Wheat prices have come under pressure in recent months as the market has become more aware of the approach of an increased crop and what is likely to be a marketing year with a comfortable supply situation. However, more recently concerns over supplies in some areas have proved bullish for wheat while the U.S. government shutdown in the first half of October created confusion by triggering the cancellation of several important USDA reports.
In the Food and Agriculture Organization’s (FAO) Crop Prospects and Food Situation Report for October, the United Nations body said that “export prices of wheat in September remained relatively unchanged compared to the previous month.”
“The benchmark U.S. wheat price (No.2 Hard Red Winter, f.o.b.) averaged $312 per tonne, which is 16% lower than in September 2012,” the FAO said. “Strong export demand, particularly from China, and the weaker U.S. dollar more than offset the downward pressure provided by favorable prospects for the 2013 world wheat output, forecast at a record high,” it said. “Export prices from the Black Sea region and Europe were also stable in September.”
The International Grains Council (IGC) in its Sept. 26 report, said that the wheat sub-index of its IGC Grains and Oilseeds Index (GOI) rose by 1% month on month, underpinned by quality issues and export demand, but remained around the lowest levels seen since June 2012.
“Increasing confidence that world wheat supplies would be adequate in 2013-14 weighed on market sentiment during the first part of September,” the IGC said. “Weakness also stemmed from declines in row crops, especially corn, although this was tempered by solid export demand.
“Markets turned more bullish towards the end of the month, boosted by concerns about lower export potential in Argentina and suggestions that China would need further imports,” it said. “Prospects for ample world wheat supplies and a record corn harvest continued to weigh on futures in the U.S. There was additional pressure from concerns about slowing export demand. However, exporters were more optimistic at the end of the month as sales continued to outpace the level needed to meet the official export projection.
“Expectations that Brazil would need more non-Mercosur purchases following potentially crop damaging frosts in Argentina and that China would likely import more because of a sustained rise in local prices, helped to spark a late-month futures rally,” the IGC said.
Analysts complained that the market was kept in the dark during a crucial time because of the U.S. shutdown, which meant that regular USDA reports did not appear during the first half of October. However, U.S. Wheat Associates reported that export trade carried on as normal. “USW is pleased to report no disruption in U.S. wheat exports as a result of the U.S. federal government’s partial shutdown from Oct. 1 to 16,” it said in its regular Wheat Letter publication. “Federal grain inspectors, employed by USDA’s Federal Grain Inspection Service (FGIS), sample, weigh, inspect and certify nearly every wheat shipment exported from the United States,” USW explained. “These inspectors remained on the job weighing and inspecting grain for export. While some FGIS employees were furloughed, user fees support inspectors and their work was not affected by the lapse in Congressional appropriations.”
It noted that USDA had announced it would not release the World Agricultural Supply and Demand Estimates (WASDE) report originally scheduled for October 11, “nor will it make up two weekly crop progress reports that it would have issued during the shutdown. Yet, USW is glad that USDA colleagues are back to work and believe our customers should be encouraged that the U.S. wheat store remained, and will continue to be, open for business.”
David Sheppard, managing director of U.K. traders Gleadell, highlighted support for prices in Europe. “E.U. markets also remain supported by the likelihood that the Black Sea region may disappear from the wheat export market, either to concentrate on exporting bumper corn crops or replenishing stocks, especially given the area’s new-crop planting problems,” he said in a report on the market. “E.U. exports are running 3.5 million tonnes ahead of last season, although the main export push has not been from France, but more from German and Eastern E.U. states.”
The U.K.’s HGCA reported on Oct. 18 that Paris wheat futures for November 2013 delivery rose through the €200 per tonne mark, a key psychological level not seen since June. Strong Chinese demand has continued for both U.S. and Australian wheat, it said.
Chris Lyddon is World Grain’s European editor. He may be contacted at: email@example.com.
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