World Grain - July 2015 - 22

GRAINMARKET REVIEW

Wheat
by Chris Lyddon

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Jun 2014

Wheat prices have been under pressure, but weather concerns around
the world have added a supportive element.
"World wheat export prices remained under pressure during May,
weighed by slack nearby demand and expectations for another season of
abundant global availabilities," the International Grains Council (IGC)
said in its Grain Market Report.
Its IGC GOI index had fallen by a net 5% since the previous report
a month earlier. "Nevertheless, there was a renewed focus on potential
weather threats to this year's global harvest," it said.
In the U.S., concerns about crops were most acute in HRW regions,
where the annual Wheat Quality Council tour found below average
yield potential following prolonged dryness, it said.
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some areas and were seen as potentially detrimental to yields and, in
particular, crop quality," it said.
"Given continued disappointing export sales, nearby U.S. export
basis levels were eroded, especially for SRW. Since the last GMR,
SRW export quotations weakened by $15, to $208 fob (Gulf). Late in
the month, export premiums for HRW entirely recovered from their
initial losses, bolstered by crop quality concerns and logistical probOHPVFDXVHGE\ÀRRGLQJOHDYLQJH[SRUWYDOXHVKLJKHUPPDW
fob (Gulf)."
While E.U. futures often responded to strength in the U.S., market
sentiment remained comparatively weak, pressured by mostly good
prospects for the next harvest and anticipated strong competition for
business from the Black Sea region, the IGC said.
"Amid little nearby export interest, export quotations in France fell
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some slowdown, solid export loadings underpinned values in Germany,
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Russian tax changes mean that country is set to be a big exporter in
2015-16.
"In the Black Sea region, nearby milling wheat prices fell by $11
PPWRIRE´LWVDLG³$OWKRXJK5XVVLD¶VH[SRUWWD[ZDVVXVSHQGed for the remainder of the season, export interest was reported to be
weak, with many buyers awaiting new season supplies.
"New crop Black Sea export values stayed competitive for the start of
the 2015-16 marketing year, with July milling wheat quotations down
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WRIRE5RXHQRQO\DVPDOOSUHPLXPWR%ODFN6HDYDOXHV´
In a monthly report on agri commodities, Rabobank said it maintained a neutral to slightly bullish view of wheat on the basis of crop
condition issues in several global regions, noting a decline in wheat
prices in the previous weeks.
"The USDA's June crop report reversed the early June rally by forecasting greater U.S. winter wheat production than the market expected,
while modestly boosting global production," it said. "But concerns
about quality and potential price impacts can still evolve when the harvest progresses."

Wheat monthly price
U.S. dollars per metric tonne

Weather concerns support market
under pressure

No.1 Hard Red Winter, ordinary protein, FOB Gulf of Mexico.
Source: U.S. Department of Agriculture

The Black Sea region is now the benchmark for export prices, the
EDQNVDLG³5XVVLDQZKHDWH[SRUWVKDGEHHQÀRZLQJDJDLQVLQFHWKHH[port tax was canceled in mid-May," Rabobank said.
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several export tenders for 2015-16 delivery. Rabobank has increased
its estimate for the Russian crop by 1 million tonnes to 55-56 million,
"given that winter wheat is mainly in good condition and that the spring
barley planting has caught up to last year's place. Together with the
available stocks, this should allow for more than 20 million tonnes of
Russian wheat exports."
The USDA's Economic Research Service explained in its Wheat
Outlook why Russia's tax is not expected to hamper 2015-16 exports.
"The new tax will kick in and limit Russian exports only if world
ZKHDWSULFHVJHWPXFKKLJKHURUDQGWKHUXEOHH[FKDQJHUDWHGHWHULRrates much further," it said. "With current near record projected world
ZKHDWDQGFRUQRXWSXWZKHDWSULFHVDUHXQOLNHO\WRLQFUHDVHVLJQL¿cantly any time soon."
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that in case of a ruble crash, wheat supplies do not get drained out of
Russia, it said.
"The new tax regime appears to increase the risk in making forward contracts for deferred delivery, but encourage export contracts for
prompt delivery."
Rabobank also reported that wheat in parts of France and Germany
has suffered from dry weather and forecast a 10% decline in E.U. exSRUWVWRPLOOLRQWRQQHV³ZLWK¿HUFH%ODFN6HDFRPSHWLWLRQ´86
H[SRUWVZLOODOVRIDFH¿HUFHFRPSHWLWLRQZLWKWKHDGGHGSUREOHPRID
strong dollar.
Chris Lyddon is World Grain's European editor.
He may be contacted at: chris.lyddon@ntlworld.com.
We want to hear from you - Send comments and inquiries to worldgrain@sosland.
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July 2015 / World Grain / www.World-Grain.com

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World Grain - July 2015

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