News

A short covering rally on the Chicago board of trade wheat futures market has sparked a wheat rally cross the globe. There has been no particular reason, but equally there is little reason for prices to sink much further as wheat has started to buy feed demand away from corn as South Korea`s recent purchases attest to. Corn harvest will be starting in earnest in the US over the next few weeks and initial harvest in the South has so far produced good yields as the growing conditions remain elongated and favorable. In the EU activity is slow as most of the importing nations have full stores. Next week sees the opening of the last TRQ third country feed wheat import quota and traders will be watching closely to see how much is bid for as an indication of price and demand. Outlook; The dust needs to settle. There are a couple of wheat tenders into north Africa next week which should give a guide to value.

Red Flag: There have been some reports that the Russian agricultural support budget is to be reduced!

Wheat

Sterling weak
Grain trading slow
Milling premiums look vulnerable

Mervyn Kings candid comments about sterling weakness helping the economy grow saw sterling weaken to five month lows against the Euro. This has sparked a short covering rally in UK cereal markets. While weaker sterling undoubtedly increases the intervention support for barley, the rationale for wheat values to improve is less clear. The improvement in values simply reflects the inelastic supply of spot grain. Export parity for UK feed wheat is between £4 and £5 lower than the current domestic levels and at some point either EU values need to improve, sterling needs to weaken by €0.05 cents or our prices need to fall. Milling premiums have struggled to be maintained as a realisation that the crop is

generally good quality sees millers sit on the sidelines:

Outlook: As can be seen in the table below, Openfields 2009/10 wheat supply and demand forecast still leaves a surplus of 2 mln mt of wheat to export and while better quality may help with sales of UKP (11.5% group 1 & 2`s) eventually we need to get to export parity. As wheat drilling commences pricing up to 20% of anticipated production may prove wise with such a large world

wheat stock.

Oilseed Rape

Market has moved lower this week, driven by a number of factors with US weather being the most prominent. At the time of writing nearby Matif is trading €7.5 lower with the domestic market trading just a £1 lower. Domestically the market has had support from a weaker STG and from a lack of sellers. With product safely in store current levels have not been tempting to growers. The main story in the market place has been the weather forecasts for the US. As reported last week, weather models had pointed to a cold spell this week, news which pushed the market higher, before promptly falling back when models pointed to more milder conditions. This sentiment has continued to weigh on the market this week as models show that the weather is likely to be above freezing well into next week now. The only supporting factor could yet prove to be the wetter weather forecast which could delay harvesting and move the harvesting window into colder weather spells. STG has also played a part this week with following comments last week from the Bank of England Governor concerning a cut in deposit rates paid to commercial banks, this issue raised its head again in the latter part of the week reversing gains made in the first half. We have also seen steep falls in Crude oil on the back of a sharp increase in stocks levels. This weakness spilled over to the veg. oil market which had been reacting to falls in the Palm oil market which itself was playing catch up following the end to Malaysian religious festival holiday at the beginning of the week. There have also been a number of crop estimates produced for South American soybeans. Brazilian production has been pegged between 62Mn-64Mn tones up from 2Mn tones from last week following welcome rains in the Mato Grasso region. There has also been a doubling of production for Paraguay, world`s fourth largest exporter of soybeans, to 7Mn tonnes up from 3.7Mn tonnes last year. We have the September 1st USDA stock and crop report due out next week in the US, a report that will be widely watched for indications on stock levels ahead of what is anticipated to be a record harvest and record usage levels for the new crop period. Bank of England monetary policy committee will not meet next week and instead will convene for a decision on October 8th. The weekend will see continued attention focused on the latest weather reports in the US and potential impacts on the US harvest.

Pulses

Beans, market has moved up £4-£5 in the spot positions; supported by a lack of sellers. There has been no fresh export interest, which has had a knock on effect on premiums as springs have not moved up with feed values and hence premiums have narrowed. The weaker STG should mean we can remain competitive when interest does return. Peas, market is trading with good quality blues well supported; however as mentioned in previous weeks, bleached samples are proving difficult to find homes for. In addition Marrowfat market remains well supported. Please contact your Openfield buyer for latest prices.

Oats

Market remains static. Milling consumers know only too well the stock overhang presently in the market and are finding open market offers to cover requirement so do not need to chase the market. We have seen some European export business for feed quality produce trade at the equivalent of £50-£55 ex farm, this was of Baltic origination. We do not see any short term catalyst to the market at present.

Disclaimer

While the information contained herein is believed to be reliable, Openfield makes no representation as to its accuracy or completeness. Any statement non-factual in nature constitutes current opinion, which are subject to change.