Jonathan Lane, Trading Manager at Gleadell provides insight into the global grain markets, which this week have been dictated by the release of another report from the US Department of Agriculture.

The USDA set the tone as another report failed to ignite any sparks. Although numbers for corn/soy were reduced, they still were above trade expectations, leaving the markets open to profit-taking. Official numbers from South America would still point to lower production, but these may well be filtered into future USDA reports.

The wheat market has seen decent buying interest over the past week, as many key importers in North Africa and the Middle East set up purchases as international tensions return to the regions. The drop in Chicago, coupled with low freight rates, allowed US to trade into Egypt, undercutting more expensive EU/Black Sea supplies. Egypt are back in today with another tender, US most likely.

In summary, there is plenty of wheat in the world, but the majority is not available. Importers will look to build stocks, and logistical issues in Australia (not enough capacity to export surplus) and Black Sea (weather/logistics limiting availability). As winter weather eases, Black Sea wheat may re-emerge onto the export markets, especially if old crop supplies and new crop prospects don’t decline.

Summary

• Cold damage to EU grain crops is limited so far – Strategie Grains forecast 2012/13 grain output up 1.7% at 289.4mln/t.
• Australian ABARE raises 2011 wheat harvest to record 29.5mln/t with exports raised to 22.3mln/t.
• Russia is not ‘a spent force’ in wheat exports – end of winter period may free up current logistical issues.
• Ukrainian Agriculture Minister states the country has no immediate plans to curb exports of grain.
• In the US, eight major crop plantings for 2012 projected at 251.2mln acres: corn 94.0mln/wheat 56.2mln/soybeans 74.0mln.
• The Indian Government has allowed state-run trading companies and state-backed co-operatives to export wheat.
• US and Dutch purchases buoy UK December wheat exports to 329tmt – year-to-date at 1.58mln/t, leaving less than 1mln/t to ship.
• Canadian crop belt bracing for drought, with reports of vast areas having less than 40% of normal winter precipitation.
• Egypt’s GASC purchases 55,000 tonnes of US wheat for April shipment, as lower Chicago/freight rates leave US wheat competitive.
• Frosts, coupled with a lack of snow cover, have damaged crops in Eastern Europe and Southern Ukraine.
• Iran purchases 400,000 tonnes of Brazilian, German wheat underlying country’s continued import requirements.
• Algeria purchases at least 700,000 tonnes of milling wheat, accelerating its purchases as tension has led to a surge of import demand.
• Major UK ethanol refinery starting up in late spring consuming more than 1mln/t of feed wheat a year.

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