- Midday comments:
- Markets received little in the way of a lift from yesterday’s USDA stocks report despite some of the the intrinsically bullish (historic) data therein. The market has, instead, focussed on the fundamentally bearish picture looking forward rather than the historically bullish stock position, which is now behind us!
- The one “big picture” warning has to remain in the large fund short positions which have the ability to trigger short covering rallies, which could be volatile and encourage following. However, as things stand right now we would still advocate a strategy of selling any such rally, which has proved correct so far this season.
- Evening update:
- Egypt secured 120,000 mt of wheat for early November ’14 shipment, all from France, in its latest tender today. The price, reported to be $241.20 C&F ($223.70 FOB) was clearly engineered by the eventual seller to be competitive. US wheat was conspicuous by its absence in the list of offers, Ukraine was $7.00 over, Russian $10.00 over, German $11.00 over and Romanian $14.00 over (all figures approximate and rounded). One Reuters news article suggesting that Russia has exited the export market should be ignored as this is highly unlikely to be factually correct, and potentially misleading.Their suggestion that 10 million mt is half the exportable surplus is wrong, the exportable surplus is more like 25 or 26 million mt; domestic grain demand has not risen 4 million mt since the embargo on food imports (livestock numbers just don’t grow that fast!) and intervention is not an issue as prices are far too low right now. Russia has to deal with good, old fashioned, competition in a market with big stocks right now and, with some 15 million mt left to export, we would expect to see them competing in the not too distant future.
- Ukraine corn markets have need of some explanation insofar as official, AgMin, data last week reduced their crop by 3 million mt, only to see 4.4 million mt added back today! Have their officials just opened a futures trading account? This has put the crop back to 30 million mt, maybe 27 million mt is a realistic number right now, but “official” data now comes with a health warning!
- CBOT markets have traded either side of unchanged through the day with wheat, corn and soybeans closing just in positive territory. The trigger for the slight gains being cited as a correction in the technically oversold position. Next week sees the important USDA crop report, which will carry far more weight than yesterday’s stocks report and market participants will not wish to carry large risk into the report despite our longer term view, which remains unchanged! We steadfastly believe it is too early in the season to see a lasting price bottom being scored.