The Brewing Raw Material Journal - RMI Online | RMI ... · 2014 Harvest (Spring Barley) 2013 Harvest (Spring Barley) Source: RMI Analytics. The Brewing Raw Material Journal – No

No. 388

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19.08.2014

The Brewing Raw Material Journal

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The Brewing Raw Material Journal – No 388

19 August 2014 Page 2

Executive Summary

Malting Barley Market The EU has so far delivered an excellent barley

harvest with surprising yields and mainly good

quality.

UK and Scandinavia's spring barley progressing

well but not finished yet.

Record barley crops are possible in Russia and

Ukraine as the harvest continues with good yields.

EU malting barley prices were slightly up after malt

business was covered. Prices remain supported by

third country export possibilities.

A cooler change in Canada held up early harvest

and crop development.

Rains in the USA were welcome but have delayed

harvest in some regions.

Good rains for southern Queensland/Northern New

South Wales with all regions needing more in

coming weeks.

Malt Market Big round of malt business done again in the past

two weeks with the focus now moving to crop

2015.

Corn & Wheat Market Good milling wheat demands a premium but feed

grains are under further pressure.



Malting Barley Market

Europe

It has become clear the EU-28 will achieve a very good malting barley harvest this year. This is

due to an excellent winter barley harvest in France, without any quality losses,

and results from various other countries showing higher yields than expected with very good

screenings bringing the

selection rate to last year’s

level. It is no wonder

Strategie Grains, in their

August report, now

estimate total barley

production at 57.7m/MT,

up by 1.5m/MT from their

previous estimate a month

ago. The spring barley crop

in France brought an

average yield of 6MT/Ha

with the total production

expected at to be at last

year's level of 3.1m/MT. Yields differed regionally getting worse from west to east with best

results in Ile-de -France and the North, average in the Marne area and disappointing in the

Lorraine region. There are still some questions over the quality of the French spring malting

barley crop with some samples analyzed showing mixed results while we also hear of wash-

outs due to possible non-contractual quality. Also despite a large crop none of the grain

collectors seem to be in a hurry to push execution. This can be a sign that separation and

allocation of different quality types is ongoing. Once more samples have been analyzed, and

the first shipments are on their way, the picture will become more complete. Harvest of spring

barley is close to finished in Denmark and south-Sweden, is 85% complete in East Anglia, 75%

in southern England and is about 15% in Scotland. Weather conditions in Scotland are very

unfavorable and further harvesting could be delayed. It is not an issue yet as for Scotland it is

still quite early in their harvest but the weather needs to improve and dry conditions are

required to go on. Farmers are a bit worried in Ireland as well as heavy downpours might cause

some damage to spring barley crops. However results reported so far in all those countries are

very positive as far as yield, screenings and phyto-sanitary conditions are concerned. Protein

remains an issue, with it coming in on the low side of specifications. In Germany the spring

barley harvest, which is close to being finished apart from some of the more hilly regions, is

expected to be up 4.4% on last year, reaching 2.03m/MT, despite a 3% drop in acreage. In the

Czech Republic the Ministry of Agriculture sees yields for barley up 11.8% on last year topping

5.11 MT/Ha. In contradiction to the mainly positive news as far as quantity and quality is

concerned prices went higher last

week before dropping slightly

back again over the last two

days. One explanation was

brewers were buying malt which

led to more or less immediate

coverage of barley by the

maltsters. Secondly EU origin is

very competitive regarding third

country exports, at least until the

Southern Hemisphere harvest

begins. Depending on the source

market participants are expecting

the already traded volume to

China (feed and malting barley combined) from Europe at between 500-600,000MT, about half

of it being malting barley. Furthermore on the basis of actual freight rates and the favorable

EUR/USD exchange rate exports from EU origins could be favorable to South American

destinations as well. Recent purchases of spring malting barley completed by international

trading companies point in that direction as well. However overall the market remains bearish

170

180

190

200

210

220

230

240

250

Euro

/MT

Malting barley prices (FOB Creil)

Crop 2013 Crop 2014 Crop 2015

0

10

20

30

40

50

60

€/M

T

Premium of 2r spring malting barley over feed barley

10 year average Crop 2013 Crop 2014 Crop 2015



with an ample supply of feed grains

around the world. But the barley S&D

may look different with the reduced

crops in Canada, Australia and

Argentina versus last year, which will

only partly be offset by very good

crops in Russia and Ukraine. Feed

barley export licenses continue to be

granted in big style by Brussels

amounting to a total of 1.1m/MT since

1st of July 2014. Jordan’s latest feed

tender will show if the EU and the

Black Sea region will continue

competing against each other or if

other players will enter the market.

