FEED WHEAT

·      FAO sees more wheat in 2011/12 as plantings increase in response to higher grain prices, but warns that the World must remain on alert for supply shocks.

 ·      Egypt’s GASC purchases 175,000 tonnes of US wheat for January 21-31st shipment. This brings the total wheat purchased by GASC (French/US/Canadian/Australian/Argentine origin) since the 1^st July 2010 to 3.42mln/t, compared with 5.53mln/t purchased in the 2009/10 season.

 ·      Russian Grain lobby reports the country will need to harvest at least 80mln/t of grain in 2011/12 to cover domestic needs. This compares with the drought-stricken crop this year of 60.5mln/t, and the bumper 2009 crop of 97mln/t.  Analysts see Russia keeping wheat export ban until late 2011 – the weather will become the decider.

 ·      UkrAgroConsult cuts the Ukrainian 2010 crop forecast to 39.24mln/t from 39.52mln/t previously. Within the report, wheat production was cut from 17.46mln/t to 17.2mln/t with barley and maize crop left unchanged (8.7mln/t and 11.6mln/t).

 ·      Toepfer International sees wheat acreage increasing in 2011, with only Russia of the major northern hemisphere producers expecting winter wheat sowing to fall from last season.

·      UK wheat area to rise 3% on this year to 1.98mln ha, according to a survey for the HGCA.

·      China seen selling corn/wheat reserves at weekly auctions in an attempt to pressure domestic prices lower.

 ·      Following the Chinese bank move last week (raising banks’ reserves requirements), which initially pressured prices, the markets have recovered. Despite US winter wheat crop ratings increasing, they are still well behind last year’s and, as the crop enters dormancy, are less able to survive any excessive adverse weather conditions. Concerns in South America over weather conditions in relationship to corn and soy crops have also added support to US markets, given the tightness in current supplies.

 ·      EU (French and UK) exports continue at a pace defying the balance sheets. The UK differential against French values has continued to narrow, and will continue to do so. The UK surplus is hard to replace from other origins and importers may not find it easy to replace UK wheat later on in the season . Domestically, the market has seen topping- up as end-users look to cover pre-Christmas requirements, although post-Christmas buying interest remains patchy, with most believing good volumes are still to be covered, into an ever-decreasing availability.

OILSEEDS

·         The oilseed market continues to see unprecedented volatility as rumours and counter-rumours about the situation in China continue to bounce around the market. The soy complex fell sharply at the end of last week on the back of reports that China would raise bank reserve requirements and this caused the futures to stumble. The market feared that the tightening of liquidity requirements would curtail the activity of fund investment, slowing economic growth and import demand in China and the market subsequently closed down 40 1/2c/bu on the CBOT futures market.  ·        The Matif rapeseed futures market got caught up in the sentiment from the falling soy complex, but this was short lived. The long liquidation that saw prices fall was overdone and, with concerns growing over the production potential of South America due to drought, was the spark to turn the markets around and the whole oilseeds complex has regained almost all of its previous losses.   The falling Euro has also helped to prop up the Matif rapeseed market as the Euro US$ continues to weaken.  The Euro initially tried to stage a recovery as the Forex market seemed happier to have the IMF in Ireland, but this was short lived, as there are still plenty of question marks about which Euro zone economy will be next!  The supply and demand situation for European rapeseed is still very tight, there will be some complicating factors (i.e., sustainability) but the overall picture remains a friendly one.