- We have seen a typical Tuesday with corn, soybeans and wheat enjoying something of a recovery, a reversal of the trend seen in recent days. Fund covering of shorts in corn, soybeans and meal has been reported to be active. It seems that there is a problem insofar as that as the US and global weather pattern comes into better focus the bulls lack a credible story to prop up and support their positions. Consequently, the market enjoys a period of short covering (such as we have seen today) but as crops are sown, and at a speedy pace, and end users the world over have extended their forward cover in corn, soybeans and wheat, markets are hit by farmer selling which caps gains.
- In a move which might just generate a market move in coming weeks and months, it has been announced that the EU will not cut a deal to expand the use of vegoils or grains in the production of biofuels. EU politicians backed a deal to limit the use of crop based biofuel to 7%, well below the initially legislated 10%. EU politicians claim that biofuels cause damage to the environment and push up food costs. It is expected that the announcement will receive the full parliament’s backing in coming weeks and bring to an end the two year long debate on the importance of biofuels in the EU’s fuel supply.
- It is apparent that the market is changing its focus towards new crop fundamentals, getting seed into the ground, which may well see some negatives later in the week. To counter this, it should be noted that many are picking up on the significance of US and most world farmers sitting on a large volume of old crop grains and oilseeds, which will weigh heavy as new crop availability becomes nearer. As US corn and soybean crops approach something like 70% planted we are likely to see cash basis levels become vulnerable as elevator operators start to stress over storage levels (which remain at least partially full of unsold old crop supplies).
- Cash wheat markets are stagnating ahead of a possible announcement from Russia as to whether they will or will not lift their export tariff. Traders are unwilling to take fresh positions that may look “silly” in the wake of an announcement, which may come swiftly after a meeting scheduled (in theory) tomorrow. Meanwhile many are contemplating near perfect weather and trying to come to terms with the burden of raising their yield predictions – with all that brings!
- The US weekly crop rating report released yesterday showed 42% of the winter wheat crop to be rated as good/excellent, down 2% week on week and compares with 34% a year ago. The ten year average is 49% with the highest rating of 78% in 1998 and the worst of 28% was in 1996. Im corn, it seems that planting is active in northern Illinois and parts of Iowa so the report next week should show good progress. This week’s data showed 2% completed, last week’s figure was “unknown” and compares with last year’s 3%. The ten year average is 5%, with the highest at 13% in 2012 and the lowest was 2% in 2009. Soybean plantings follow corn so it is too early for data to be reported. It appears that soil moisture levels should benefit early crop development in both corn and soybeans – as a very general statement.