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Keeping an eye on the grain market: March 8 update

Could Vivergo could be set to reopen its doors in the UK and provide a boost in demand?


Alex   Black

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Alex   Black
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Keeping an eye on the grain market: March 8 update

Vivergo could be set to reopen its doors in the UK, which could provide a boost in demand to support UK prices.

 

Global markets have been supported by dry weather across the US plains.

 

And Russian prices have risen mainly due to logistical issues.


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May 18 LIFFE wheat futures closed on Wednesday March 7 at £144.75/t, a rise of £5.90/t on the week


UK - Demand boost to support UK prices?

UK - Demand boost to support UK prices?

News filtered through earlier in the week that Vivergo was set to open her doors once again following several months of closure.

 

The news helped push old crop UK wheat prices a couple of pounds higher, in contrast to losses on Tuesday for wheat prices across the Channel.

 

While this ethanol plant is expected to operate at a reduced level for a period, and as we enter the final quarter of the season, the implications of its return for the domestic balance sheet may not be insignificant.

 

Perhaps 250,000t or more of additional wheat could need to be found in the old crop marketing season, from either domestic or foreign sources, perhaps bringing importance again to import parity calculations.

 

Looking ahead, basis levels are seen a key indicator ahead as Vivergo would need to compete with the strong demand pull of the compound feed industry, as well as from the other large ethanol plant, Ensus, in Teeside.

 

However, the plant’s re-opening will again provide volumes of its by-product to the market, something compounders will readily absorb to the detriment of grains.


Feed barley prices continued their relentless trajectory higher, supported by very robust demand, notably from the compound animal feed sector. The discount of barley to feed grade wheat has all but vanished for many sellers, while rapeseed prices have weakened, making £300 hard to achieve for most farmers.

 

Rupert Somerscales, ODA


European - MATIF finds support in global markets

European - MATIF finds support in global markets

MATIF has firmed since our last report, supported by rises in global markets, international tenders and gains in Russia wheat prices, mainly linked to logistical issues.


The return in earnest of winter conditions has disrupted and slowed Russian shipments. EU markets took some comfort in becoming more competitively priced, especially in the more recent Saudi and Algerian tenders.


It is reported that German and Baltic wheat are likely to fulfil the Saudi business, while the recent rise in Argentinian prices should allow France to take the Algerian trade.


This more positive export outlook is much needed, with current shipments being over 20 per cent lower year-on-year. However, reports that warmer temperatures, which should free-up Russian logistics, may point to the likelihood of increased Russian exports and potentially lower prices.


Much debate will now take place over the recent severe freeze and its impact, although most of the European and Black Sea crops have come through the winter in relatively good condition.


Increased inventories should provide a level of security against potential crop losses, both in the EU and Russia. Although it is likely that some damage has occurred, major crop losses over the past years have been more as a result of adverse summer weather, rather than winter-kill issues.


For the wheat market to turn from a spike to a long term bullish outlook, a major crop failure or two may be needed, which leaves weather and upcoming US spring plantings key factors to monitor.

 

David Woodland, Gleadell


Global - Dry US weather supports markets

Global - Dry US weather supports markets

Wheat markets have been gaining steadily over the past few weeks supported by continued dry weather across the US Plains. This week, US wheat futures paused in their rally midweek due to the release of the state crop reports which showed a slight improvement in Texas, rising from just 4 per cent good to excellent last week to 10 per cent this week.

 

Other states, including the key watch point of Kansas, remained close to unchanged. Next week the US will start to release national crop ratings giving a good overview of the whole winter wheat area.


Argentina is the other area that has been under scrutiny with dry conditions. This week, a private analyst dropped Argentinean corn crop estimates by 1 million tonnes to 35 million tonnes.


There is no real sign of any rain in the forecast but there is evidence that La Nina is coming to an end which should reduce the risk of ongoing dryness for the US and Argentina.

 

However, temperatures across the US plains are starting to rise significantly and as things warm up crops will break winter dormancy and soil moisture deficits will become more important. March will be a key month in which rains are needed to improve crop conditions.

 

Zoe Andrew, Frontier


Oilseeds - Markets wait on news

Oilseeds - Markets wait on news

The oilseed markets are still waiting for SAM news. With today’s USDA report published at the end of EU trading day any impact in the UK is likely to be felt on Friday morning. The Markets will be watching the numbers and also to see if the funds look to lengthen their current long position in US soybeans or sell out.

 

They currently hold a very similar long position to this time a year ago which was then reversed to a similar size short by early July. Close to home the relationship between MATIF OSR and CBOT soybeans has narrowed putting both commodities at a more normal relationship with OSR now trading at a much smaller premium to soya.

 

Consumers of meals and oils have certainly been shopping around for the cheapest alternative while OSR values were so high earlier in the season and this is being shown through ration compositions.

 

Moving forward UK consumers will be debating the crop number and trying to work out if the UK is likely to be net long of old crop OSR at the end of the season or if the small increase in UK exports to the EU could tighten the situation in the coming months or if Aussie imports keep a lid on things.

 

Cecilia Pryce, Openfield

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