News

International grain markets have been on the back foot as `investors` liquidate positions. CBOT wheat futures showed seven straight days of losses, losing the last six weeks gains. As is often the case in such markets physical trading has been very slow. This month`s USDA supply and demand estimates showed modest changes in wheat with increased supply from Canada partially offset by a lower forecast for Australian production. Harvesting in Australia is edging south but there still hasn`t been sufficient wheat harvested to garner a view on yields. The Corn supply was left virtually unchanged with ending stock projected to be very tight. With approximately 10% of the US crop still to be harvested and ethanol production very profitable at the moment there is potential for the market to tighten further. There remains a political issue in Argentina where export taxes have been lowered for wheat & corn which has allowed some export certificates to be taken up. Trading in the EU is dire. There have been some minor revisions to the French supply and demand estimates but not enough to break the trend of EU prices following the CBOT futures. The next tranche of TRQ import licenses will be available from 1st January and could prove to be pivotal if Black sea supplies remain tight. Outlook: The dilemma of bearish wheat fundamentals opposed to the financial markets desire to hold commodities as an inflation hedge remains, and traditionally there are large capital inflows in the New Year.

Wheat

Cereal prices fall
First revision of supply and demand issued
Milling market fragmented

Cereal markets have seen a sell off over the last few days. Sparked by easier US markets as the turn of the year approaches traders have been taking profits. As values fell there has been a round of buying by UK feed compounders for spring delivery with some taking initial cover for the summer period. Prices have now slipped below £100 ex farm for January collection; and supplies from producers have dried up. The first official revision of the DEFRA supply and demand showed marginal changes allowing for the closure of a starch facility and the commencement of intake into the new ethanol facility. The conclusion is that the UK still has to export wheat. The milling market has become fragmented and it is difficult to establish any premium for low grade soft and hard wheat`s and the export interest for UKP & UKS currently calculates to a discount to domestic feed wheat. Outlook: The markets look set to drift over the next few weeks, but will be sensitive to any sustained buying.

Oilseed Rape

Matif has given back €1.25 over the course of the week with the domestic market remaining relatively static with movements in STG countering those on the futures exchange. The week got off to a slow start ahead of the USDA S&D report, released today, which meant that funds and investors alike were reluctant trade ahead of the numbers. This has meant that Matif has continued to trade in a €6 range that has been in place for over 3 weeks now. External markets remain a driver. Some support was seen early in the week from news that China would be increasing its canola oil imports however this support was short lived. Big news this week was the USDA S&D numbers. The figures show a static US Soybean crush and only marginally higher export number. This translates into a slightly reduced carry out number of 255Mn bushels which is at the upper end of trade expectations. The range had been between 200Mn-270Mn bushels. Interestingly the USDA have retained their production figures for Argentina and Brazil at 53Mn tonnes and 63Mn tonnes respectively, this against some trade estimates for 47Mn tonnes from Argentina and 61Mn tonnes from Brazil. The report has been seen as weighing on US soybean prices in the short term. STG was also shaken by the Chancellor`s announcement in his pre budget report about banker`s bonuses suggesting a tax rate of 50% on bonuses over £25k. Bank of England MPC meeting today resulted in no change to interest rates and an unchanged stance on the quantitative easing programme. We expect market focus in the short term to remain on US export numbers and any sign that demand maybe slowing ahead of the South American crop becoming available in March/April.

Fertiliser

There has been a firming of the fertiliser market over the last week or so, this is due to an extremely bullish Nitrogen market. India is short of Urea, this is causing a great deal of concern in their parliament, a huge 1 m tonnes is needed and the supply is not assured. There have been plant shutdowns in Italy which do not help availability. China is to re introduce an export tax of 110 % to ensure they have supplies domestically. The phosphate and ammonium phosphate markets have seen demand recovery and prices have risen as a result.

Pulses

Beans, prices remain supported through shorts still active in the market place further buoyed by interest for export. We are currently aware of cargoes being loaded which should support the market through to early January and there is interest for a further 5-6 more. Spring premiums have eased as market interest has waned and is now seen between £6 and £7. Peas, a market remains for bleached samples with values around £145-£150 dependant on location. We also still have limited space on our blue pea buyback, please speak with your Openfield buyer for further information.

Oats

Oats, market has stalled with the market void of any short term requirement. We have limited homes for March with the realistic movement dates now into April. As we remain uncompetitive in the European market place export interest is dead. We see very little to support market prices in the medium term and would encourage growers to take the opportunity to review/reduce holdings. There are no bids for new crop 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.