Gleadell Market Update

WHEAT ‘With 2010/11 stock levels set to increase given the current USDA numbers, there seems plenty’ / OSR ‘It has been an eventful week in the rapeseed market with prices rallying sharply’

FEED WHEAT

The USDA has cut US corn stocks for 09/10 and 10/11 due to increased use by the ethanol industry. As these were below trade expectations, some buying/short-covering activity has been noted and the USDA confirms 2010 Global wheat productions at 668.5mln/t, with closing stocks increasing to 193.9mln/t, says David Sheppard, managing director, Gleadell Agriculture.

CWB report that Western Canadas un-seeded crop area could reach 5 million acres.

Chinas CNCOIG estimates 2010 wheat crop at 115.1mln/t.

Spanish wheat harvest commences with the Farmers Union forecasting 2010 winter cereal crop up 9% (Wheat 3.6mln/t).

Ukrainian farmers have planted 7.48m ht to spring crop as of June 8th, or 98% of the planned area.

There are enough weather related problems to keep the bulls interested. The wheat harvest has begun in Spain and the US with good test weight reported, although rain is seen slowing harvest progress and may cause quality issues. Canada with its wet conditions delaying plantings, Black Sea with increased winterkill, and weather concerns still over western Europe would confirm the lower USDA production number, but is it over-stated at 668.5mln/t?

In summary, with 2010/11 stock levels set to increase given the current USDA numbers, there seems plenty of wheat available on the EU, US and World supply and demand balance sheets. Unless we witness major production losses into and through harvests, wheat alone will continue to lack fundamental support, meaning any sustained rally would have to be led by other markets or external factors, Mr Sheppard adds.

OILSEED RAPE

It has been an eventful week in the rapeseed market with prices rallying sharply, says Jonathan Lane, Gleadell trading manager.

There has been underlying support for the EU rapeseed for some time due to the demand profile of the EU outstripping the intra European production and the subsequent necessity for imports. This in itself isn’t necessary bullish, but the support has stemmed from EU prices being too cheap to draw in the required volume of imports.

However, the real catalyst to this week’s rally has been the wet weather conditions in Canada that have severely hampered planting, and this has sparked a CAD$30 lift in prices that had to spill over into the EU market.

Looking forward, the outlook is still favourable to rapeseed prices but this market has gone up a long way very quickly and will undoubtedly see some retracement and, of course, the UK farmer should always have an eye on : which looks more likely to remain steady going forward, Mr Lane adds.