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Weekly Commodity Report w/e 4th August 2017

'It's raining, it's pouring, and this old man is snoring' – Oh how I hate weather markets!  Give me normal Supply & Demand dynamics any day; stuff I can measure!  As a commentator on the markets, it is easier to chew on hard data (like meat and potatoes) rather than airy-fairy clouds and drizzle (like salads).  Anyway … [deep breath] … 'a forecast of cooler US temperatures and a distinct lack of heat across the Midwest for the first half of this week and rain in the second half' [yawn] means that prices eased significantly this week.  November wheat futures closed at £147.80 last Friday and ended the week at £143.75/t.  Initially, the funds bought CBOT feed wheat on hearing of the Dakota and Montana drought, then realised that the real action was in Minneapolis Hard Red Spring wheat (HRW), so spread traded the two, buying HRW and selling CBOT.  Consequently CBOT wheat has fallen back to pre-scare levels, whilst HRW is still up in the clouds.  The forecast of rain forced some of the funds to sell, so all commodities fell, and soyabean meal also fell to pre-scare levels.  

GM soya prices have fallen £15/t over the week and are now trading at £280/t ex-port for Nov-Apr.  The forecast is for 'cooler than normal temperatures' to continue in the medium term, which means that dry crops will not be put under undue stress.  About 60% of the US soya crop was in good/excellent condition as at 30 July, which is 2% better than the previous week; last year 73% the US crop was good/excellent, which indicates the quantum of this year's drought/market stress.  In Illinois the good/excellent soya ratings were increased from 59% to 66% after a week's rain; which indicates that the general downgrade this year is not yet irreversible.

Here in Europe, a brace of good news stories from Russia and Germany reminded everyone that the semi-disaster of US HRW is not the only focal point in the world, and the uplifting stories relieved the stress of many traders.  One analyst, IKAR, believes that Russia could produce a record wheat crop of up to 77mt (72mt last year).  An improvement in weather over Northern France and Germany means that the wheat harvest has been able to resume with reports of reasonable quality.  Harvest pressure has already started on the Matif, where wheat prices are below pre-scare levels and have now hit contract lows; this means we have seen an 18-month high of €189 and a contract low of €168.25 within a four week period.  
When converted to €, UK November wheat futures are trading at about €10/t less than Matif.  Part of the Matif harvest pressure is coming from currency, some from the European harvest, and some from the rate of Black Sea exports which are pre-empting French and German exports.  There are reports that the UK might be export competitive for milling wheat, but not

for feed.  The strange UK weather pattern we have experienced this year, with early heat then sunshine-and-showers to date means that in parts of the South, all the crops have ripened at the same time.  Farmers are rushing about in-between showers trying to simultaneously harvest malting barley, rapeseed and milling wheat.  Feed wheat is ready to be harvested (and this is the first week of August – unusually early) but as it is the poor cousin compared to its more valuable family members, it will have to wait until last.  Early reports indicate that milling wheat is giving good yields but that the Hagberg falling number is less than ideal, which is sad news for the millers, but brightens the outlook for feed millers and livestock producers.

In 1957, Professor Tribini started the World Santa Claus Congress, in Bakken, Denmark.  He took the view that being Santa Claus was a profession, thus the out-of-season annual Congress allowed Christmas to take place twice a year in Bakken, and offered Santas a professional networking forum to exchange experiences and to compare how Christmas is conducted in different parts of the world.  Last week’s event attracts hundreds of Santas, pixies and elves, working in partnership with the Danish Santa Claus Guild.