- The drop in prices over the last few weeks, which has left funds net short in both soybeans and wheat, has left markets technically oversold as we have previously mentioned. Corn and wheat futures have hit four year lows whist soybeans have shed almost $2.00 from their June highs. The only way a technically oversold market can relieve the condition is to either rally or trade sideways for a period until selling pressure abates. Today’s higher levels suggest we are in this period of consolidation, which we believe will pave the way for fresh selling and lower levels in coming weeks, and that we will see fresh lows before any significant longer term price trend change.
- To further support this argument we would note that US and world farmers are, in general, poorly sold and we believe they will use price rallies as an opportunity to correct this situation, which will potentially put a lid on price gains.
- The EU today implemented the first corn import duty of €5.32/mt. This is to prevent too much cheap corn being imported, and this is particularly relevant today in times of abundant feed wheat supply. Duty levels are calculated daily and if FOB US corn premiums decline, CBOT prices decline or freight rates reduce, the duty will rise further. The data used in the calculation is published by Brussels on 16 and 30 (or 31) of each month. EU importers are unaware of the duty payable until such time as their cargo is cleared.
- The harvest in Russia is continuing to surprise to the upside with wheat yields leading private forecasters to increase their forecasts to 55-56 million mt. The Russian AgMin has estimated the total grains crop at a nice round 100 million mt, which is an increase fro their previous forecast of 97 million mt.