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New opportunities for Argentine wheat
Posted on 22 Aug 2018 By paredesu In Uncategorized
The boreal summer manifested itself intensely this year with limited rainfall and thermal marks above the average. This led to the major wheat regions of central - northern Europe and, to a lesser extent, the Black Sea, increasing the areas with water deficits. These conditions have been installed during the growth cycle of the crop, causing irreparable damage in large areas of the old continent. This is how the estimated yields are significantly reduced and, by transition, the harvest of almost all the producing countries.
Such is the case of Germany, second producer of the European block after France, which faces a critical scenario and foresees a fall of 25% of its harvest with about 18.00 mill.tn. planned at the moment. French crops suffer the same fate and are expected to thresh 10% less than the previous cycle with 32.90 mill.tn. according to local private sources.
In Italy, the heat wave was combined with excessive rains that promoted the appearance of fungal diseases and pests, degrading the quality of the crops. In this case, the impact it has on exports from the continent is not very relevant, with a production close to 2.65 million tons. (4% less than last year). Different is the situation in southern Europe, more precisely on the peninsula, which presented a more temperate and humid climate. Thus Spain differentiates anticipating an increase in its harvest and, since it is a net importer, it would absorb a smaller tonnage of the rest of the neighboring exporters.
Taking into account the common wheat of the 28 member countries of the European Union, production would fall to the lowest levels in six campaigns reaching 127.70 mill.tn. Logically, as the collection work proceeds, the final numbers will be taken and there could be subsequent adjustments.
The international markets were reacting as this productive conjuncture consolidated. The MATIF in Paris experienced a steep upward trend that put prices at four-year highs, around 210 - 215 € / tn (241.40 - 247.10 US $ / tn) if we contemplate the closest contracts. The increases were replicated in the main ports worldwide, with the FOB of France (Rouen) at 248.27 US $ / tn, the US Gulf of Mexico. to US $ 229.90 / ton for the SRW variety, among others, according to the values ​​updated to August 17.
This context reinforces the optimism for Argentine exports, in which part of the demand (unattended by the European suppliers) will have to reorient their requests to alternative origins and this is where our country has the potential to expand the placement of cereal surpluses. Official FOB export prices for Argentine bread wheat climbed to about US $ 241 / tn for shipments made during August, while for September - October an additional US $ 1 / tn is obtained. In just two weeks, gains of between US $ 5 and US $ 7 / tn were seen in the different terms, in line with the forward markets.
In the last round of last week, the futures operated in MAT were negotiated at the maximum limit of daily rise and the positions at Jan-19 for Rosario adjusted by 222 USD / tn. The maximum for this contract occurred on August 6 with a price just 4 U $ S / tn above the current. The gap observed with respect to last year is increasing and we already observed a market 33% more expensive than exactly a year ago, when the notes were made around 167 USD / tn.
As the threshing of the European lots and other regions of the northern hemisphere progresses, the operators will assimilate the final yields and, depending on the results, the market will adapt. With these elements in play, it is appropriate to close sales floors and why not be open to subsequent increases. One possibility offered by the market is to acquire a PUT Jan-19 at a strike price of 211 US $ / tn. with a premium of US $ 9 / tn. establishing a minimum of US $ 202 / tn.
A second alternative raises two simultaneous operations, such as the sale of a future Jan-19 to 222 US $ / tn and the purchase of a CALL. Thus, a synthetic PUT is created, giving rise to a sale floor with the possibility of obtaining part of the raise before the position expires, in case the market exceeds the price of the previously negotiated future. In the first two weeks of the month, Jan-19 futures were negotiated for 394,178 tn. and if we add the operative of options, the volume ascends to 656.878 tn in MAT.
On the other hand, the wheat producers have commercialized about a quarter of the new crop. If there were no climatic adversities in the critical instances, Argentina would be in a position to harvest 21 mill.tn. that, not only would supply the consumptions of the milling, but it would throw an exportable balance in a context of smaller global supply. With favorable prospects, forward operations reach 5.21 mill.tn. and they surpass in almost 70% the volume of a year back, the previous maximum. One point to consider is that a large part of these operations would be delivered during the months of December and January, at times when supply pressure is usually concentrated.
The purchases of the mills in Brazil, the main importer of Argentine wheat, which competes with the local demand and marks a support for the available values ​​and with shorter deliveries, are not unrelated. In fact, during July the highest volume of Brazilian imports was registered in 2018, with 757,552 tons. Unlike the previous months, other sources were used (such as the USA, Canada and Uruguay) due to the low physical stocks in Argentina. In July, 71% of the cereal that entered Brazilian territory was sent from our country, while towards the 1st semester, this ratio averaged 94%.
