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Europe raises the red flag …

Nidera Australia Weekly Market Report – 20th June, 2017

Peter McMeekin, Nidera Australia Origination Manager

The fate of the North American winter and spring crops have been hogging the limelight on market wires and futures exchanges over the last few weeks. Meanwhile, on the other side of the Atlantic the European crop has, up to now, been ticking along with relatively few issues.

However, the benefits of the widespread rainfall throughout Europe in May, are being eroded by hot and dry weather across many parts of the continent in the first two weeks of June. This is jeopardising production, particularly in western European countries, where above average temperatures are forecast to continue for at least the next ten days.

The recent dry conditions has led to agro-economic consultancy Strategie Grains to cut this year’s European Union (EU) soft wheat crop by 1.1 million metric tonne (MMT), to 141.6MMT. Nevertheless, this is still 5.5MMT above last year’s 136.1MMT crop. The yield downgrades were primarily in France, Germany and Spain, with the later suffering the worst of the hot, dry weather.

The barley story is quite similar, with production being cut in the same three countries. Strategie Grain’s latest EU production forecast is now 58MMT, a reduction of 1.6MMT month-on-month, and about 2MMT below last year’s final production number.

Like in the US, and here in Australia, the weather is now a big watch for the European winter crop. The aforementioned countries certainly require good rains to arrest the downward crop revisions, and parts of central and eastern Europe also require more rain to maintain current yield forecasts. Widespread frosts, particularly in northern parts of the EU, are also playing havoc with their soil moisture profile.

In Russia, spring conditions have generally been quite favourable, with crop yield estimates running at average to above average, at this stage of the season. Favourable to wet growing conditions across the Caucasia and Volga Regions of Russia has seen wheat productions estimates increased 2MMT to 69MMT. This is only 3MMT under last year’s record crop.

Weather forecasts through the Baltic states, Poland, Belarus and down into Ukraine have been dry in recent weeks, sparking upward price reactions in local markets. Until early June, the central-northern reaches of the Ukraine had seen less than fifty per cent of normal spring rainfall but recent falls have eased the concerns and the crops have reportedly held on extremely well.

Further south, the recent rains have added to production, compensating somewhat for production losses further north. There is also very good moisture available for the summer crop planting program in this part of Ukraine. The satellite-derived vegetation health data indicates excellent conditions in southern and eastern portions of the country. In contrast, there is poor vegetation health in central Ukraine due to spring dryness and drought.

With harvest in the Black Sea region fast approaching, the condition of their crop and the impact on export values will have a huge impact on the pace of Australian exports in the second half of 2017. Australia is certainly off the barley menu for Saudi Arabia based on price relativities, and the recent weather related rally in Australian values, may bring Ukraine into the China game.

On the wheat front, prices have rallied across all port zones in recent weeks, making the export task problematic for the back end of 2017. Simple numbers say that there is plenty of wheat in Australia after a record 35MMT crop last season. The big question is will Australia be competitive enough to find the required demand to maintain a wheat export program exceeding 22MMT? In the absence of a significant rally in Black Sea values, it would seem highly unlikely.

This will leave Australia with a carry out approaching 10MMT of wheat alone. Of course, this may come in handy if new crop production continues to decline as much, and as quickly, as the domestic market rally over the past week suggests.

Garsh, Sha-zam, Gall-lee …

Nidera Australia Weekly Market Report – 13th June, 2017 Peter McMeekin, Nidera Australia Origination Manager   As Gomer Pyle would say ‘surprise, surprise, surprise, looks like we have ourselves a weather market here Sarge!’ The relatively benign markets of the early northern hemisphere spring months have given way to increased volatility as a flurry of […]

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What will be the trigger?

Nidera Australia Weekly Market Report – 6th June, 2017 Peter McMeekin, Nidera Australia Origination Manager   European cereal crop estimates have been inching lower in recent weeks, with Spanish production the biggest culprit. Production in Spain is concentrated in the northern parts and the early spring dryness has developed into drought conditions, seriously impacting winter […]

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The rain in Australia falls mainly…

Nidera Australia Weekly Market Report – 30th May, 2017 Peter McMeekin, Nidera Australia Origination Manager Depending in which part of the country you reside, the winter crop planting/seeding/sowing season is well under way. However, the moisture profile is certainly quite variable, and rainfall totals across the continent for the first two months of the southern […]

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China solving it’s cornucopia…

Nidera Australia Weekly Market Report – 23rd May, 2017 Peter McMeekin, Nidera Australia Origination Manager   Global corn production is forecast to be lower in the coming season, but it is difficult to see values moving significantly higher despite the strong US corn export numbers over the past few months. The biggest declines are forecast […]

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El Niño bias retreats…

Nidera Australia Weekly Market Report – 16th May, 2017 Peter McMeekin, Nidera Australia Origination Manager   El Niño is a climate cycle in the Pacific Ocean with a global impact on weather patterns. El Niño refers to the extensive warming of the central and eastern tropical Pacific that leads to a major shift in weather […]

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Swings and roundabouts…

Nidera Australia Weekly Market Report – 9th May, 2017 Peter McMeekin, Nidera Australia Origination Manager   In a week of ups and downs for wheat futures markets, the United States Department of Agriculture (USDA) has decreased the nationwide wheat crop rating just one percentage point to 53 per cent good to excellent. This was at […]

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Ocean freight rates bunker down…

Nidera Australia Weekly Market Report – 2nd May, 2017 Peter McMeekin, Nidera Australia Origination Manager Ocean freight is seldom mentioned when we talk about factors impacting grain values in Australia, but it is certainly worthy of discussion. Put simply, ocean freight is the cost to transport the product from the port of loading through to […]

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