WHEAT
⇓ USDA
quarterly stocks/planting reports provide little surprise – figures within
trade estimates and would confirm large 2014 US crop potential.
⇓ International Grains Council (IGC)
forecasts fall in global 2014/15 wheat output of just over 1% at 700mln t. Global
stocks seen as stable, corn production set to increase.
⇓ Ukraine’s weather centre estimates winter grain
losses at 1-2%, a historically low figure following mild winter conditions.
⇓ Ukraine’s grain exports increase during March to 2.98mln
t – season-to-date figure put at 27.5mln t, up 40% on the year (includes 7.8mln
t of wheat and 17.3mln t of corn).
⇓ Russian grain exports reported as of 26 Mar at
20.3mln t, up 44% on the year (includes 15mln t of wheat and 3mln t of corn).
⇓ Egypt aims to cut wheat imports by 1-1.5mln t next
fiscal year.
⇓ Brazilian government has reportedly increased
minimum wheat price by 5% to encourage farmers to produce more wheat.
⇑ USDA likely to trim US corn stocks
due to increased domestic and export demand in next week’s report.
⇑ Cold and wetter weather seen delaying US Midwest sowings.
With the Crimea situation removed from front-page headlines,
and reports of improved weather conditions entering the southern US plains,
fund longs have entered a bout of profit taking following the recent strong
two-month rally.
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| Location of Crimea (dark green) with respect to Ukraine (light green) on a map of Europe. (Photo credit: Wikipedia) |
Over the past week CBOT has shed $10/t (28 cents/bushel) as
the main current bullish factors lose their intensity. The USDA stocks/planting
report gave little market direction, although the stocks numbers would support
a cut in next week’s USDA corn supply and demand, but could trigger a rise
in US wheat stocks.
The EU market in general has followed the US lower, albeit
only €4/t, supported by the strong cash market. Exports for the season now
exceed the previous annual record (of five years ago) at over 24mln t, with three
months of the campaign still to go! With lower new crop cash levels being
offered (improving weather outlook) fresh old crop wheat supplies began to
surface – just at the time when demand is declining ahead of new crop.
It’s a potential recipe for carnage!
The UK market has followed the other global market lower,
with May 14 trading £5.50 down over the week. However, decent spot demand from
merchant shorts (and the odd end-user) and the continued reluctance of farmers
to sell fresh supplies has seen delivered premiums continue to firm.
The release last week of UK import/export data showing the
vast increase in maize imports again raises the question over the wheat balance
sheet, especially with the apparent tightness overshadowing cash grain.
Prospects for 2014/15 remain favourable with crops looking in good condition,
although ADAS did report the while crops escaped inundation damage from the
UK’s unusually wet winter, the mild conditions which accompanied the heavy
rains have encouraged high risk of disease.
In summary, this week’s price action is either a fundamental
retracement or the market ‘taking a breather’ before trying to march higher. As
the weeks progress, and we get closer to domestic harvests, import demand
will slowly decline ahead of new crop. If the balance sheets are
correct, and the apparent volumes of wheat materialise onto the market,
the end of the 2014-15 season could be difficult, especially if the current
favourable weather continues.
This blog is maintained by The Global Miller staff and is supported by the magazine GFMT which is published by Perendale Publishers Limited.
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