October 14th

Market Report

Our market reports are opinion based and are not instructions to trade. You are responsible for your own trading decisions.

November London wheat closed 50p higher yesterday helped by weaker sterling (low inflation figures). Export / fob prices improved with bids parity / small premium to futures, previously exports/fob were a significant discount.

Sentiment appears to have shifted to a general buy commodity attitude. International buyers (Egypt, Algeria, Saudi) have been recently purchasing, looking to stock up as wheat prices are 14% lower than the turn of year. Part of this buying impetus is due to Russian crop concerns for 2016 crop, there has been 40% less rainfall than normal and Russian wheat prices are also higher, partly due to stronger rouble.

Australian wheat crops reduced due to dry conditions and threat of El Nino continues to make headlines.

The U.K has produced two 16 mmt wheat crops, plus carry in that has been estimated at 3.5 mmt available surplus for exports (522,000 2 seasons ago) so exports need to accelerate (especially with biofuel plants closed but expected to start again by 2017 as E.U changes biofuel regime)
Last time there was 3.52 mmt surplus in 2008/9 futures fell to £87.50 but this was in different circumstances

USDA reduced Ukraine corn crop to 25 mmt with 17 mmt exports (-14% year on year), this still fells optimistic with talk of a 20 mmt crop; France has also downgraded corn crop.

US markets are up; corn dragged up by beans and wheat as commercial buying and possible Chinese bean exports fuel the rise.

UK markets are short term supported by limited farmer selling and short covering. If selling accelerates, demand would struggle to absorb it, however conflict between 2015 surplus and 2016 crop concerns will determine whether demand will increase.

author: Joe Beardshaw