Market Report - July 2010

Posted 01 July 2010

"World economy continues to recover from the recession"

GENERAL

Soaring commodity costs are pushing up food and clothes prices, the British Retail Consortium(BRC) said as it reported a rise in shop price inflation in August.
Overall shop price inflation increased to 1.9%, its highest rate for five months, from 1.7% in August.

‘Food inflation is at a 15-month high as the effect of earlier rises in wheat and oil prices work through to things like bread and meat but these production costs appear to be stabilising now,’ said BRC director general Stephen
Robertson. He said that the worst of the knock-on effects of soaring commodity prices may have passed.

CURRENCY

Against the $, sterling opened the month at 1.54 and ended at 1.59 as at 12th Oct.
Against the Euro, sterling opened the month at 1.21 and fell to 1.14 as at 12th Oct.

CRUDE OIL

Energy prices have strengthened over the past month as Chinese manufacturing expanded and US economic indicators beat estimates, with both Brent crude oil up 5%

FATS AND OILS

Vegetable Oils - continued to rise over the past month influenced by new fundamental information and increases seen in the grain sector. Sunflower oil rose sharply by 16% in Rotterdam as further reductions to the Black Sea region crop have been made.

Rapeseed Oil - prices remained unchanged on the high values achieved so far this year.

Soyabean Oil - ended up 11% on CBOT due to increases in demand for soyabean as feed supply tightens. The global soyabean crop is forecast at a record 254.9m tonnes in 2010/11 but speculative trading by fund investors continue to drive prices up against the true fundamentals of the market.

Palm Oil - ended up 8% in Malaysia as supply is still below last year’s levels and supported by soya prices.

DRIED FRUIT

Sultanas - The price of Sultanas has remained very high, due to the lower than expected crop in Turkey. Based on the prices that have been paid for this material, prices are set to remain at higher levels for the foreseeable future. It is unlikely that prices will ease any further as there has been so much commitment by exporters and traders alike at high price levels.

Raisins - As predicted, the rainfall in Turkey at the beginning of September was enough to convince the farmers not to produce many raisins. Also, with a smaller than anticipated crop, farmers were able to realise higher values for their raw material and so were discouraged from taking the additional risk of producing Raisins. Prices from the USA still remain very firm. Late rain at the end of the harvest has also impacted on the tonnage. With additional damage to an already short crop, prices will remain very firm.

Currants - The Currant crop this year is turning out to be more difficult than anticipated; in particular, there are very limited quantities of small currants. In general, the berries are much larger than expected and there are no more genuine Small Currants left for sale. Prices have already increased since the start of the season by $80 per mt. The Euro has also gained in strength against the pound, making prices even more expensive.

DAIRY

Firmer prices have been seen in this sector as the market remains tight. SMP prices continued to rise by 5% in the EU whilst WMP and whey also continued to trend upwards with increases of around 6%.

GRAINS

Sharp price increases continued in this sector as grain estimates have been further lowered for 2010/11. Oat prices surged on CBOT by 20% whilst wheat prices were mixed, with increases registered for the UK at 14%. World wheat production for this season has been adjusted downwards by 1.7m tonnes.

COCONUT

Desiccated coconut prices ended up 9% as poor weather in Indonesia and the Philippines cut supply.

Report by Frank Wade.


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