There was bigger volume traded in 6-row winter malting barley, especially in Etincel, over the

last ten days in order to cover recent malt sales to brewers. Prices went up from EUR165/MT

FOB Mosel Basis July 2014 for Etincel to EUR168/MT before dropping back to EUR166/165/MT

today. There is only a small difference of about EUR5/MT between Mosel and Creil positions as

the premium of winter malting barley above feed barley is already on a very low level. FOB

Creil is quoted for good ports at EUR160/MT Basis July 2014, whereas for smaller ports, where

it is rather difficult to get freight out, the price is EUR157/MT Basis July 2014. Most of the

Cervoise close to inland ports has gone either into vessels heading to China or straight into the

feed bins and hence it is difficult to find offers for that variety. Crop 2015 was also traded but

with lower volumes with prices at EUR178/179/MT Basis July 2015 FOB Mosel.

As the focus was more on the German, Scandinavian and UK spring barley markets the FOB

Mosel market was somewhat sidelined. Prices are stable there with an EUR2-3/MT difference in

bids and offers. The latest prices we have heard is EUR192/MT from sellers and EUR190/MT

from buyers for the actual crop. The spread between crop 2014 and 2015 has increased further

and is about EUR14/15/MT, which is attracting less interest from buyers.

Single Variety (Optional) Protein Euro +/-

Exchange

Rate

(Euro/US$)

US$ +/- Shipment

Crop 2014

Feed Barley 150,00 +10,00 1,333 199,91 +12,01 JULY 14

6r Winter Cervoise 11,50% 160,00 +6,00 1,333 213,23 +6,55 JULY 14

6r Winter Esterel/Etincel 11,50% 160,00 +6,00 1,333 213,23 +6,55 JULY 14

2r Spring 11,50% 182,00 +2,00 1,333 242,55 +0,97 JULY 14

Crop 2015

Feed Barley 155,00 +1,00 1,336 207,11 +0,43 JULY 15



2r Spring 11,50% 197,00 +5,00 1,336 263,23 +5,55 JULY 15

Source: RMI Analytics

France Prices Basis FOB Creil in Euro/US$ per tonne

Single Variety (Optional) Protein Euro +/-

Exchange

Rate

(EUR/$)

US$ +/- Shipment

Crop 2014

6r Winter Cervoise 11,50% - - 1,333 - - JULY 14


2r Spring 11,50% 192,00 +2,00 1,333 255,88 +0,88 JULY 14

Crop 2015



2r Spring 11,50% 207,00 +5,00 1,336 276,59 +4,92 JULY 15

France Prices Basis FOB Mosel in Euro/US$ per tonne

Source: RMI A nalytics

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

France Germany Czech Rep. UK Denmark Sweden

Har

vest

ed

are

a (i

n %

)

European harvest progress

2014 Harvest (Spring Barley) 2013 Harvest (Spring Barley)

Source: RMI Analytics



Denmark has seen a very active malting barley market over the last two weeks. By the time

RMI Analytics hosted its crop tour buying interest was bringing prices to levels as high as

EUR187/MT FOB Denmark/Sweden Basis 1st half October 2014 for delivery October/March and

for January-June 2015 positions at EUR190.50/MT Basis 1st half January 2015. Last Friday the

market came down a bit to EUR185.50/MT Basis 1st half October 2014 FOB Denmark/Sweden

and was offered today at EUR184/MT. Yesterday there was a trade done at EUR188/MT Basis

1st half January 2015, which would confirm that sort of level. The spread between crop 2014

and 2015 also increased in the Scandinavian market to EUR14-15/MT as well, bringing the price

for Basis 1st half October 2015 slightly below EUR200/MT.

