Currencies

£ has continued to lose value against both the $ and € this week. The continued financial crisis with the Chinese real estate market is helping to strengthen the $ and as mentioned last week, the UK equity market is tied into this to a degree so being hit from both sides.

Against the €, we have lost value because the panic buying of fuel this week has made markets question just how much confidence consumers have in the state of the UK economy. A vicious cycle in effect!

Wheat

Wheat this week has ended up being all about the USDA report. The report gave more surprises which were not expected and as such, sent the market sharply higher. Both US production figures and end stocks were cut causing US markets to reach their highest close in a month. Matiff and Liffe both followed with the concern already there on the state of the European balance sheet for wheat.

UK wheat is currently competitive into homes such as Ireland and Spain but freight remains the biggest issue. It would appear that the UK market is largely covered up until Christmas so we may see a drop in prices down to purely down to a slow down in sales pace. However, this could be offset by the face that millers have now agreed to accept wheat with up to 16.5% moisture, ‘upgrading’ some of the volume which had been destined for the feed pile.

In truth, we now need the Southern Hemisphere harvest to be able to get a real idea of where the market is and hopefully, remove some of the volatility from the market.

Soya

Soya had a much more optimistic report with a surprise increase in stocks as harvest progresses driving Chicago to its lowest close since June.

The weakness of the £ currently though means that the UK market has not felt the benefit of this drop. Soya oil on the other hand has rallied with the increased demand for renewable fuels which us making for an interesting spread in the market currently.

Organic Markets

The organic markets for this coming winter continue to move up at an alarming rate. Organic cereals across Europe and the Baltic region are tight and there has been a portion which has been sold as conventional because premiums were still too low. This coupled with the ongoing  logistics challenges, has seen grain move up circa £40 per tonne in the space of a month.

Proteins remain the biggest area for concern with the supply chain unsure if they will be able to secure the container freight to supply Europe from homes such as China and India.

There are still questions over India’s crop and if they will even actively come to the market to sell which would see the UK switch their reliance to Chinese material, something which has not been the case before and comes with its own uncertainties. The mix of uncertainty over volumes and ongoing freight issues have seen soya move up to over £900 per tonne for new crop.

And Finally…
Happy travels this weekend!

Regards,
Kay Johnson & Martin Humphrey