Currencies
The £ continues to give little in either direction with the Bank of England’s pessimistic tone to long term economic growth coupled with the general global downturn, which always tends to mean investors switch off from currency as an option for their money.
Wheat
Wheat has thrown up a surprise downturn this week. Prices had begun to push higher last week ahead of the USDA report, with harvest in the northern hemisphere, and certainly in some parts of the UK, all but done now.
The report itself, although not bearish, did not give any fresh bullish news owing to the adage, ‘you have to keep feeding a bull’. This has meant this week we have seen £17 per tonne off November wheat futures! This broke through the hard support price of £260 which had been giving us a floor to prices for sometime now.
The question now will be if prices continue to further test lower or if we retrace back up to our previous floor which would give us the same sideways range again.
The Ukraine grain corridor is still the biggest unknown in the market with questions raised about just how much volume is likely to come to fruition.
Further underpinning that, is the maize story. There have been dramatic yield cuts in Europe and US due to the hot weather, which will in turn put more demand on wheat and further support prices. The US are reporting the second lowest carryout in 8 years and Europe cut their crop projections this week by 10 MlnT.
All in all, the short-term reprieve we are seeing currently in prices feel just that and longer term the view is still for higher prices giving us a small window of opportunity.
Soya
Soya has followed other markets and moved lower post report but perhaps for more strong fundamental reasons.
The report itself did increase production slightly but after seeing prices rally last week, the outlook for main growing areas in the US was for good levels of rain over the next 10 days which should be in time to help with the critical pod development due over the next 2-3 weeks.
Longer term we also have the highly anticipated large South American crops but as they are barely in the ground, it would be difficult to grasp onto that too much as a story!
As mentioned before, the EU has dropped their sunflower projections down to 10.3 MlnT, from closer to 11 MlnT as expected with the uncertainty over exactly what will come out of the Black Sea areas. There are also concerns overheat damage to crops which is beginning to push up winter prices.
Organic
Organic cereal offers are beginning to be offered a little more freely which is finally giving the market a truer value. Wheat has seen around a £20 per tonne drop from first offers back in July time although again, there are concerns over the stability of supply from some Black Sea areas so we would view this as an opportunity!
Proteins, both sunflower and soya crops are looking good and at the moment, supply seems more than adequate. There are still rumblings of issue with some Indian certification bodies but these do not seem to be impacting price at the moment because of the levels of stock being held across the UK and Europe.
Regards,
Kay Johnson & Martin Humphrey
