World Grain - November 2010 - 88

FEATURE: MARKETS STILL IN 'ERA OF VOLATILITY'

Steve Jesse, left, head of agricultural commodities sales at Barclays Capital, and HGCA Senior Analyst Jack Watts were among the speakers at this
year's conference.

cheapest source of wheat with the Russian export ban, and bullish funds returned to the market.
The result had been a 50% increase
in Chicago Board of Trade wheat since
June. At the Marche a Terme International de France, wheat is up by 60%.
Watts highlighted the sharp swings in
the USDA's crop estimates, noting a fall
of 29 million tonnes in the world wheat
crop figure for 2010 between the May

world, but certainly they are less comfortable," he said.
He pointed out that the most important stocks were in the U.S., where
ending stocks are predicted at 24.6
million tonnes, compared with 8.3
million tonnes in 2007-08. He said
this is making the world a much more
comfortable place than it was in 2007.
Governments' attempts to gain an advantage in the face of recession added

"The U.S. will become a primary beneficiary from the demise
of the Black Sea. On paper at least, the U.S. can cope with this
extra demand."
- Jack Watts, HGCA analyst

and September reports. "The difference
in wheat is quite astounding," he said.
He cited changes in wheat crop estimates around the world. Russia's crop
had been cut by 24 million tonnes, the
E.U.'s by 10 million tonnes, and Canada's by 2 million. However, the U.S.
estimates were increased by 6 million
tonnes, China by 3 million and Australia
by 1 million.
"It would be wrong to suggest now
that wheat stocks were tight around the
90

to the uncertainty. "We're in this phase
now of very cyclical volatility between
currencies as everyone is trying to devalue at the same time," he said.
TOO DEPENDENT ON RUSSIAN WHEAT?
One of the most important drivers is
the Russian wheat situation as well as
the Russian government's response to
it. "One of the key questions is did the
world become too reliant on Russian
wheat?" he asked. "With a continental

climate such as those in Russia and the
wider FSU (Former Soviet Union) region, we cannot guarantee production."
Without wheat from the Black Sea,
the world would have to turn to the U.S.
"The U.S. will become a primary beneficiary from the demise of the Black
Sea," he said. "On paper at least, the
U.S. can cope with this extra demand."
However, the U.S. is at a freight cost
disadvantage, which he put at $12 a
tonne, into North Africa.
U.S. maize (corn) will outcompete
E.U. feed wheat, which gives the Europeans a problem. "The E.U. will find
it very difficult to export feed wheat in
2010-11 given the current price relationship with maize, so the emphasis will
be on quality," he said. "In France, we
knew that yields would be down."
Yields actually turned out better
than expected in France, while quality
was reasonable. Germany, however,
had quality problems.
"Only about 45 percent of the German crop will be selected for milling
compared with the usual 90 percent,"
he said. "Germany's had to rely on increasing exports of its feed wheat into
the E.U. That's in direct competition
with U.K. exports."
For Watts, the swings in the modern

November 2010 / World Grain / www.World-Grain.com


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World Grain - November 2010

Table of Contents for the Digital Edition of World Grain - November 2010

Contents
World Grain - November 2010 - 1
World Grain - November 2010 - 2
World Grain - November 2010 - 3
World Grain - November 2010 - Contents
World Grain - November 2010 - 5
World Grain - November 2010 - 6
World Grain - November 2010 - 7
World Grain - November 2010 - 8
World Grain - November 2010 - 9
World Grain - November 2010 - 10
World Grain - November 2010 - 11
World Grain - November 2010 - 12
World Grain - November 2010 - 13
World Grain - November 2010 - 14
World Grain - November 2010 - 15
World Grain - November 2010 - 16
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World Grain - November 2010 - 18
World Grain - November 2010 - 19
World Grain - November 2010 - 20
World Grain - November 2010 - 21
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World Grain - November 2010 - 23
World Grain - November 2010 - 24
World Grain - November 2010 - 25
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World Grain - November 2010 - 27
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