UK prices are at a discount versus Scandinavia, which is surprising a lot of market participants.

One reason is that under GAFTA contracts there is no minimum value of protein so the lower

proteins will all go into those "paper" contracts in string. The fact is that if one asks for a

guarantee of min. 9.5% protein the offered price is at best EUR2-3/MT higher. Prices were at

EUR183/182 FOB SC/EC UK Basis full October 2014 last week and dropped yesterday to

EUR179/178/MT based on ordinary specification and contract terms. Crop 2015 is not a topic in

the UK, but theoretically there should be the same spread as in Scandinavia.

Germany

After a very long period of time und under the impression they would see a very good harvest

south-German farmers woke up and started to sell this week, prompting an immediate drop in

the market to competitive levels. First handers, because of a previous lack of farmers selling,

had no pre-harvest contracts and they offered those spring barley lots immediately to the

market. As maltsters are quite well covered with old crop barley it was rather difficult to sell for

nearby positions even at a discount. Prices were EUR210/MT for September and EUR213/MT

last week, but when sales activity started they dropped to EUR204/MT September and

EUR208/MT Basis October 2014. All these prices are based delivery to south-Bavarian

maltsters. In northern Bavaria prices were EUR4-5/MT lower. Traders and maltsters have taken

advantage of this sudden purchase opportunity and have reduced their short position

considerably.

Russia & Ukraine

The import ban implemented by Russian government against the EU, USA, Canada, Norway

and Australia has had no direct impact on the grain trade because the list of restricted goods

does not contain any grain or grain products. Some operators were a bit worried at the

beginning, because there was a shipment of malting barley on the way as well as containers of

specialty malt but Putin has no interest in limiting or forbidding grain imports. For the rest of

the agricultural sector (dairy, meat, fruit and vegetables) especially in eastern EU member

states, as well as for some parts of the German industry, negative effects are being felt. The

Russian government is now trying to cover their import demands by sourcing from other

countries like Egypt, Turkey and some South American states. Trade flows might change with

South America trying to gain market share in Russia while Western European states make

further efforts to develop alternative export markets in Asia.

2r Spring

Single Variety (Optional)Protein Euro +/-

Exchange

Rate

(Euro/US$)

US$ +/- Shipment

Crop 2014 11,50% 184,00 +4,00 1,333 245,22 +3,64 OCT 14

Crop 2015 11,50% 198,00 +3,00 1,336 264,57 +2,31 OCT 15

Denmark Prices Basis FOB Danish Port in Euro/US$ per tonne


Single Variety (Optional) £ +/-

Exchange

Rate

(£/Euro)

Euro +/-

Exchange

Rate

(Euro/US$)

US$ +/- Shipment

Crop 2014

2r Winter (South Coast) 136,22 +2,36 0,80 170,00 +2,00 1,33 226,56 +1,09 OCT 14

2r Spring (South Coast) 144,23 +2,40 0,80 180,00 +2,00 1,33 239,89 +0,99 OCT 14

Crop 2015

2r Winter (South Coast) 149,31 +4,85 0,81 185,00 +5,00 1,34 247,20 +5,12 OCT 15

2r Spring (South Coast) 157,38 +4,89 0,81 195,00 +5,00 1,34 260,56 +5,03 OCT 15


United Kingdom. Prices Basis FOB UK Port in £/Euro/US$ per tonne



The Russian grain harvest is progressing at speed especially in spring barley with 12m MT

harvested from 4.3m/Ha with an average yield of 2.8 MT/Ha, about 600-700 kg/Ha more than

last year. Regarding the total grain harvest 42% of the planted acreage had been harvested as

of late last week, amounting to a total of 62.1m/MT, 25% more than the amount harvested for

the same period 2013. Exports of grain from Russia are moving quickly as well with July alone

seeing Russia export 3.1m/MT of grain, which was a record for this month and 25% higher than

in July 2013. All these figures show what is still to be expected from Russia on the world grain

markets. The malting barley quality in the country is good while protein is higher than in the EU

and some regions have lower screenings. While Russia will be able to make it without malting

barley imports this year we put in a nominal figure of 50,000MT because there could be regular

shipments to St. Petersburg, or another port, as international companies switch within their

book for quality reasons.

