- Chicago markets have seen the third day of spread unwinding, which has seen price support in corn with wheat following, but less so in soybeans. US weather is becoming a more important market driver now that S American crop losses are better known and understood. Cash markets, which area key driver of futures prices, are weak nearby on the back of plentiful supplies. New crop prices carry premiums deemed unacceptably high by consumers, who are not being encouraged to place orders or extend cover further forward at tis time, particularly as cover levels are reported to be reasonable.
- The market is not prepared to give up its recent gains lightly, strength in crude oil, which is at rally highs, and concern over a potential US Midwest drought are sufficient to prevent a tumble in prices.
- It is our view that at some time before long, the USDA will have to take into account favourable weather conditions and the good start to the 2016 season in the US as well as EU, Ukraine, China and Canada. Global cash market prices are awaiting the start of the winter wheat harvest. In addition the El Niño Southern Oscillation (ENSO) has moved to neutral and it appears that the jet stream should keep the US well watered through the early season. Upside looks limited to us right now.
- The US crop condition report showed winter wheat to be 62% good/excellent, as anticipated, which is up from 45% last year. Spring wheat is 89% planted, down from 92% last year and just below expectations. Corn is 75% planted, 1% behind expectations, down from 82% last year but above the five year average of 70%. Soybeans are 36% planted, down from last year’s 41% and above the five year average of 32%.