Author: Eugenio Irazuegui ZENI
Posted on 22 Aug 2018 By paredesu In Uncategorized
The boreal summer manifested itself intensely this year with limited rainfall and thermal marks above the average. This led to the major wheat regions of central - northern Europe and, to a lesser extent, the Black Sea, increasing the areas with water deficits. These conditions have been installed during the growth cycle of the crop, causing irreparable damage in large areas of the old continent. This is how the estimated yields are significantly reduced and, by transition, the harvest of almost all the producing countries.
Such is the case of Germany, second producer of the European block after France, which faces a critical scenario and foresees a fall of 25% of its harvest with about 18.00 mill.tn. planned at the moment. French crops suffer the same fate and are expected to thresh 10% less than the previous cycle with 32.90 mill.tn. according to local private sources.
In Italy, the heat wave was combined with excessive rains that promoted the appearance of fungal diseases and pests, degrading the quality of the crops. In this case, the impact it has on exports from the continent is not very relevant, with a production close to 2.65 million tons. (4% less than last year). Different is the situation in southern Europe, more precisely on the peninsula, which presented a more temperate and humid climate. Thus Spain differentiates anticipating an increase in its harvest and, since it is a net importer, it would absorb a smaller tonnage of the rest of the neighboring exporters.
Taking into account the common wheat of the 28 member countries of the European Union, production would fall to the lowest levels in six campaigns reaching 127.70 mill.tn. Logically, as the collection work proceeds, the final numbers will be taken and there could be subsequent adjustments.
The international markets were reacting as this productive conjuncture consolidated. The MATIF in Paris experienced a steep upward trend that put prices at four-year highs, around 210 - 215 € / tn (241.40 - 247.10 US $ / tn) if we contemplate the closest contracts. The increases were replicated in the main ports worldwide, with the FOB of France (Rouen) at 248.27 US $ / tn, the US Gulf of Mexico. to US $ 229.90 / ton for the SRW variety, among others, according to the values ​​updated to August 17.
This context reinforces the optimism for Argentine exports, in which part of the demand (unattended by the European suppliers) will have to reorient their requests to alternative origins and this is where our country has the potential to expand the placement of cereal surpluses. Official FOB export prices for Argentine bread wheat climbed to about US $ 241 / tn for shipments made during August, while for September - October an additional US $ 1 / tn is obtained. In just two weeks, gains of between US $ 5 and US $ 7 / tn were seen in the different terms, in line with the forward markets.
In the last round of last week, the futures operated in MAT were negotiated at the maximum limit of daily rise and the positions at Jan-19 for Rosario adjusted by 222 USD / tn. The maximum for this contract occurred on August 6 with a price just 4 U $ S / tn above the current. The gap observed with respect to last year is increasing and we already observed a market 33% more expensive than exactly a year ago, when the notes were made around 167 USD / tn.
As the threshing of the European lots and other regions of the northern hemisphere progresses, the operators will assimilate the final yields and, depending on the results, the market will adapt. With these elements in play, it is appropriate to close sales floors and why not be open to subsequent increases. One possibility offered by the market is to acquire a PUT Jan-19 at a strike price of 211 US $ / tn. with a premium of US $ 9 / tn. establishing a minimum of US $ 202 / tn.
A second alternative raises two simultaneous operations, such as the sale of a future Jan-19 to 222 US $ / tn and the purchase of a CALL. Thus, a synthetic PUT is created, giving rise to a sale floor with the possibility of obtaining part of the raise before the position expires, in case the market exceeds the price of the previously negotiated future. In the first two weeks of the month, Jan-19 futures were negotiated for 394,178 tn. and if we add the operative of options, the volume ascends to 656.878 tn in MAT.
On the other hand, the wheat producers have commercialized about a quarter of the new crop. If there were no climatic adversities in the critical instances, Argentina would be in a position to harvest 21 mill.tn. that, not only would supply the consumptions of the milling, but it would throw an exportable balance in a context of smaller global supply. With favorable prospects, forward operations reach 5.21 mill.tn. and they surpass in almost 70% the volume of a year back, the previous maximum. One point to consider is that a large part of these operations would be delivered during the months of December and January, at times when supply pressure is usually concentrated.
The purchases of the mills in Brazil, the main importer of Argentine wheat, which competes with the local demand and marks a support for the available values ​​and with shorter deliveries, are not unrelated. In fact, during July the highest volume of Brazilian imports was registered in 2018, with 757,552 tons. Unlike the previous months, other sources were used (such as the USA, Canada and Uruguay) due to the low physical stocks in Argentina. In July, 71% of the cereal that entered Brazilian territory was sent from our country, while towards the 1st semester, this ratio averaged 94%.
Author: Eugenio Irazuegui ZENI
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