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Latest Market Report - September 2010

GENERAL

Commodity prices have fluctuated during the month, with decreases seen in the plastics and dairy markets but significant rises in Grains, because of drought in Russia and high temperatures in the E.U. diminishing Grain harvest prospects, and Sugar given demand, which has depleted stock levels.

• Against the Dollar, Sterling opened the month at $1.53, ending at $1.48 as at 9th August.
• Against the Euro, Sterling opened the month at 1.23 at which level it has remained.

CRUDE OIL

Brent Crude prices rose 2%, muted by concerns about medium term global growth forecasts.

FATS AND OILS

Vegetable Oils – Prices continued to rise, mainly influenced by potential oilseed yield losses in key producing countries, given unfavourable weather during the past few weeks.

Rapeseed Oil – Prices in Rotterdam rose 6%, as 2010/’11 global crop estimates have been reduced from previous levels, because of crop losses in Canada and some E.U. countries.

Sunflower Oil – Rotterdam prices rose 8%, supported by potential output losses expected in Russia and Ukraine.

Soyabean Oil – Prices rose 7% on C.B.O.T. Crop conditions have deteriorated in the U.S., as a result of hot and dry weather during the crop’s key development stage.

Palm Oil – Prices rose 7% in Rotterdam and 5% in Malaysia, as heavy rains and flooding limited transportation of produce to ports in that country.

Olive Oil – Prices have risen by 2%.

DRIED FRUIT

Californian Raisins – Prices have risen 10%.

Greek Currants – Prices rose 5% during July, because of increased export demand.

Dried Apricots – Prices increased by 4%, as Turkish supply is limited this year after a heavy frost this spring cut production in the world's largest apricot producer by an estimated third.

Turkish Sultanas – Prices increased suddenly at the start of August, further to estimated damage to the new crop.

DAIRY

World dairy markets have eased in recent weeks, with some products falling in price. Skimmed Milk Powder – E.U. prices fell 9%, given reduced world demand and higher E.U. production. The Euro-pean Commission has yet to sell any intervention S.M.P. by tender, rejecting all bids, despite having 192,000 tonnes available for sale, because of the low level of the offers.

Whole Milk Powder - E.U. prices were 4% lower, while prices in New Zealand fell sharply.

Butter – E.U. prices rose slightly, as the supply situation improved. Cheddar – U.K. prices have changed little U.K.

Milk - Total E.U. milk production is still expected to remain below the milk quota, which is 1% higher than last season, limiting milk availability.

Eggs - Price declines continued, as production costs dip seasonally and supply increases.

WHEAT

Wheat prices increased nearly 40% during last month. As a consequence, homegrown bread milling Wheat prices increased 35% above the average of last season’s crop.

The Ukraine and Russia have always been major “cheap sellers” of wheat, but prolonged drought has reduced Wheat production estimates by 10 million tones - a very significant loss, at 10% of the whole world Wheat trade. Rumours abound that their Governments will put restrictions on exports, which could really drive prices up. Canada has lost an estimated 4 million tonnes of Wheat production, because of flooding. The dry conditions in France and Germany will produce lower yields that could reduce production by 2-4 million tonnes between them. Poland’s Wheat production is down 2 million tonnes, because of floods and U.K. crops could be down 1 million tonnes due to drought.

The International Grains Council recently estimated that Wheat production would be 30 million tonnes down on last year. The impact of this has been magnified by speculators, who have invested massive amounts in Wheat futures. Until the 2010 crop is harvested and accounted for, there is unlikely to be stability. Other factors are the significant unknowns - production and consumption in China and India!