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Weekly Commodity Report w/e 6th April 2018

London wheat continued to gain despite losses in both the EU and US as domestic markets took precedence over global events as the expiry of the May 18 futures contract approaches.


Torrential Easter weekend weather was no surprise, but was problematic to both spring crops and forced grazing land underwater, so old crop was pressurised by higher than expected feed demand for this time of year.   AHDB reported `Season to date’ (Jul-Feb) animal feed production was up 11.5% for sheep, 8.5% for cattle and calves, 4.7% for pigs and 2.1% for poultry (including integrated poultry units), compared to the same period in 2016/17.  For the same period wheat and barley usage to produce animal feed was 2.6% and 24.7% higher compared to last season.   The UK is a net importer of wheat this year with a 2000T vessel loading in Rouen this week destined for the NE biofuel plants. 

The USDA report lowered estimates for US winter wheat to 640Mln Bushels (750Mln B last year).  The crop progress report showed winter wheat ratings were at a 16-year low with only 32% good to excellent (51% last year).  This combined with fear of a continuation trend of lower protein quality was sufficient to trigger buying at the start of the week.  Informa left Global 2018/19 wheat overall unchanged at 744 Million T (758 Mln T last year).  The Russian wheat crop estimate for 2018/19 was 75 Mln T (85 Mln T this year), while the US estimate was 29 Mln T (30 Mln T last year).   US markets became especially volatile after China announced 25% tariffs on US imports in a tit-for-tat retaliation which amounted to a $50 Billion tariff on US soya, maize, wheat and pork, hitting Trump supporters below the (grain) belt.  Thus with many of the farming states being Republican supporters, China has cleverly targeted US politics to get its message across.  Soya initially saw a dramatic fall in prices affecting both soya bean and soya bean meal, which largely recovered the next day.  Soya beans accounted for $12 Bln of US exports to China last year.   The new tariffs are not in effect yet and are due to commence within two months, so negotiations are hoped to reduce the tensions, although news that Trump is threatening further tariffs against China will increase the current concerns.


On a global outlook the imposition of tariffs does not change the world supply or demand for these commodities but dramatically changes the supply network and trade flows.   If China decides to buy soya only from outside the US, then South American soya will be less available to other importing countries that will then be forced to buy from the US as an alternative.  China imports around 100 Mln T soya, of which Brazil accounts for 53.3%, and 60% of the worldwide trade.  With the Brazilian crop predicted to be 117 Mln T the numbers for China are tight, but possible.  The USDA did announce a sale of 129,000 Mln T of new-crop soyabeans to China but the total US beans left unshipped to China for 2017/18 is 2.8 Mln T, plus 3 Mln T of US beans left to ship to other unknown destinations, with the majority assumed to be China.  Five million tonnes of US beans are at risk and Brazilian bean offers for May went sharply higher on expectations of increased export opportunities.  Chinese feed mills are said to be frantically trying to source soya meal substitutes.  Chinese importers who ordered US commodities prior to the Chinese tariffs are diverting vessels to Vietnam and other Asian destinations.


Bored after a yet another typically wet Easter Bank holiday weekend? Looking for some retail therapy? How about owning a piece of aviation history?  A spitfire, a biplane or even an old hot air balloon?  The contents of Heathrow Terminal 1 will be auctioned off in two weeks’ time.  What about one of the 110 check-in desks, nine travellators, or even a huge (15m x 3m) welcoming mural painted by Stefan Knapp?  Think of the fun you could have with your new airport security scanner!