Market Update July 2011

Grain markets remain extremely uncertain with various factors having conflicting effects on price levels.

In Europe the harvest has stalled from central France northwards as wet weather has stopped play. There are some concerns that quality may be impaired in northern parts of France. However conditions remain very supportive for a large EU corn crop.

Recent crop estimates have raised the size of the EU soft wheat crop following rain in June and early July. With Russian and Ukrainian prices trading at significant discounts to EU levels it is clear that importers who can accept Russian / Ukrainian wheat will buy that rather than EU origin.

In the USA extremely hot weather has raised concerns regarding the pollinating corn crop. Added to doubts as to the validity of the USDA’s planting estimates, this has supported Corn and wheat prices in US markets.

Ukraine’s farm minister raised the official estimate of their grain crop to 47 mln t. This is 4.6 mln t above the USDA’s forecast of last week. Egypt is also rumoured to be about to re-admit the Ukraine as a wheat supplier.

Actual market activity remains at low levels. We have yet to see any UK wheat cut and therefore quality and yield are unknown. Consumers are largely absent from the market – but so are farmers, whilst the macro-economic picture in the euro zone and in the US is a cause for concern. In amongst all of this the next price move is hard to call. Uncertainty breeds more uncertainty, which in the grain world equates to more volatility.

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