- Tomorrow’s USDA report has overshadowed trade today. The rally of the last couple of days feels “tired” and lacking momentum, based upon US old crop tightness and suggested weather threats. Given the relatively abundant soil moisture levels (compared with last season) it will take a seriously prolonged dry period to materially damage output. Despite this, short covering has been the order of the day once again following significantly low fund positions reported at the weekend.
- The outlook for US weather is relatively benign after about a week with predictions of a return to average or normal conditions, neither too hot or too dry. The effect will be to permit winter wheat harvest to progress and allow sowing of double crop soybeans, which will potentially further boost overall output.
- The Russian weather outlook shows normal to better than normal rainfall in the coming week to ten days which will benefit spring wheat crops across the Central, Volga and Siberian regions.
- Following yesterday’s news of financial support from neighbours of Egypt, we heat today of further assistance this time in the form of $4 billion in aid from Kuwait. Clearly there is a willingness from neighbouring Arab nations to assist the troubled Egyptian economy.
- In summary we view the current rally as being largely old crop based, aided by weather news which (at present) is not fully warranted, as as such presents a selling opportunity rather than a trigger for consumers to take cover.