Domestic prices for spring malting barley are heard at RUB8300/MT (EUR172/MT) delivered

malt house excl. VAT. Ukraine has brought in a bumper barley harvest with 9.3m/MT harvested

up to the 15th of August from 2.99m/Ha, giving an average yield of 3.11 MT/Ha, 700 kg/Ha

more than last year. The total barley crop could be as high as 9.5m/MT while the total grain

harvest in the country could reach 63m/MT versus the last USDA figure of 58.5m/MT. This is

despite the fact in some eastern parts around Donezk and Luhansk fields could not be

harvested due to fighting and transport is being hampered by armed forces. With the good

barley crop and decent quality it is likely malting barley from Ukraine will be shipped, free of

duty, into malt houses in neighbouring Poland, Hungary or Romania. Despite the political

turmoil exports are still going well with Ukraine exporting 3.3m/MT of grain from 1st of July to

15th August 2014, made up of 1.33m/MT of barley.

Argentina

The Buenos Aires Grain Exchange has lowered their estimate for wheat acreage to 4.1m/Ha,

down 100,000Ha versus their last estimate, and significantly lower than 2013 figures

(3.6m/Ha). Quite surprisingly they did not change anything in their barley estimate, it the

same as last time at 900,000Ha. Market participants are challenging that number and the

consensus is it will be between 820-850,000Ha. However as per our latest information farmers

were continuing seeding this week despite the fact that the ideal frame time for barley is over.

Given the low feed barley prices farmers might switch in the last minute from feed to malting

barley. There are concerns that grain development could be harmed by recent warm and dry

weather. Feed barley prices are around USD215/MT FOB and the last malting barley quotes

were unchanged at USD295/MT FOB. Some smaller trades were done recently at USD210/MT

FAS. High inflation as well the uncertain tax situation is not creating a comfortable export

environment to encourage farmers to sell a lot in advance.

USA Across the USA growing states conditions have been warm with some regions experiencing

thunderstorms, high winds and heavy rains but with only localized damage being reported.

Similar to Canada temperatures have dropped slowing the maturation of the crop but warmer

conditions are expected to return next week. Montana has started its harvest in the south and

it is moving north with about 30-40% finished so far with crops looking good but production

down on 2013. The last of the cool, wet, weather is moving in from Canada and this could

impact on northern crops that are ripe but as yet not harvested. In Idaho farmers are back in

the fields (31% complete) after heavy rains last week which brought concerns over pre-

germination. Sources on the ground say up to 25% of the crop in south-central Idaho may be

suffering from pre-germination in other less advanced regions, such as the south-east, this is

less of a problem. North Dakota’s early regions have begun their harvest (16% complete

compared to 5-year-average 36%) with some worries over vomitoxin following rains and the

warmth. Minnesota is lagging behind at 24% harvested compared to the 5-year-average of

54%. Washington is well advanced with 65% harvested after a spell of dry, warm, weather and

well ahead of their 5-year-average of 27%. Barley is thinner there with higher protein and

yields are down due to lower plumpness of the barley corns but germination is good. Farmers

and market participants are now watching the harvest and conditions very closely as a lower

carry over and the lower Canadian crop could lead to volatility if conditions turn bad. Overall

52% of the barley across the growing states is rated as good while 30% is fair, in line with

previous years and the five-year-average.



Canada

Warm weather across the

prairies over the last two

weeks helped crops catch up

but a cold change last

weekend has slowed things

down once again. A limited

harvest has begun in some of

the more advanced areas with

samples of barley slowly

coming in. Our sources in

Canada say it’s not enough to

make a judgment of crop

quality yet but that will start

to change as harvest ramps

up over the two to three

weeks. During the RMI

Analytics Canadian Crop Tour

next week temperatures are

expected to rise back up to

the mid-20s C with little rain

for the first half of the week.

