- The week has started with markets spooked by more Ukraine tensions as uncertainty reigns in the region. Added to this, we have seen cold temperatures continuing in central US and this has led wheat prices higher, corn and beans followed as fresh money came into the market in moderate volume trade. There certainly appears to be limited appetite for fresh risk position.
- As far as the colder US temperatures are concerned, it is unlikely to be sufficient to enough to produce any widespread damage but sufficient to alarm market participants – for the time being.
- Much has been talked of the chances of an El Niño weather pattern in 2014, so much so that the US Climate Prediction Centre places a 65% chance on it happening, and the Australian Bureau of Meteorology rates the chances at 70%. The outcome of such an event is drier conditions in SE Asia and Australia but wetter in S America. Should we see an El Niño event the dry conditions could well see reduced palm oil production, potentially driving demand higher for soybean oil (amongst other veg oils). This could well leave crushers producing for oil, and its growing value, leaving meal as the poor relation as far as price is concerned. This has been seen in previous El Niño events and soybean meal prices have declined sharply as a result. The world will be watching closely into the onset of S Hemisphere winter to see how the patterns develop.
- The outcome of Friday’s Egyptian GASC tender was, as anticipated, that the EU was at the back of the queue with zero tonnes whilst the Black Sea won it all. Out of the 230,000 mt tender with Ukraine securing 55,000 mt in its first award in three months, 120,000 mt was awarded to Romania and Russia gained the final 55,000 mt despite suggestions that two vessels are stuck in Russia due to non-opening of letters of credit.
- Clearly the situation in Ukraine has moved up a gear and the eyes of the world are watching. We will not pontificate on the rights, wrongs or politics of the situation but suggest that markets are vey focussed on how matters progress.