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Grainexx Market Report 24/2011

If people are calling this market a roller coaster ride, then I have to say, it´s a very tough one. Every time in the last months we have been in 4 weeks of a one-way street in the market and were trading both ends always on the very extreme sides.

After going up by Euro 60,- a ton in the second half of May, the malting barley market has now completely lost all these gains and is back to levels we had in the middle of May.
One might well consider the up-move in prices earlier as too much exaggerated, but then one has to be fair and say that this correction might also be overdone.

Business in the malting barley market has been very sporadic this week, but there is a little bit more brewers´ interest coming up. The question is: Is that only sniffing around, or do brewers take a chance to further increase their coverage – now at prices which might be a little bit more realistic and more suitable towards their budgets.

All the grain markets are driven by the international futures market, such as Chicago and MATIF. People are desperately looking for an explanation why after last week´s USDA figures for the US and the world crop, as well as after yesterday´s publication from Stratégie Grains concerning the EU crop, markets could come so much under pressure?! The USDA report had to be considered as bullish, especially for corn. They had reduced the global ending stocks of the old crop by close to 4% and had reduced the ending stocks of the new crop year in comparison to this year by 5.5 million tons and by 17.3 million tons (which means more than 13%) in comparison to their own May report. For the first time USDA sees the global corn balance sheet in deficit. On the other hand there are very lively discussions that due to financial problems and budget difficulties the US government might reduce the subsidy for ethanol production which would of course be a shock to the US industry.
Stratégie Grains in their yesterday report further reduced the EU-27 wheat crop by about 6 million tons to only 125.6 million tons. They also further reduced barley to 52.2 million tons (versus 54.2 million tons in their last report and 53.1 million tons in 2010).

The UK wheat crop is estimated to be around only 12 million tons, which would be about 1.5 million tons below the 5 year average.

Still in the wheat market it´s all about Russia where wheat and barley are offered quite aggressively and do not find buyers.
This seems to be the biggest problem in the physical grains market that there are no buyers around and every consumer for every product in the world keeps on waiting until prices drop further.
However, this would increase the risk of a bigger up-swing, once the first bigger inquiries would show up.
Apparently there are also recommendations by some “financial experts” to get out of agro commodities (Watch out: We have seen this in March before, and after that we had the steep up move to new highs).

Due to a rainy weather period we have unfortunately not much more details about the progress and the quality results of the French winter barley crop. We heard some results from South of Paris which were confirming the yield losses of 15 to 20%, lower screenings (sometimes 50 to 60%) and a very heterogeneous picture as far as proteins are concerned: Sometimes absolutely within the range of 11.0 to 11.5%, sometimes being much too high between 12.5 and 13.5%). France should get dryer after this weekend and then further harvest progress can be expected. By then, we might get also the first two-row winter barley results from the South of Germany. We will inform you then accordingly.

Canada still looks cool and very wet, and they cannot get their crop in the ground. So still they are way behind schedule now, and the number of acres staying unplanted is increasing.

The talks on the Argentinian barley turned quiet again for the time being. No wonder, with these lower market prices!


We have always stated that a drop in prices (even if we would not have thought about such a large drop) is an opportunity to buy, and we think it is a good chance right now.

We wish you a good and relaxing weekend in these crazy markets and a very successful week next week.

Please note actual last prices for crop 2011 which we heard:

France basis July 2011 plus Euro 0,93 /ton/month
FOB Creil Sebastian and other spring barley Euro 270,-/ton (nominal value)
FOB Mosel Euro 280,-/ton (seller), last traded value Euro 283,-
FOB Creil Esterel Euro 235,-/ton (nominal value)
FOB Mosel Esterel Euro 245,-/ton (traded value)
FOB Creil Cervoise Euro 225,-/ton (nominal value)
FOB Mosel Cervoise Euro 235,-/ton (seller)
Denmark basis October 2011 plus Euro 0,60 /ton/half-month
Spring barley Euro 270,-/ton FOB (seller, some people even talk about Euro 265,-)
UK barley Euro 270,-/ton FOB (nominal value, market deadly quiet, no prices discussed)

If you have any questions, please kindly let us know.

Link: http://www.grainexx.com

written by Grainexx on 17.06.2011 um 15:56.

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