Wheat

David Sheppard, Gleadell’s Managing Director, comments on the wheat market

• IGC forecasts 2013/14 global maize crop to rise 10% to 939mln t, wheat up 4% to 680mln t.
• Argentine BAGE cuts maize crop estimate to 24.8mln t, although Brazilian maize crop reported at record 78.4mln t by SAFRAS
• India likely to allow more wheat exports this year – likelihood is that minimum price of  $300 will have to be lowered to compete 
• EU wheat exports to ‘feel the pinch’ of Black Sea competition with reappearance of Russian/Ukrainian wheat onto export markets. 
• Warm weather boots French crop growth – 67% of the crop now seen in good/excellent condition.

• USDA reports 33% of the US winter wheat crop in good/excellent condition – continued deterioration on HRW  
• USDA reports corn crop 5% planted against 49% last year and 31% as five-year average. 

There has been a sharp rally to some markets led by the US, as delays in corn plantings and reports of potential yield loss from the key HRW producing states has led to increased buying.

EU markets have followed the US higher, although the rise has been buffered by a weaker US$. EU exports continue to run well ahead of last year, but potential increased competition from the Black Sea may slow EU export prospects during the last two months of the marketing year.

Warmer, drier conditions in the UK have allowed farmers to play ‘catch-up’ to some extent with spring sowings and have also boosted growth of the already-planted crops. However, the HGCA has reported that crop development is still slow compared with recent years, and that crop quality is also variable due to late drilling and wet soil conditions – 5% of the total area is considered of ‘very poor’ quality.

In summary, weather concerns are keeping the ‘bulls’ interested, while the potential of record global maize and increased wheat production keeps the ‘bears’ from the markets. Many of the ‘old home guard’ have been here before, and one would say ‘don’t panic’!  

Oilseeds

Jonathan Lane, Gleadell’s Trading Manager, comments on OSR market

The May 13 MATIF contract expired on Tuesday with UK domestic prices moving sharply lower. The contract had been supported for technical reasons with traders buying back the contract to avoid having to make physical delivery. Ex-farm values are now around £367/t. Old crop demand remains poor with crush margins unattractive and the oil sector weak.

The new crop European rapeseed market is currently slow with little coming forward from farm in both the UK and mainland Europe. We expect to start seeing sellers in Europe and the Black Sea in the near future as crops currently look excellent in Germany, Poland and Ukraine and while French production is predicted to be down around 10%, that country will still have a large crop. This year we could potentially see the UK import rapeseed.  

Currency markets remain volatile and continue to affect UK domestic prices. This week the European central bank cut the Eurozone interest rate to 0.5%. This could potentially help sterling to remain relatively firm against the euro, which won’t aid UK domestic prices.