Jonathan Lane, Gleadell’s trading manager, comments on grain markets …

WHEAT 

Russian AgMin sees 2013 grain crop at 95mln t, against drought-affected 70.3mln t this season. However, winter conditions are said to be worse than average.

Russian AgMin reports removing a 5% import duty on grain remains possible – likely to import 1.2mln t.

Ukraine sees winter grain yields rising in 2013 – with indications of 20/30% increase.

Black Sea wheat growers see easier winter in 2012/13 – too early for definite forecasts.

Canadian wheat harvest seen gaining as global supply rebounds – all-wheat area up 1.5mln acres at 4-yr high.

Wheat ratings deteriorate across US plains as drought shows no signs of ending in key production regions.

Russian grain exports reach 13.9mln t as of January 25^th – AgMin expected to cut export forecast from 15.5 to 14mln t.

Ukraine exports 15.5mln t of grain as of January 21^st – wheat at 5.96mln t with trade expecting 6.3mln t total.

Weather concerns in South America over crop production has supported higher beans and corn prices, allowing wheat to edge higher. US concerns over continued dryness in the US plains provides underlying support, although global prospects for new crop remain positive with higher acreage reported in the US, Canada and the EU. Yields are projected to recover in the Black Sea region, returning production to ‘the norm’.

EU markets continue to be driven by price action in the US. A firmer € has allowed MATIF values to dip €4/5 on the week. EU soft wheat exports are running about 2mln t ahead of last season’s pace, and news that Russia may have to import grain this season provides support, especially if the 5% import duty is removed 

The UK is little changed. The update of the supply and demand projects exports at 850tmt, leaving a carryout at a historical low figure of 1.45mln t. However, imports at 2.19mln t seem understated at the current rate and concerns over long-term domestic demand would point to a carryout figure above the HGCA/AHDB estimate. With little signs of fresh export business the market direction could turn bearish if we have a tonnage of low-grade wheat to sell into an EU market that is focused on cheap Corn (maize).

OILSEED RAPE

This week UK domestic prices have continued to rise, primarily due to the weakness of sterling against the Euro. The Matif May 13 rapeseed contract at the time of writing is again around the top of its recent range of 463 euros, giving us an ex farm price of £385. UK crushers continue to buy seed for February, March and April and the volatility of the past few months has subsided with the daily trading range contracting considerably.  

The soybean market has risen around 25 cents this week on concerns of South American logistical problems, some dryness in Argentina and some chart/technical indicators looking positive.  Although the market is up slightly we presently feel there are currently no real weather problems in South America. Crush and export demand remain strong for soybeans against the prospects of a large South American crop looming.