Weekly CCI Analysis:
The CCI/CRB commodity index tried to rally this week, but failed on the prospect of rising US interest rates and a stronger US$. The US FOMC will be meeting this next week to decide when US interest rates will start to be normalised. The expectation is that the US Central Bank will hold rates steady, but it will suggest that the first US rate change in 6 years will be offered during either the September or December meetings. The US$ rallied on the prospect of a rate rise while Greek debt repayment remained a worrisome event for the European Central Bank and the IMF heading into the end of June. Research maintains that crude oil is caught in a range of $48-64.00 into year end and we remain sellers above $62.00. A seasonal high should be forming in crude which will allow the CCI index to forge new lows by late summer or early autumn. We are bearish the CCI on rallies
Longer-term soybean analysis:
Soy futures finished the week mixed with old crop beans fractionally higher while November was slightly lower. The June WASDE did not hold any bullish surprises, and market focus is on new crop conditions and global trade/price trends. China continues to suffer from soy oversupply and both spot and forward crushing margins turned negative for the first time in over a year. S American premiums on beans and meal both continue to work lower offering an import chance into the US. Planting progress through Sunday night is expected to reach 86-88% while crop ratings will remain historically strong at 69-71% good/excellent. Without a major weather threat, the outlook for the soy market remains bearish amid excessive supplies and record large new crop production. Our downside price targets for July rest at $9.00 and $8.40-8.60 November for a summer seasonal low. During harvest Nov could slide to $8.00.
Longer-term corn analysis:
CBOT corn futures settled the week down 7-9 cents in old and new crop positions. The highlight this week was a higher Brazilian corn estimate (81 million mt) from both the US/Brazilian governments and additional hikes are expected in the coming months. S American corn production in 2015 will be record large, and exporters there will begin to dominate world trade by late July/early August. USDA also raised US corn stocks modestly on a lower projected industrial use due to this year’s surge in ethanol yield. There is a concern over too much rain scheduled in the next 3-4 days across E KS, IA and MN, but we can find no real correlation between excessive June precipitation and final US corn yield. The broad theme of 2015/16 will again be huge competition in world feedgrain trade, which based on fob relationships will favour S America beyond the next 20-30 days. We maintain that short covering rallies should be used to extend or make forward sales. The risk is sub-$3.00 Dec corn at harvest amid lacking US demand growth and strong yield potential. Spot corn rallies will likely be limited to $3.70 without the unexpected development of a dire US/Chinese drought.
Longer-term wheat analysis:
US and European wheat futures ended down on the week as the USDA hiked major world wheat exporters’ production – including the US – in its June WASDE. The highlight was the 2.5 million mt rise in the Black Sea harvest, which was put into exports. This will keep fob offers depressed throughout the coming months. Black Sea prices are the world’s benchmark in the first half of the crop year, and Russian wheat continues to be sold into N Africa at $190/mt or below. This is comparable to $4.60-4.70, basis spot CBOT. Weather is improving across France, S Germany and whole of the Canadian Prairies, and without dire weather in Australia or Argentina, global wheat stocks look to exceed 200 million mt in 2015/16. The goal of the market is to elevate US wheat exports or the US will be left with end stocks near 1,000 million bu. A range of $4.50-5.25 is indicated into late 2015. Wheat quality across the far S Plains (TX/OK) has been reported to be above miller’s expectations.
