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Weekly Commodity Report w/e 24th April 2018

UK May wheat futures have been trading weaker as the May contract comes to a close; after trading at £148.25/t last Wednesday it has been supported at £143/t for the early part of this week; and closed the week at £142.40 – but with a very strong close on Friday night in the US, the trend may reverse.


Other market drivers include a general exit by the funds who have sold cereals and proteins in recent weeks, as well as a weakening £.  The UK is still acting as an independent island in the wheat market with next to no exports, and increasing demand from the bioethanol plants; the north-south price divide is still with us, facilitating EU maize and wheat imports to the northern counties.  The AHDB reported delivered prices in the UK were higher or stable due to tight supplies, demonstrating the current disconnect from current futures prices.  Some analysts use the term ‘technical’ to describe this phenomenon.  In Europe the price drop started earlier but was less dramatic.  The rail strikes in France caused some logistics delays and exports are still below predictions.  As the weather improves the delayed spring plantings gain pace in both Europe and the UK.

In the US continued dry weather across the plains supported prices but this was overtaken by a slipping as the $ gained against other major currencies.  US wheat prices have dropped approximately $30/t this month.   The market pressure has been mixed for the US with some support from news that weather would be more favourable and of Russian export figures for April being less than those of March, rather than increasing month on month as they have previously done.  On top of that, all commodity markets are seeing volatility as each piece of news on the US and China trade dispute is published.   The US Secretary of Agriculture promised to do ‘everything we can for the American farmer’ as China focused its tariffs on selected commodities.  But later in the week the announcement of the 178% tariff on Sorghum resulted in several ships en route to China being re-routed to unknown Asian destinations.  Although Sorghum is not normally a major export market, it has been used to circumvent China’s tariffs on dried distillers’ grains and maize; and with China its largest importer, sorghum could flood other markets and may set a precedent for the 25% tariff on soya beans.


US commitments to China, the world’s largest importer of soya, are 19% less than 2016.  The USDA’s export soya forecasts to China have been reduced from 60% to 53%; although this has caused price declines in both soya bean and soya meal over the last week, with uncertainty making the funds nervous, but in the longer term the soya market could lift.  With growing world demand and world soya bean production likely to decrease by 10Mln T to 338Mln T Oil World predicts a world production deficit in 2017/18 and a reduction in world closing stocks of soya.  Argentina has imported US beans to fulfil its soya bean meal contracts, and the US crush is expected to be high as demand for meal is displaced worldwide.  With little global storage for meal, soya bean meal prices could increase to ration supply although the discount on US material may continue for some time to encourage US trade with other countries.   With China consuming 32% of the world’s meal and the impositions of tariffs, China has demonstrated an increased interest in alternative materials not traditionally used by them such as sunflower meal.  This again could indicate dramatic changes in the supply and demand far reaching the commodities normally seen to drive the markets.  GM soya is about £360/t delivered to the mill.

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The Flat-pack.  A stylish piece of furniture that my wife must have, with assembly instructions translated from Swedish and several bags of weirdly shaped pieces of wood, metal and plastic.  Finally, surrounded by a few large parts and a million small ones, trying to make sense of inadequate drawings, the stress starts to build inciting rebellious day-dreams of a bonfire.  So what if you could simply hire an assembly robot at the same time as you bought the flat pack?  A Singaporean University has now designed a robot that can assemble an Ikea chair in less than 9 minutes.  So now the challenge is how to position and turn on the flat-pack robots to build the flat-pack chair.  Or as an alternative to programming your robot to build that Ikea chair … could we persuade anyone to invest in a wearable chair?