Currencies

The £ has lost value this week against both the € and $, and in particular against the $ is now testing what we call a ‘double bottom’ support line. If it bounces off this line then it is effectively saying it is not ready to move any lower which in turn, is likely to see it move higher.

Long term the view for the £ is still bullish but the decision by the Bank of England to keep interest rates where they are for now has dampened that optimism slightly.

Wheat

Wheat markets have almost been a story of two halves. We did see a £9 drop on the May futures at the start of the week which was mirrored across all wheat markets. This was largely seen as profit taking ahead of the USDA report on Wednesday.

The report however did further tighten stocks, and despite the positive news that Russian production had increased slightly, it was not enough to stop the markets moving back up. We are finishing the week effectively where we started back last week.

 Some areas around the word are close to switching into corn, despite the bull run which corn is having. This, in theory would help global wheat prices, however for now, UK wheat is still competitive relative to Matif wheat, meaning UK prices could move high yet. Our balance sheets suggest the UK would be a net importer at the end of the season so to be running at a discount to Europe does not make sense.

Looking ahead to next season, the UK farmers have seen a good start to their planting campaign, and this is being mirrored across the rest of the northern hemisphere. In the US, the high wheat prices are encouraging more acreage over corn. If this all comes to fruition and we have a good growing season, harvest etc, then it all looks very positive for lower prices, but this is all still a long way off!

Soya

Soya has turned since the report with a slightly bullish tone, lowering stocks.

US harvest is now 87% complete. Brazil are still reporting an expected volume of 144 MlnT and Argentina, 50 MlnT although there has been talk around a La Nina weather pattern which would make Argentina dry and could be one to watch.

Organic Markets

Organic grain markets continue their impossible rise upwards as we look further ahead into the season, largely driven by shippers unable to book forward freight and therefore, unable to cost this into prices. Current indications on container raw materials is that circa $350 for every tonne is to cover freight costs, whereas in a normal market you would be looking somewhere closer to $50.

 In terms of physical raw materials, grain offers are tight and it is hard to gauge what there is still to sell at origin because the continuing rising prices is not encouraging offers.

For proteins we now have the concern about the Indian organic boards at risk of being decertified. This may well impact material which is either already in transit to the UK or even already in UK stores. If this does go through, it could significantly short the market in the nearby.

And Finally…

Regards,
Kay Johnson & Martin Humphrey