In Manitoba rains were welcomed at the end of last week with early barley stating to be

harvested. In Alberta quality is down thanks to an extended period of dryness despite recent

reports of spotty rains and hail across the whole state. Saskatchewan has had its fill of rain

with 5% of the state’s soil moisture reading in surplus and 85% adequate so now they are

looking forward to dry conditions which should come next week. Currently daytime

temperatures are in the low 20s C across the Prairies.

Any old crop that’s still floating around won’t be exported and will be used for domestic feed or

malting in Canada. New crop malting barley (2014-15) is estimated to be at around

USD340/MT FOB Vancouver, up USD10 on the last Journal. China is still showing interest in

quality Canadian malting barley with prices at USD325/MT but it’s unlikely buyers will book at

these prices with expectations they’ll push them lower.

Australia

Farmers in drought affected

parts of southern Queensland

(QLD) and Northern New South

Wales (NSW) were celebrating

this week as up to 50-100mm

of rain fell across the drought

affected region. While good for

isolated barley growers, wheat

farmers and cattle graziers in

the region it sadly isn’t enough

and it will only slightly reduce

the need to ship feed grains up

from southern states.

Elsewhere in Australia Victoria

(VIC) is now looking for some

rain with the frosts of late July

to early August drying soils out

and knocking back growth

potential of the crop. Reports are coming in from Victoria that the cold snap also caused

damage across all barley in the major growing regions but as is typical with the region this is

highly localized. Mainly early sown crops were affected, with those too the ones which now and

in need of good rainfall. No significant rainfall is expected in Victoria over the next week but

some falls will come to the west by the end of the week and into next week.

Western Australia (WA) is getting some rain early this week, in the form of isolated



thunderstorms, and is looking pretty good while South Australia has had some rainfall and is

still looking OK. Temperatures have also been unseasonably high, +10C over the average, at

around 30C during the day in WA. For later in the week some more rains will come across

isolated areas of south-western WA but they won’t last over the weekend heading into next

week. In total the rainfall situation is still in deficit compared to the average, despite recent

good rains, with WA again the only state to be slightly above average.

El Niño is a possibility with the Bureau of Meteorology (BoM) continuing to say there’s a 50%

likelihood of an event with five out of eight international climate models predicting a short lived

event.

Old crop (2013/2014) malting barley is all over with the last couple of shipments leaving

Australia and the only interest coming from the domestic malting and feed industry. Feed

barley is priced at exit WA USD245-248/MT, SA USD242/245/MT, VIC USD254-258/MT and

NSW USD263/264/MT with a premium for the eastern state origins as demand for grains comes

thanks to drought conditions in QLD and NSW. While new crop (2014/2015) malting barley is

still finding a price it’s been pegged at USD280-285/MT but there’s not a lot of interest at the

moment in the market. Into China malt 1 is pegged at USD315-320/MT CNF with a discount of

about USD15 for FAQ theoretically putting values below the psychological barrier of

USD300/MT. The USDA says barley production in Australia for the 2014/15 crop will decline to

7.5m/MT (down from 9.6m/MT 2013) with 4.6m/MT exported, 3.1m/MT used domestically and

ending stocks of 184,000/MT.

Malt Market/Industry News

Big volumes of malt have been traded and/or priced against LTA's within the last ten days with

some large brewing groups closing their purchase needs for calendar year 2015 and other

taking some further coverage for 2016 as well. After barley prices came up slightly, and the

spread between crop 2014 and 2015 increased, the market quietened. It can be said coverage

at this stage is a bit more advanced than in previous years with actual malt prices seeming to

fit within budgets there is only the fantasy of considerably lower prices. On the other hand

there are still brewers which only recently started their purchases for 2015 and are at no more

than 50-60% covered. From a barley point of view there is limited risk prices will go up very

soon, it is more the increased capacity usage that might limit the offers in the future.

