefined period of time. If true, this will boost the UKs exportable surplus for 2011/12.

USDA, in its initial estimates for 2011, pegged US wheat production at 2.043 million bushels, down from 2.208 million in 2010. HRW wheat production was marked down at 762 million bu (1.018 billion bu in 2010) due to the current drought-like conditions.  SRW wheat production was increased to 427 million bu (238 million bu in 2010).

For the 2011 global outlook, maize production was estimated at 868mln/t (815mln/t in 2010) with wheat production estimated at 670mln/t (648mln/t in 2010), although wheat stocks were projected to marginally decline year-on-year.

The USDA report released yesterday was deemed bearish, with higher than expected US corn stocks and 2011 global corn and wheat production seen covering the projected increase in demand. However, current weather issues relating to US corn and Canadian wheat plantings and EU, Chinese and US winter/spring wheat crop development still prevail, and these should provide support to the markets. One point to note, and to make EU markets nervous, is the prospect of Bulgarian/Romanian feed wheat – where crops look good – hitting EU importing countries at 25/30 below UK replacement.

OILSEED MARKETS – Jonathan Lane, trading manager

The weakness in the grains/oilseeds markets last week has not been as dramatic as other commodity classes. This could be a signal that there is underlying support in the market and that participants are still concerned about the crop situation globally.

Crops in Europe require more precipitation and, until they receive this, prices will remain underpinned. Most of Europe now has showers in the forecast although recent forecasts have all been disappointing.

In the US supply and demand data released on Wednesday, it was the soy complex that was seen as ‘least negative’.  US 2010/11 end stocks were raised but the 2011/12 supply and demand produced the second lowest ever absolute level for the first estimate of the season.

With all these fundamental factors underpinning the market, oilseeds held up very well compared to other commodities and, until there is a sizable shift in the underlying fundamental picture, the market should remain strong and any downside in the market should remain limited.

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

• Gleadell Agriculture currently has offices in Full Sutton (Yorkshire), Hemswell (Lincolnshire), Swaffham  (Norfolk), Lyndon (Rutland), Warminster (Wiltshire) and Bilsborrow (Lancashire).
• Gleadell Agriculture Ltd is equally owned by Toepfer International – based in Hamburg, who are one of the largest global traders of agricultural products; and InVivo – based in Paris, who are the leading provider of goods and services to their partner cooperatives and one of the largest traders of European grain.
• Prices quoted are indicative only at the time of going to press and subject to location and quality.
• Gleadell Agriculture cannot accept liability arising from errors or omissions in this publication.
• mln/t = million tonnes, mt = metric tonnes, kg/hl = kilogram per hectolitre, k/mt = thousand tonnes.