Market Report - August 2010

Posted 01 August 2010

"Retail sales grew last month at their fastest pace since March"


Retail sales grew last month at their fastest pace since March, thanks partly to sunny weather late in the month. Sales rose 1.2% on a like-for-like basis, which ignores new store openings, compared with June 2009, up from 0.8% in June, the British Retail Consortium (BRC) said.


Against the $, sterling opened the month at 1.47 and rallied to 1.53 as at 15th July. Against the Euro, sterling opened the month at 1.20, increased to 1.23 before falling back to 1.18 as at 15th July.


The price of Brent Crude ended the month close to where it began, but because of the oil spill in the Gulf of Mexico, concerns over the viability of the global economic recovery, debt issues in the EU and slowing manufacturing growth in China, meant that the crude oil market was far more volatile than the price result suggests. The wholesale price of diesel in Europe increased by 2%.


Rapeseed Oil - rose by 3% in Rotterdam influenced by the deterioration of the Canadian rapeseed crop, which has been affected by flooding and heavy rain in the main growing regions. Rapeseed rose sharply and continues to rise during July.

Soyabean Oil - remains stable on CBOT as soya bean crushing increased in the main South American producing countries following an unexpectedly good crop.

Palm Oil - was down by 3% in anticipation of the seasonal increase in palm oil production although yields appear to be down which is curtailing the downward trend.


Sultanas - There are some diverse views and opinions of how the new Turkish crop is developing. Without question, the frost damage in March has affected some of the vineyards and it is clear to see some vines and rows within vineyards, which have fared better than others. It is also clear that there remains a strong likelihood that there will be a carryover of at least 20,000mts.

Currants - While unsold stocks in Greece (and UK) have been fast depleting, the increases in the raw material pricing in the UK at least, have been part offset by the generally weak Euro against the stronger Sterling. Although this currency trend has recently stalled, the good news is that the new crop is expected to be no smaller than the current crop, so by October, we should see the twin benefit of better supply re-stored and hopefully a continuation of the Pound Sterling recovery against the Euro. Short term however, prices are likely to remain stable up to new crop.


The release in June of 23,500 tonnes of intervention stock butter, held by the EU Commission, has caused mixed price reactions with decreases of 3% seen in Europe. Despite the recent release, the market remains tight and price increases could continue towards autumn. SMP prices have fallen in general in anticipation of a potential release of public storage stocks. All bids for SMP stocks were rejected by the EU Commission on both June tender dates due to low bid prices. WMP fell slightly in the EU, whereas whey powder remained stable and UK cheddar prices stabilized and remained unchanged. Total milk production in the EU is still expected to remain below the milk quota, which is 1% higher than last season, limiting milk availability. Price declines continued in the egg market, as the cost of production dips seasonally and supply increases.


Once again, the on-going impact of the weak currency since our last report has continued to squeeze UK prices seemingly ever higher. Given that Sterling alone has depreciated by 12% since the (recent) highs in early 2010, and set against reports of drought reducing production in the Philippines. With increased demand it looks likely to increase further in the approach to seasonal spikes arising from Ramadan and Christmas demand thereafter.

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