FEED WHEAT

• Wheat prices received support earlier this week as another ‘bullish’ report from the USDA gave the market fresh impetus to march higher.  However, as the week has progressed, follow-through buying has failed to appear, leaving the market open to profit-taking.
• In the report, the USDA cut US yield, production and ending stocks for both corn and wheat, although this was expected by the trade. World corn and wheat stocks were also trimmed,         despite higher wheat production projections for Australia and Argentina. 
  • Canadian/FSU winter wheat sowing are seen to fall significantly as a result of the adverse weather this season. 
  • Egypt’s GASC purchases 235,000 tonnes of wheat for January shipment (60k/mt French, 115k/mt US and 60k/mt Australian). 
  • Algeria purchases 150,000 tonnes of optional origin milling wheat – origin likely to be South American.
  • Strategie Grains report the EU wheat market is in deficit for 2010/11, mainly concentrated in France due to the current high pace of exports. They also reported that EU prices would have to firm to slow the export pace. 
  • Market moved initially higher after the USDA report, only to retrace lower as buying interest slowed and profit-taking entered the markets. The rise in export potential from the southern hemisphere, with larger crops forecasted, will loom over the market for the next few months. Longer-term the abundant US wheat stocks should control the market, as European stocks are being exported too quickly, and current restrictions remain in place in the Ukraine and Russia. 

The apparent ‘bull’ market continues to be ‘non-wheat’ led, with soybean and corn values supporting the recent rises in wheat levels. However, there is no shortage of wheat, just a quality issue and, with the current discount for new crop, expect end-users to draw down stocks levels to a minimum and fully maximise new crop supplies when available. This may well encourage stockholders to review their export stance, meaning ‘non- traditional’ exporters entering the market to take advantage of the higher prices later in the season, especially if winter crops get through the winter without issue.

OILSEED RAPE

• Soybeans jumped to the highest level for 26 months on Tuesday after the USDA reduced production, yield and ending stocks. Stocks projected at 185 million bushels were well below the average trade estimate of 240bu, and the released figure rekindled the need for some degree of rationing/increased planted acreage. 
• Some support was offset by production increase in Brazil and Argentina, but both crops have a long way to go before production is secured. The US balance sheet does not have much room to absorb additional production losses or demand, therefore, traders will monitor weather conditions in South America.  Any production issues or major delays in new crop bean supplies could force importers to switch back to dwindling US supplies. 
• Soy oil traded to new contract highs, supported by the increasing tightness of US beans and world oil markets and this, combined with a jump in crude oil prices, pushed European rapeseed prices up €18 on the week. 

EU values marched higher, supported by the USDA figures and a generally firmer oilseeds complex. We have seen some profit taking since Tuesday’s contract highs but the underlying fundamentals still point towards prices remaining underpinned.