US demand rationing
needed… poor quality wheat in Germany, Poland and the Baltic countries… but
rains a help for French corn… in the latest in a weekly series, EU experts give their views on grain and oilseed
Weather problems keep
quality wheat market dynamic
The global market remains dynamic, as there are still enough
weather-related problems in North America, Australia and Europe to keep the
quality wheat market, if not the feed wheat market, underpinned.
However, as funds have recently switched to holding long
positions in Chicago, the less threatening short-term forecast has left the
market open to bouts of profit-taking, dropping Chicago wheat prices $1 a bushel
off the early July peak.
Declining spring crop ratings has the trade waiting to see
what adjustments the US Department of Agriculture will report in next week's
Wasde world crop supply and demand report, which will provide market direction
in the short-term.
Traders are expecting a significant cut in the US corn
yield, and a sequential fall in ending stocks, though levels will remain
adequate. A small reduction in US soy yield and production is also likely.
Long-term weather forecasts are still expected to bring
warmer weather into the Midwest, which could still affect corn and soy yields,
although the trade continues to trade short-term weather.
The US wheat balance sheet would point to the fact that some
demand rationing is needed, especially in the higher quality classes, as the
current export pace of 15% ahead year-on-year, against the projected 8%
decline, is not sustainable.
The Wasde report will provide the market with the numbers.
What the trade makes of them, and their level of credibility, is anyone's
France gets export
boost from EU rains
The heavy rain in the north of the EU is likely to lead to
poor quality wheat in Germany, Poland and the Baltic countries.
This is likely to boost export demand for France's wheat to
both third countries and the Baltic countries.
Russia is showing very good results. Of the 22m tonnes of
wheat harvested, yields are up by 3.6% on last year, itself a record year in
terms of production.
Quality is a problem this year, however, with a smaller proportion
of high-protein wheat.
The unhelpful harvest weather in the UK is starting to cause
some concern to UK farmers and the trade.
In terms of quality, the specific weight of French spring
barley is good, so to for the winter crop. The harvest in the Black Sea is
making progress. To date, 4.6m tonnes of barley has been harvested in Ukraine
and 2.4m tonnes in Russia. Some rain is forecast for both countries next week,
which could disrupt harvesting.
After a very dry spring, rains have arrived at just the right
moment for the French corn crop. France's harvest therefore looks set to be
good in terms of yield and timing.
We forecast an 8% increase in yields when compared to the
norm: even though the acreage is small, production should reach 13.5m tonnes.
Gary Phillips, ODA
Improving US weather
puts pressure on prices
A sharp drop in soybean prices has put pressure on oilseeds
globally this week due to improving weather conditions in the Midwest US which
has been parched for some time, as well as an improvement of soybean crop
ratings to 59% "good" to "excellent".
Harvest in the UK has been stop start this week as rains
have been falling, although yields thus far look fairly promising on the whole.
In Europe, Stratégie Grains increased its EU rapeseed crop
estimate by 800,00 tonnes to a level now 8% above last year's harvest. This is
following better-than-expected harvest results, particularly in France but also
the UK and Romania.
Crude oil put pressure on the oilseeds this week as West
Texas Intermediate (WTI) slid from a two-month high following an industry
survey showing Opec increasing production in July.
Risks remain in Canada and Australia for canola, with dry
conditions prevailing and production reductions looking likely.
James Bolesworth, CRM