Market Report

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Special One Grain Commodity Market Update 09/03/10
The European wheat crop will start to exit dormancy in the next few weeks as temperatures begin to increase. Overnight lows beginning March 9 will rise into the 40s and low 50s across Spain, France, Germany, the United Kingdom and Italy – which accounts for 65-70% of Europe’s total production.
As we reported last week, the snow cover in the Northern Hemisphere has been good across the winter wheat growing areas and this is no exception in Europe. The weather forecast offers ongoing rain in Western Europe through the next two weeks, limiting spring field work, but benefitting winter crops. At this stage the market is assuming trend line yield on an EU harvested area of 26 million hectares, vs. 25.9 million last year, which allows for production of 143mmt vs. 138.2 mmt’s last year. Assuming these yields are established, the European union will have another year of wheat stock building and solid exports is forthcoming as production rises to its 3rd highest level since 2000.
EU Wheat Production & Yeild
160,000 Production 140,000 Yield 5.00 120,000 6.00
Production (K mt)
4.00 100,000
80,000
3.00
60,000 2.00 40,000 1.00 20,000
0 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11
0.00
European milling wheat prices have fallen in the Black Sea (being the cheapest wheat on the world market) and have been filling tenders from the Middle East and North Africa. French milling wheat is valued at just a $2/mt premium to Russian offers and discounted $20/mt against US wheat. Currently the European wheat market is trying to discover a price that will boost nearby demand which will allow the clearing of old crop stocks, before the onset of the new harvest in May and June. Assuming the build up of stocks once again in the European union, we would expected limited upside in the wheat prices and potentially downside pressure when new crop wheat comes on stream. This outlook is only likely to change if we see adverse weather conditions in the US or Northern Hemisphere over the next two months that will dramatically change the current circumstances. Prices must boost demand – and the only way this can occur is to find a low enough wheat value that will stimulate demand. The EU and the world is a washed with wheat, and a demand or weather driven rally is needed to capture stronger prices.
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Yield (t/Ha)
Chickpeas ‐ Approx 2 weeks ago reports of a reduced crop in Pakistan lead to renewed overseas buying interest from the Indian Sub‐continent. This increase in demand lead to the Australian domestic market trading up to $450/mt delivered packer. This price was a trigger for a number of growers and appears to have flushed out enough peas to satisfy buyers demand. Since then the buyers have once again gone to ground and demand has all but diminished. Some market analysts believe overseas demand for Australian chickpeas will continue for the next few months, however it seems more than ever the current chickpea market is very fickle and price and market direction is really anyone's guess. Current prices at $420‐$430/mt del. packer. Fababeans ‐ the fababean market is very quite with little to no buying interest. Some believe that the New England tableland sheep graziers will look for beans during the autumn/winter months, however a number of the regular users in this area have already established contracts with suppliers over a spread for this period. Given cottonseed will also soon start to become available as another feed protein source and the recent drenching the east coast of Australia has seen in the last week, as well as a large sorghum crop about to be harvested, feed fababean demand is likely to be limited. Price indications, if a buyer can be found, are around $180‐185/mt farm depending on relative location to the buyer. Export demand is also limited for No. 1 quality beans with prices back to $220/mt (less $15/mt No.2) del. packer. However occasional shorts/buying demand may see this market at better levels.
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