Market Report - October 2010

Posted 01 October 2010

"Inflation remains well above 2% target"

GENERAL

Inflation remains well above the Bank of England's 2% target, unexpectedly boosted by strong rises in air fares, clothing and food. Fuel prices fell, however.

CURRENCY

Against the Dollar, Sterling opened the month at £1.48 and ended at £1.54 as at 10th September.
Against the Euro, Sterling opened the month at £1.23 and fell to £1.21as at 10th September.

CRUDE OIL

High U.S. Crude Oil stock levels and concerns about the speed of the global recovery, resulted in price reductions for Brent Crude and NYMEX Light Crude of around 4%. The European wholesale diesel price fell 1%, partly due to currency.

FATS AND OILS

Vegetable Oils - August prices were firm, despite an increase in the forecast Soya Bean and Palm Oil production figures for 2010/’11. Rotterdam Sunflower Oil prices rose 7%, as last month’s 2010/’11 global sunflower seed forecast estimates were reduced by 6%.

Rapeseed Oil - Prices continued to rise, as E.U. production will be 1.4m tonnes lower than last season’s volumes. It is expected that the E.U. will become the largest global importer of Rapeseed, as demand from the food and biodiesel industries remains strong.

Soyabean Oil - Rotterdam prices rose 7% mainly supported by recent gains in competing oils, as this season’s Soya Bean supply is expected to be ample.

Palm Oil - Rotterdam prices rose 3%, as stocks in Malaysia and Indonesia are relatively low. This is likely to be temporary, however, as 2010/’11 Palm Oil production is forecast to be almost 4m. tonnes higher than last season.

Olive Oil - Spanish prices have risen 2%.

DRIED FRUIT

Sultanas - There has been a recent, unprecedented increase in the price of Turkish Sultanas. Initial crop estimates of 248,000 tonnes now appear very high. Some vineyards have been affected by disease, which is causing up to 10% lower yields and many believe this year’s crop will not exceed 210,000 tonnes. Prices are expected to increase significantly, as growers hold on to their fruit in order to achieve a better price. Exporters are reluctant to offer deals, as prices continue to increase.

Raisins - The U.S. crop is set to be around 285,000 tonnes, against an average of 318,000 tonnes. Typically, the U.S. carries 90,000 tonnes forward to August but this year the total amount of fruit in the system was 70,000 tonnes, with many contractual obligations. It is possible that they will go into new crop from October with no carry forward at all - a position not faced by the industry since 1987.

Currants - This year’s crop is reported to be of very high quality. The crop size is estimated at 25,000- 26,000 tonnes, which is around the same quantity as last season. Last season, however, there was a carry forward of some 4,000 tonnes, so this year supply will be slightly reduced. As the Euro is much weaker than last year, this will hopefully contain price levels.

DAIRY

Butter - Prices were stable in August but are rising into September.

Milk Powder - Prices are increasing again.

Cheese - Prices rose, supported by lower milk availability, with Cheddar prices up 2%.

FLOUR

The Flour market remains firm, in spite of grain stocks having seen two seasons of stock replenishment, as a decline in world wheat production is forecast. At an estimated 646m. tonnes, the 2010 wheat crop would be the third highest ever. Hedge Fund Managers have driven the wheat price up but there is still uncertainty as to the action Russia will take come 2011, following their decision to ban exports. The common opinion is that they will not export until the 2011 harvest and, as the world’s third largest exporter of flour, this has obviously taken its toll on other world producers, with exports on the increase in areas such as the U.K., France and the U.S.

COCONUT

Prices have been continuing to climb steadily since the start of this year. A combination of reduced supply, strong demand and prices tracking the increasing Crude and Edible Oil markets, has resulted in this continued pricing spike. With origin stocks now fully committed for the next 2-3 months, there is no chance of any lower prices until December or January, at the earliest.

Report by Frank Wade.


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