january 2011 eu & global wheat market outlook

8/7/2019 January 2011 EU & Global Wheat Market Outlook

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WORLD WHEAT SUPPLY & DEMAND

Dec/Jan Changes/USDA January 2011 (Mmt)

Global beginning stocks increased.8mmt from 196.68mmt to 197.43mmt

Global Production decreased .7mmtfrom 646.5mmt to 645.82mmt

Global feed use reduced .3mmt from124mmt to 123.73mmt

Global total use reduced 1.1mmt from

666.4mmt to 665.27mmt

Global ending stocks raised 1.2mmtfrom 176.72mmt to 177.99mmt

Ample stocks to

meet global demandfor current marketing

year.

WORLD WHEAT SUPPLY & DEMAND

USDA January 2011 (Mmt)


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European Wheat Supply and Demand

January 2011 (Mmt)

EU production increased .3mmt to 136.53mmt

Imports decreased .5mmt to 4.5mmt

Feed use decreased 1mmt to 53mmt

Total use decreased 1.5mmt to 122mmt

Ending stocks increased 1.3mmt to 12.91mmt

Current

export pacewould

suggest

lower endingstocks.

France is key

European Wheat

USDA January 2011 (Mmt)

Exportshold firmvs. last

years anddown

3.3mmt

on 2008/9

Downward trend

in End stocksfrom 18.97mmt

in 2008/9 to

currentestimated level

of 12.91mmt.Trade feels this

level could belower

Marketconditions

suggest thiswill continue

to decline

unlessprices easeoff current

level


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European Wheat

Overview of USDA figures

EU Production Increase to 136.53mmt comes aslittle surprise with strong wheat prices around our

planting window in EU encouraging increasedplantings amid positive planting conditions

Imports are reduced .5mmt Reflecting greaterflexibility and drive by EU consumers to maximize EU

output/quality

Decrease in feed use reflecting price rationing in thissector as animal producers struggle to cope with high

compound prices. Set to continue!

European Wheat

Overview of USDA figures

Overall consumption down 1.5mmt. We are seeingthe first signs of human consumption rationing. If wecompare price movement in Europe to that in the US

we can see that both the magnitude and volatilityhave been greater in Europe. Balance sheet is also

opposite to US.

Exports remain at 22mmt. Key exporters such asFrance and the UK are seeing export pace raise

serious questions.

Ending stocks increased to 12.91mmt, however thepoint above brings into question this figure.


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France

Overview

Winter wheat plantings ended in late November with strong areaestimated by Agrimer for winter and spring wheat plantings at

5.03mha

French exports reduced by around 9% on last years figure byAgrimer at 18.77mmt representing 6.85mmt to EU and a record11.8mmt for third country export and compared to 9.8mmt last

year.

French ending stocks estimated at 1.96mmt vs. 3.4mmt last yeardown 42.5%

Trade feels this figure may even lower.

Talk of Export restrictions from French Ag ministry that aresubsequently dismissed add further concerns. Will Australia and

Argentina be in a position to deliver to world market??

France

Overview

Talk of Export restrictions from French Ag ministrythat are subsequently dismissed add further

concerns. Will Australia and Argentina be in a positionto deliver to world market??

High cost of feed sees French co-ops beginning tosource feed requirements from imports including corn

from Ukraine and Sorghum from the US.

Sourcing of lower grade EU wheat from Germanycontinues as operators blend, retaining as muchquality until back end of marketing year. Expect

quality premiums to build for French wheat in end ofmarketing year. Main holder of volume quality wheat

in Europe


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Germany

Overview

First German planted area estimates sees winter wheat areaunchanged for 2011 at 3.26mha.

Wet weather hindering planting intentions is primary driverbehind lack of area increase despite Rapeseed plantings falling

foul of weather.

Logistical blockage in central Germany (Rhine) as ship carryingtoxic load sinks is not expected to upset overall trade.

Dioxin contamination further hitting an already hard hit feed

industry

German A and E wheat retain premiums with firm upward trendin tact on cash market.

UK

Overview

DEFRA peg UK exports at 1.3mmt. Howeverwith pace already way ahead in the first halfof marketing year 2010/11 this estimate is

unrealistic.

Therefore with ending stocks figure of 2mmtwe can expect the end result of this years

exports to impact this figure.

Question mark over ability to meet salesalready on the books with current stocks


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Spain

Overview

Spanish output for 2009/10 4.7Mmt vs. 3.3Mmt(Marm)

Demand continues to avail of discounted nationalwheat prices vs. imported values as has beenreflected in basis these past several months.

Feed and animal sector continues to struggle with

current high prices, reflecting the trend across Europe

European Exports

Slowdown slow despite current price levels

Last week saw 675Ktbeing awarded. Thoughts

of previous two weekslevels of 72Kt and 188Kt

seeing demand rationedpremature


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European Exports

Shift in Pace and Direction

European market

Persistent calls from the political world for strong regulation onfutures market are a concern.

Continued misunderstanding and misappropriation of blame oncurrent price rise by politicians must be put in check.

The current bull run in Europe strongly reflects underlyingfundamentals!

Kneejerk reaction from Commission could ultimately cripplethe very tools that can help a struggling EU commercial

market from mitigating risk.

Need for greater dialogue between all concerned parties.


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Southern Hemisphere

Australia

Australia

Decrease in production of.5mmt

Increase in feed wheat total to5.4mmt

Exports decreased 1.5mmt

Ending stocks increased .5mmt

Expect feed % to potentiallyincrease and exports to declinefurther

Exportable surplus in wrongarea

Floods impact on logisticsexpected to be limited


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Argentina

Beginning stocks raised .9mmt

Output raised .5mmt

Exports increased .5mmt

Ending stocks increased .9mmt

Trade talking of outputpotentially reaching 15mmt

Industrial unrest is back withfarmers halting sales of wheaton export quota dispute

Brazil will mop up much of

Argentinas wheat exports

Implications of Southern

Hemisphere on Europe

With Australias impact on world trade reducedand Argentinas looking at disruptions, any

expected alleviation for European export pacerests with the US export market.

Market volatility sees nations building stocks asis reflected in Egypt and Saudi Arabia


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Corn

We will follow corn and beans out to March

Corn

Brazil and China data left unchanged

US Corn accounts for up to 60% of globaltrade

We need to see more demand beingrationed

We cannot afford a reduction in supply yetthis is what we are getting


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Chinese Imports of Corn

Will they cease importing??

Other external Drivers

USD

Inverse relationship with grainsmay fail to stem price rises as

fundamentals both internal andexternal dictate terms


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Other external Drivers

Funds

Global wheat futures market


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Moreupside

potentialin

Chicago

thanParis!


Current S&Dsuggests this

trend may bebroken or at least

well exceeded.


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Despite current spread,logistics, freight and

Euro weaknesscontinue to see demand

come into Europe


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NYSELiffe forward curve

NYSELiffe forward curve

We should expect this spread to

move higher as quality premiumsbuild into back end of 20010/11.

However, corn strength may limitthe widening of spread.


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When will the bull run end?

Monitor OI closely. Smart

money always gets in first andout first. Any correction in

current trend will be preceded

by move lower in OI

EU Basis

French 11% Pro


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EU Basis

German 12% Pro

EU Basis

National 11% Pro


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EU Basis

Italian 11%+ Pro

Recommendation

For recommendations contact your Risk managementConsultant

Watch for the inverse in NYSELiffe milling wheat whenplacing your hedge


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Thank you

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january 2011 eu & global wheat market outlook

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