AB InBev's beer volumes increased in the second quarter of 2014 by 0.5% versus last year,

driven by growth in Brazil (+7.2%), Mexico (+ 1.5%) and China (+ 4.6%). In the first half year

2014 AB InBev sold 2.4% more beer than at the same time in 2013. Despite being world

champion in soccer Germany is only European champion as far as beer sales are concerned,

selling 94.4m/HL in 2013 followed by Russia (88.6m/HL), the UK (42.4m/HL) and Poland with

39.6m/HL. One interesting thing to note is that in 2012 Russia was the leading European beer

consumer but since then has lost about 8m/HL. On a worldwide basis China continues to be the

leading nation with 506.3m/HL, which represents an increase of 16.3m/HL compared with

2012. Fraser & Neave Singapore reported growth of 37% for their beer volumes in their third

quarter ending 30th of June 2014. The USA Craft Brew Alliance reported a 16% increase of

their sales in the second quarter of 2014 versus last year while San Miguel in the Philippines

saw an increase of 3% in their beer sales during January-June 2014. On a more negative note

a beer shortage, which has gripped Cuba for most of 2014, has become more of an issue as it

Origin US$ +/- Shipment

Canada 330,00 0,00 OCT - DEC 2014

Australia 290,00 +10,00 JAN - FEB 2015

Argentina 295,00 0,00 JAN - FEB 2015

Europe (2r spring) 260,00 -5,00 OCT - DEC 2014


International Malting Barley prices basis FOB in US$ per tonne

Crop 2014



stretches into the hottest summer since 1951, pushing up demand. The shortage is blamed on

delays to a shipment of Czech malting barley in the early half of 2014 from which local

production hasn’t recovered. The Russian ban on Ukrainian beer, wine and spirits effective from

the 13th of August 2014 is one to be watched with authorities denying any political motivations

instead citing quality issues like violation of consumer safety regulations were taken as an

argument. The import of alcohol products from Ukraine into Russia was worth USD90m in

2013.

Malting Barley Futures

Close to 2,000MT, 40 contracts, were traded over the last two weeks, a low volume but at least

some trade was done. Prices were mainly staying in a narrow range after starting at

EUR203/MT for November 2014 basis, then hitting a low of EUR196.50/MT a week ago. The last

settlement for November 2014 was EUR197.50/MT. The November contract chart-technically

remains further under pressure with the next support level at EUR193/MT and afterwards

there’s room to go down to EUR175/MT. Wheat futures have to be watched closely in this

context as well with their support level of EUR168-170/MT holding steady so far even though it

was almost broken a few times.

The Grain Markets

Grain market bears have found their control over prices loosened. But values have not shown

strong gains – apart from when Moscow-Kiev tensions flare up.

But futures have, on both sides of the Atlantic, halted their spree of successive multi-year lows.

FOB Amsterdam-Rotterdam-

Antwerp-GentShipment

Protein Euro USD Euro USD Euro USD

Crop 2014

6r Winter Cervoise 11,5% 11,50% 331 441 353 471 363 484 Oct - Dec 2014

6r Winter Esterel/Etincel 11,50% 331 441 353 471 363 484 Oct - Dec 2014

2r Spring 11,50% 358 477 380 507 390 520 Oct - Dec 2014

Crop 2015

6r Winter Cervoise 11,5% 11,50% 355 472 377 502 387 516 Oct - Dec 2015

6r Winter Esterel/Etincel 11,50% 355 472 377 502 387 516 Oct - Dec 2015

2r Spring 11,50% 382 509 404 539 414 552 Oct - Dec 2015


FOB BulkFOB Bulk in

containers

FOB in 50 kg bags

In containers

Theoretical malt prices

Based on current market conditions, French malting barley prices and forward Euro/US$ exchange rate

Interval Week Nov 14 Jan 15 Mar 15 May 15 Nov 15 Jan 16

Volume Week No.33 25 0 0 0 0 0

28 to 03.08.2014 Week No.31 199,80 199,80 199,80 199,80 199,80 199,80

04 to 10.08.2014 Week No.32 200,45 200,45 200,45 200,45 200,45 200,45

11 to 17.08.2014 Week No.33 198,85 198,85 198,85 198,85 198,85 198,85

+/- W31-W33 -0,95 -0,95 -0,95 -0,95 -0,95 -0,95

EURONEXT MALTING BARLEY FUTURES – Weekly Average Settlement Prices in € per tonne.

