The wheat market is focussed on the weather, politics and currency, and in the background the record short position of the funds is threatening to come to the fore.
UK crops were saved by the recent wet weather, and sunshine & showers are needed for the next two months. Old crop UK wheat prices have eased about £3/t in recent weeks due to the French wheat imports (previously reported) and the news that we imported a huge 210,000t of wheat in April. That means that we have exported about 1mt wheat and imported a total of 1.5mt this year, so some analysts believe that the UK carry-out this year could be 2mt. Presumably all that wheat is sold, otherwise why would anyone want to lose £10/t between old and new crops? November futures are trading at a contract high of £143.75 – why?
Around the world, the cereal crops are generally dry and have caused US spring wheat prices to lift to the highest prices for a year. The US funds will be getting nervous. Australia is dry and the three-week weather forecast for Europe and the Black Sea is for dry warm weather. The Ukraine and North China are also reporting dry conditions. The UK new crop wheat looks good (so does the barley) and as a result of crop condition and the higher carry-out, the exportable surplus could reach 1.5mt; however UK prices are currently about €10/t too expensive to export, which is frustrating for UK exporters who expect Spain to be hungry importers this autumn.
No doubt the political shenanigans of a minority government negotiating Brexit, with Trump tweeting a commentary, will provide enough currency volatility to offer opportunities. It is difficult to envisage why UK wheat prices should continue to rise – even the UN predict ‘subdued’ wheat prices and caution against any expectation of a lift in oilseed prices. The FAO predict ‘good supply prospects’ with a global wheat forecast of 743mt for 2017-18; the USDA estimate is 738mt, and the IGC 736mt compared to this year’s 753mt. The wheat production of the US, Russia and Australia is expected to be 13mt, 5mt and 10mt lower respectively than last year.
Canadian and US farmers are now planting soya in moist ground, and are about 92% complete (91% last year) and the prognosis looks good, which is presumably one reason why the funds are about 12mt short of soya. The USDA increased the old crop carryout by 15mb to 450, left production the same, so that the new crop carryout will be 495mb. Some years ago we saw sub-200mb and high prices, at these current stock levels there is no shortage of US soya.
The USDA increased the Brazilian soya crop by 2.4mt to 114mt and increased the Argentinean crop by 0.8mt to 58mt. Brazilian farmers are said to be reluctant sellers and there has been a rush to buy silo bags – enough to hold 20mt soya. The world ending stocks of soya are put at 93mt for this year, and 89mt for next year. GM soya ex UK port is about £280/t.
A French pilot left Paris by car, drove to Calais, unfurled his paraglider and took off across the Channel; fifty minutes later he landed near Dover and drove to London. The all-terrain vehicle is designed for French Special forces, and has STOL (Short Take Off and Landing) capability requiring 330 feet to take off and 33 feet to land. Finally, an answer to traffic queues! Does anyone remember the flying bedstead which led to the Harrier Jump Jet?
Paul Poornan & Martin Humphrey