WHEAT

Wheat futures markets continue to trade within the recent range, with little to suggest that they will break out either way at present.

Egypt’s GASC import agency bought 175,000t of Russian wheat at its recent tender and paid $10/t more than the previous one. The higher price was mainly linked to higher freight costs and to sellers building in a risk premium, as the issues such as ergot and poppy seed admixture represents a serious potential rejection cost.

In Canada and Australia crop sizes are being downgraded, whilst in Russia the crop continues to grow and capture most available export business that will take that country’s wheat.

In Europe, German wheat is struggling to find export outlets. Although French wheat is more competitive than a fortnight ago, significant demand remains elusive. In short, the EU exportable surplus is building and is not being shipped. 

In the UK, harvest is still not complete, albeit less than 5% remains to be combined. Sterling seems underpinned after its recent rally and UK wheat is not competitive for export. It is evident that we will be a net importer again this season.

Regional feed wheat prices vary greatly and quality premiums depend on who wants what and where they want it.

It does appear that nationally there is enough wheat of milling quality to satisfy demand, but there might not be enough in certain regions, which means that wheat will have to travel further than normal to fulfil this demand. This is a particular factor in the central south and south west milling wheat markets.

OSR

Canadian Agency StatsCan has released its latest production estimates, revising canola production upwards. Despite the dry summer weather, Canada is now forecast to produce a bumper 19.7mln t, up 0.5% on last season’s near record.

Australia however, is still suffering with dry weather and frosts, and the forecast is for more of the same into October.  This is having a negative impact on potential production this campaign. So, whilst things are looking really good in Canada, Australian production could decline by as much as 30% year on year.

Coceral raised its European crop estimate to 22mln t yesterday, up 500,000t with French production in particular being revised higher. This comes as European crush demand could potentially decline by upwards of 1mln t, following the EU commission’s ruling to cut the anti-dumping tariffs on Argentine bio-diesel. Reported exports of biodiesel from Argentina are already increasing, with about 150,000t in the vessel line-up destined for Europe.

Despite a 2mln t UK harvest, domestic consumers continue to import as farmers withhold material from the market. Both crushers have brought in foreign material, with Cargill about to discharge its delayed 33,000t of Romanian rapeseed in Liverpool.

The UK’s balance sheet, like the rest of Europe, is looking increasingly burdensome. The market is already pricing the potential declines in Australian production and, without an additional crop problem or some political intervention, the threat to the market is looking increasingly to the downside.