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Weekly Commodity Report w/e 8th December 2017

Last Friday UK May wheat market futures closed at £142.50, touched a high of £143.10 during the week and is now trading at £142.00. The lack of price action recently has been so dull, that the grain trade are acting like door-to-door salesmen in their efforts to try to create a market.


Last week, the AHDB cereal quality survey confirmed that only 24% of Group 1 wheat achieves milling specification which is adding downward pressure as the rejected surplus moves into the animal feed market.  This, combined with the closure of Vivergo (the biofuel plant), and general lack of exports makes for a dull market.  The Matif (French) May wheat futures are trading at €165/T with the UK €3/T behind at the equivalent of €162/T so no currency advantage for export, despite Brexit phase 1 having been completed.  The grain trade enjoys volatility as it gives a reason for activity whether it is buying, selling or exporting, but flat markets are boring.  In theory, there is 50,000T more feed wheat available than previous estimates but domestic usage is also higher.

EU and US prices are also weak, with Chicago March futures hitting new contract lows this week at $4.19/b (and December futures sub $4/b) as Russia continues to dominate the global export trade.  EU export shipments remain 22% lower than this time last year, and EU wheat prices twitched upwards from recent lows in obeisance to perceived weather problem in South America.  The Argentinean wheat harvest is 45% complete (41% last year) with an expected 18Mln T harvest.  So far Russia has harvested 140Mln T of grain, before drying and cleaning (125Mln T last year) and it expects to export 45Mln T this harvest year, of which 35mt will be wheat.  Russia also appears to be reducing its prices to maintain its hold and control of the markets; allegedly Russia is subsidising grain transport to the tune of 2Bln roubles (approx.  $34Mln) to ensure this stockpile of this year's record crop is moved, and to convert its wheat into hard currency.  China auctioned 248,654T of wheat from its state reserves, at an average price of 2,508 yuan/T (£283/T); the year of the vintage is unknown. 

Maize is the `engine room’ of our commodity markets, and is trading just above contract lows low in a narrow range.  The slow pace of US exports, high world stocks and low energy prices are keeping a lid on maize prices, and stimulating domestic animal numbers and ethanol production.  US weather watchers are monitoring the dry weather in Argentina, and South Brazil, to see how much La Niña will disrupt production with an estimated reduction of 3Mln T of Brazilian maize by Informa Economics.  Funds are slightly long of soya and are very short of maize (almost 30Mln T).  Lower crude oil prices may have also have started to contribute to lowering trends on corn prices.


Brazilian soya is about 92% planted (87% 5-year average) having been slow to plant due to dry weather a month ago, but good rains during the month allowed planting to catch up by the end of the month.  Brazil is expected to produce 108Mln T soya (114Mln T last year) although it appears we are in a weather-watching market with bulletins every few hours.  Beneficial rain has sprinkled central, eastern, and north-eastern Brazil, but it is still relatively dry in the South – but not yet at the ‘problem’ stage.  The early-planted soya is at the flowering stage, and the early birds will be harvesting on New Year’s Day with the majority harvesting in mid-January.  China has relatively plentiful stocks of soya at port, and is apparently delaying some purchases waiting for better prices.  If history is anything to go by, then China will wait for harvest pressure, and then place its orders before Chinese New Year.  US soya bean exports are lower than predicted as the world waits for South America.  In the UK, soya bean meal prices started and finished the week at more-or-less the same levels having peaked in the middle, due to Brazilian currency.  GM soya is about £310 delivered to the UK mill. 

A microwaved egg has been the subject of an American lawsuit where a customer bit into an egg resulting in burns and hearing loss due to the massive ‘pop’.  Scientists were engaged to investigate the acoustics of exploding eggs and microwaved 100 shelled hard-boiled eggs before piercing them with a sharp object.  They recorded noise at 86-133 decibels but concluded that there was a low probability of hearing loss.  They discovered that water trapped in pockets of the yolk becomes super-heated and spontaneously boils when pressure is released.