Mel's Market Report August 2018
It doesn’t seem two minutes since we were knee deep in spring snow with no “spring flush” of milk . Now there is not a drop of water to keep our grass developing. Heat stress on the cows can easily knock two litres a cow a day or more off production – around 3 to 5%. This does not look good for milk volume or for cream fat.
Butter prices are all over the place which causes big buyers to hold off taking cover. This hesitation could cause disappointment as the market could take off and head towards last year’s highs once again, leaving cover difficult to find.
Milk prices are on the increase and Cheese and milk powders remain firm.
Pricing remains stable on Sugar for the third consecutive month supporting the various theories that the market may have found a bottom. Concerns that recent hot and dry weather across the European beet belt may potentially affect crops have been quashed by the abundance of raw material still available that was carried over from the previous campaign year. This together with the lack of appetite to export on the world market means that the EU is still highly stocked with sugar product keeping.
The market remains tight for wheat as access to material is tightly controlled and stocks begin to reach lower levels. In addition, the EU Commission has cut its forecast for 2018 EU Soft Wheat production by 2.6 million tonnes making this year the smallest production year since 2013. With Russian wheat crop forecasts down also, the market has no real drivers to support easing in the short to medium term.
OILS AND FATS
Soybean oil: The Soybean Oil prices moved higher again during June. The jump in levels was caused by larger than expected export figures coming out of the U.S.
Rapeseed Oil: Rapeseed Oil had a strong month and showed upward movement. A lack of sellers is currently causing the majority of this firmness. Biodiesel demand and concerns over next year’s crop due to the hot and dry weather is keeping upward pressure on prices.
Palm Oil: The Palm Oil market bounced back from losses seen mid May but has now followed the upward trend set by competing oils. With Crude Oil rising this is making Palm Oil attractive in the energy markets. This market continues to be weighed down by poor export figures.
Sultanas: New season crop development is not as good as had been anticipated. It is now likely that we will see a 15% volume reduction compared to last season.
Factoring in the GBP/USD exchange rates we have seen an increase over this season of 40% and this looks set to continue as we go in to new crop negotiations.
Currants: It is still very difficult to extract offers from Greece. Current crop is largely already sold out and presently, packer/processors are nervous about offering anything for new crop in case the weather over the summer is as hot as last year and the crop is further reduced for the third year in a row.
For that reason, it is hard at present to cost pricing for October deliveries onwards, at least until the exporters feel confident enough to take a view on how supply might play out this year. That said prices will remain high.