Markets ended weaker all round yesterday
Despite the modicum of potentially good news from the banking sector yesterday the market still continued on its downward trend.
Their intervention has been seen as another sticking plaster only and the cynical would say that it only proves that there is indeed another credit crisis on the way, “how to turn bad news into good” one observer said.
New crop in particular found sellers towards the close of play.....think about it:
There are no supply scares at the moment
There are no weather scares....anywhere!
Crop establishment is reported to be excellent almost everywhere. (See HGCA report link below)
World production/stock keeps growing
Speculators have completely lost their appetite for risk for reasons that are obvious.
In my opinion there is no good reason that wheat prices should be in the mid £130’s for old crop and mid £120’s for new.
From the wires....
Crops/Weather: The US central Plains look to be in line for a major snow storm heading into the weekend which should be beneficial for winter wheat, and Europe also continues to push the dryness further south, but still leaving Ukraine completely dry with warmer than normal temps.
Similarly, N Africa, Turkey, the Middle East, Pakistan and India all have almost no rain for the next 7 days.
Few changes in the S Hemisphere with rain in eastern Argentina and the southern half of Brazil remaining well below normal, but Australia is pushing the rain out of the southern half which should bring some needed respite for NSW.
Markets: After an early rally, and with the exception of spot Chicago, US wheat futures showed general disdain for yesterday's concerted intervention by the central banks.
In a Lehman-style 'treat the symptom, ignore the cause' move, the banks threw US$ liquidity at Europe, which along with China lowering RRR for the first time in 3 years, pushed equities and metals sharply higher. But the gains in the soft’s were poor given the weaker US$, the 500 point rally on the Dow and the 5.5% hike in copper.
The Aussie crop looks big, but quality is a real question mark.
EU markets were all over the place yesterday, moving in a manner that (to us at least) was totally counter-intuitive: as the €uro soared 200 points on the central bank intervention, Matif rallied €4 from the lows, but then gave it all back in what appeared to be simply a mirror image of the US move. As usual in this kind of whipsaw market, cash trade was zero. And there was little fresh to say about the Black Sea - still some distressed nearby longs but still no farmer selling in the forward positions, and thus nominally unchanged values.
Outlook: The S Hemisphere remains hugely competitive on both milling and feed, and can easily assume the Black Sea's role of 'cheapest wheat' from now until spring, when the French and Germans might finally realise they missed the boat. All of which still makes its very tough to be bullish wheat.
DEFRA figures reveal value of agriculture to UK economy
Thursday 01 December 2011
Figures published yesterday by DEFRA reveal the contribution from farming to the wider UK economy is rising year on year. Welcoming the figures, the NFU today said the farming industry is playing a crucial role in stabilising the economy. Farming was shown to have contributed £7.4billion to the wider economy in 2010, a 5.3 per cent increase year-on-year.
The DEFRA UK Agricultural Accounts report also shows farm output increased, recording a 5.4 per cent rise as the value of UK agricultural production topped £20.7billion.
However, the figures show that farmers are still facing challenging business conditions. The overall profitability of UK farming fell by some £173m (-3.6 per cent) in 2010 as the industry saw input costs rise by 5.5 per cent whilst price rises for milk were shown to be below market value. Projections from DEFRA show higher input costs will again influence 2011 profitability, but indicate a two per cent rise in farming’s total income in the current year.
NFU chief economist Phil Bicknell cautioned that, “This headline performance is not representative of trends across all agricultural sectors or individual farm businesses. In sectors like dairy and poultry for example, rising input costs have outpaced any change in farm gate prices. Elsewhere, farmers and food processors are increasingly conscious of potential downward price pressure from supermarkets that could squeeze margins.”
Making agriculture less fuel dependent
According to the report, growing, manufacturing, processing, transporting, marketing and consuming food accounts for approximately 30 percent of global energy consumption and produces over 20 percent of global greenhouse gas emissions. Direct energy use from agriculture accounts for around 6 per cent of this.
On farms, energy is used for pumping water, housing livestock, cultivating and harvesting crops, heating protected crops, and drying and storage. After harvest, it is used in processing, packaging, storing, transportation and consumption. FAO spokesperson for Environment and Natural Resources, Alexander Mueller said an energy-smart approach to agriculture and food production could offer a way to produce energy as well as using it more wisely.
Mueller explained, "The global food sector needs to learn how to use energy more wisely. At each stage of the food supply chain, current practices can be adapted to become less energy intensive."
The FAO spokesperson continued that several steps can be taken for little or no cost at farm level to increase efficiency. These include using more fuel efficient engines, sourcing compost and precision fertilizers, irrigation monitoring and targeted water delivery to avoid inefficient water use, adoption of no-till farming practices and the use of less-input-dependent crop varieties and animal breeds.
After food has been harvested, improved transportation and infrastructure, better insulation of food storage facilities, reductions in packaging and food waste, and more efficient cooking devices offer the possibility of additionally reducing energy use in the food sector.
Several studies have shown that, adding up both on-farm and post-harvest losses, around one-third of all food produced — and the energy that is embedded in it — is lost or wasted. With more support, the FAO believes a significant amount of this could be avoided, thereby contributing to global agriculture’s ability to provide for an increasing population.
Please find attached UK crop development report, provided by ADAS on behalf of AHDB-HGCA.
Summary:
Autumn 2011 was mild and dry across most English regions. Parts of the Midlands and the Eastern region had cumulative rainfall of less than 70% of normal for the period, however in Scotland and the North West there was above average rainfall. Meanwhile air temperatures were above normal for most of the period, peaking at 6 degrees above normal in early October, and over 2 degrees more than normal for most of November. These conditions have allowed farmers to make good progress with the drilling of oilseed rape, winter cereals and field beans, with all planned crops now in the ground except for occasional first wheat crops following late harvested roots. The exception was in Scotland where the wet harvest, delays in baling straw and continuing wet weather caused some delays. The majority of crops have established well, despite some temporary uneven and delayed emergence in the driest regions. Farmers are up to date with fieldwork.
Full report can be found at www.hgca.com/markets.
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