Source: NYSE Euronext

Interval Week Sep 14 Dec 14 Mar 15 May 15 Jul 15

Open Interest Week No.33 277 538 735 054 143 006 33 825 53 671

28 to 03.08.2014 Week No.31 360,10 369,70 381,85 390,05 397,55

04 to 10.08.2014 Week No.32 357,90 369,10 381,95 390,10 397,10

11 to 17.08.2014 Week No.33 360,20 371,50 384,60 392,95 399,65

+/- W33-W31 +0,10 +1,80 +2,75 +2,90 2,10

Source: CMEGroup

Chicago Board of Trade (CBOT) weekly average prices – Corn (Prices in cents per bushel)



There were seasonal reasons to think price stabilization might be in order, as the Journal

suggested last month. Chicago corn futures have a habit, in years not plagued by summer

heat, of sideways movement at this time of year, as investors await the last significant

potential weather threat – frost – before the autumn harvest. Wheat futures feel released from

the end of the winter crop harvest in the northern hemisphere. And there are other factors too

which have supported values this time, besides Ukraine concerns.

For corn, the US Department of Agriculture surprised markets in its monthly flagship WASDE

crop report, with a relatively meagre upgrade, of 2.1 bushels per acre, to its forecast for the

record domestic yield. The revision took the figure to 167.4 bushels per acre, well below

expectations for the report of a figure of just over 170 bushels per acre, let alone ideas among

some analysts that the final result would show up north of 176 bushels per acre. Although the

USDA’s figure is seen as only a step on the path to a higher estimate, the conservative forecast

took some wind out of bears’ sails.

For wheat, the WASDE report was less supportive, in hiking the estimate for world production

by nearly 11m/MT to 716.1m/MT, taking it ahead of the 2013 record of 714.1m/MT. Indeed,

2014-15 is on course for achieving the rare result of record world corn, soybean and wheat

production. However, on the more price-positive side, quality issues are proving a growing

concern, popping up in Russia, where the issue is low protein, and the US, where high levels of

fungal-residue vomitoxin (DON) in the early spring wheat harvest, on top of the EU’s well-

documented problems. That is, at least, supporting premiums for higher quality wheat. Hedge

funds have been reluctant to add to their bets on falling wheat prices after lifting their net short

position in Chicago futures and options to nearly 72,000 contracts in late July, the second

highest on record. Extreme hedge fund short positioning raises concerns over the appetite for

more of these bets, besides leaving prices vulnerable to sharp moves upwards as positions are

closed. Still, even if grain futures have found a temporary trading range, there is widespread

feeling among US brokers that it would end with a further move lower in prices, as the prospect

of the domestic harvest weighs on values. A key point for now appears to be the potential for

frost. Midwest crop tours are revealing corn and soybean crops which, while in good condition,

are late in development, a downside of cool summer weather. That would leave them

particularly vulnerable to an early frost, although it is seen as likely that a freeze would merely

take the highest yield estimates off the table, rather than spelling any kind of disaster.

Notice to subscribers

Please note that this publication is covered by the International Laws of Copyright.

Copying or transmission of all or parts of the publication to a third party is strictly prohibited.

Every effort has been made to ensure that this Journal contains accurate and current information. RMI Analytics AG shall not be liable for any loss or

damage suffered by subscribers as a result of any information or opinion given in the publication.

Interval Week Sep 14 Dec 14 Mar 15 May 15 July 15 Sep 15

Open Interest Week No.33 123 200 188 513 58 277 14 771 34 137 1 530

28 to 03.08.2014 Week No.31 529,30 550,90 573,50 587,60 597,80 609,80

04 to 10.08.2014 Week No.32 555,05 573,80 593,15 605,45 612,45 623,80

11 to 17.08.2014 Week No.33 540,20 555,15 574,85 587,45 595,85 608,15

+/- W33-W31 +10,90 +4,25 +1,35 -0,15 -1,95 -1,65

Chicago Board of Trade (CBOT) weekly average prices – WHEAT (Prices in cents per bushel)

Source: CMEGroup

Documents

The Brewing Raw Material Journal - RMI Online | RMI ... · 2014 Harvest (Spring Barley) 2013 Harvest (Spring Barley) Source: RMI Analytics. The Brewing Raw Material Journal – No