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Weekly Commodity Report 23rd November 2018

The November 2018 futures have expired, so the focus has switched to the May 2019 wheat futures have averaged £173/T for the last month.  Prices hit a high of £200/T in the first week of August, and since then the low was last week’s £171/T.


Trade in the UK wheat futures market remains tied to the restrictions and uncertainty surrounding the Brexit negotiations.  Many in the grain trade remain cautious about our unclear future.  Recent news of a draft Brexit deal created some support in wheat prices during the last week.  Currency remains volatile and adds its pressure to the commodity markets in this ever changing climate of conflicting news stories.  The closing of the Ethanol plants still has an impact on the UK, especially in south, as farm trade continues to be low with concerns that more wheat may still be seen redirected to the south of the UK.  Additionally there is a large quantity of relatively cheap imported maize this season (544,000T) being 200,000T over the 5 year average and UK wheat is finding it hard to find a home. 

The French market dropped rapidly as volumes spiked due to an imminent contract expiry and positions limits for the Dec-18 contract.  World trade remains focused on Russia, as the predicted level of exports to trigger action to protect their domestic stock levels grows ever nearer.  However, many in the trade believe that it is unlikely any action will be seen before the New Year.  The trigger may be caused by rising domestic prices, or the impact of logistics due to lack of grain availability near to ports or due to government intervention.  Russian wheat exports are slowing due to the imposition of phytosanitary checks etc, but various analysts are pointing to glaring discrepancies between domestic demand for flour and feed, livestock numbers, harvest yields and exports to date. 

US wheat is waiting on the side-lines ready to be called into the global market, as Russian milling wheat is still the cheapest in the world by $50/T.  This season the EU has been a small player in export markets as the combination of the smaller EU crop size, and the cheaper price of Russian wheat means it cannot compete.  It is reported that Russian wheat planting is at record levels this autumn.  The dry start to this crop could still affect final output, but weather conditions over the growing season could yet affect yields and quality.  Export figures for the US remain disappointing at 438,000T.  Exports at a rate of of 468Mln T a week would be required to hit the yearly target.


Chicago soya prices are still being suppressed by the lack of exports to China, and some analysts are expecting China to throw in the towel as global non-US stocks dwindle until new crop South American soya becomes available.  However, old hands with exposure to the Far East, understand the concept of ‘loss of face’ and expect that China will never give up; they would rather starve than admit defeat and the consequential loss of negotiating power.  Trade was seen in both directions as a result of comments made by President Donald Trump relating to talks with China to re-establish trade.  Support was seen for the positive indication of Trump’s comment that additional tariffs would be unlikely to be needed.  However, in the US reports from 85% of banks in the Kansas farm belt area predict that despite $840Mln already provided in aid to offset losses, due to the trade war, many US farmers will need to sell off assets or secure further loans to allow progress into the next season as credit conditions continue to weaken, which could have far reaching consequences on those farmers in the future.  Again, we see that the market is reacting more to future possibilities than to current activity and global supply and demand balance.  Uncertainty drives almost all agricultural commodity market action. 

A New York City gem dealer managed to catch and record a would be diamond thief.  This daring theft took place in the open and the criminal made no attempt to hide - what really made this crime different was that the diamond thief was an ant! 

Despite the fact that the diamond is almost the same size as the ant, the determined little guy carries and drags its prize for almost a minute.  Scientists from Michigan State University state that although ants often collect items and can drag items over 100 times their mass, it is rare for them to choose a prize that does not have a value as a food or nest building material.  The best guess is that the diamond had something edible on it, fooling the little guy who had no idea of his new status as a diamond thief.