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Weekly Commodity Report w/e 25th August 2017


Two weeks, ago on Friday 11th November wheat futures closed at £142/t; last Friday it closed at £138.80, on Tuesday it hit £137.00/t and today it is trading back up at £139.00.  The weird thing is that the £ has also been falling against the €, which is supporting the value of wheat.  If the £ were back at pre-referendum levels, then we estimate that wheat would be about £20/t cheaper than it is now!  For those brave souls wanting to cover their feed purchases through to next year it is possible to lock in today’s low wheat prices (the lowest for 6 months) it could be the right thing to do, but if the £ strengthens then embarrassment is likely to follow – the challenges of buying forward vs being a spot buyer!


In the South East farmers have braved the weather, with reports of some harvesting in the rain and for most, the harvest is complete.  A really strange harvest, with feed wheat in Sussex and Hampshire ready to cut at the end of July, but delayed by weather and other more valuable crops that had to be harvested first.  Malting barley is fetching £170/t compared to feed wheat at £128/t ex farm.  Further West the rain was just too hard, and much wheat has yet to be harvested with reports of sprouting particularly with the variety Skyfall; and there were TV reports this week of farmers standing in front of their standing wheat which was turning black.  Good quality straw will be a valuable commodity this year.  In essence we have a mixed bag of qualities and quantities this year, and we suspect the same is true of the rest of the EU depending on their localised weather pattern.

US and EU markets have continued to fall.  It has been raining in the US and more rain is forecast this weekend.  Most formerly drought-stricken crops have staged a remarkable recovery, except for the Spring wheat crop in N & S Dakota and Montana where the crop ratings are 8%, 35% and 8% good/excellent respectively, compared to Minnesota which is 86% good/excellent.  The US Spring wheat harvest was about 60% complete on 20th August.  US maize was rated as 62% good/excellent (75% last year), soya at 60% good/excellent (72% last year).  The annual FJ Midwest crop tour (formerly the Pro-Farmer crop tour) has started, and initial reports are that the soya condition is much better than expected and needs a couple of downpours to reach perfection before harvesting.  GM soya is about £280 ex port with non-GM about £418/t.


The funds have been selling all our commodities in recent weeks; a month ago they were 4mt long of wheat and are now about 5mt short of CBOT wheat whilst also selling their long of Minneapolis Spring wheat.  A month ago the funds were 7mt long of soya, and of the 15th August were 2mt short; they were 14mt long of maize a month ago, and of 10 days ago were only 5mt long.  Consequently US wheat and maize hit new contract lows this week.  The weather now looks favourable, so the funds have nothing on which to hang their hats.  Matif wheat also hit a contract low this week near €159/t, and its faithful lapdog, the Liffe maintained its €10 distance from its master at €149/t.  The French harvest is virtually all in the barn and most of it looks good; Germany, Poland and the Baltic are racing to catch up with question marks about their quality.  Russia expects to harvest 127mt grain this year (125mt expected, 114mt last year), of which they forecast a record 79mt will be wheat (72.5mt last year); which also indicates that the Ukrainian harvest will be good.  In terms of exports, the Black Sea is fulfilling most tenders with the French uncompetitive by about $10/t.  So the markets feel peculiar … recovering from the US milling wheat spike … at contract lows … feels like a bottom … but EU milling wheat is still too expensive to export, so is there more downside to come? And that’s ignoring currency (see para 1).  Place your bets!

This 3700 year-old Babylonian tablet measures 13 x 9 x 2cm.  In cuneiform script it lists various values of a2 + b2 = c2 known as Pythagorean triples [Remember: the square of the hypotenuse is equal to the sum of the squares of the other two sides].  Its use has been a mystery since the tablet was purchased by George Plimpton in the 1920s, and so is called Plimpton 322.  Now two Australian scientists believe that the Babylonians cracked trigonometry some 1000 years before Pythagoras, by using ratios (not angles and circles) based on their own maths – base 60 (we use base 10).