- Chicago markets have started the week lower and one commentator has used the description, “Lacking inspiration, which feels very apt this afternoon. Weather forecasts are leaning bearish with harvest active and the US Plains are due some soaking rains later in the week. Cash selling is reported to be very active as farmers are running out of immediate storage and reports of elevators storing crops on open ground not under cover are not uncommon. November option markets expire on Friday, which together with the rapid pace of harvest is setting the market tone. There is a lack of fresh news input and we expect a narrow trading range to persist, unless we see a major macro event unfold.
- EU and Black Sea cash wheat markets are experiencing a slight anomaly at present; growers are strong holders of the crop based upon unusually large spot discounts caused by large harvest and tight storage. The discount is keeping a lid on farmer selling leaving exporters, who are short, to pay up for nearby supplies to fulfil commitments. This looks as if it could well continue for some while, unless we see a fundamental driver change things.
- Prices (in Chicago) are approaching our initial target levels, and we would be cautious about being overly bearish from here. Our preferred view is to look to sell rallies. The longer term continues to offer a bearish pattern but it should be noted that with historically cheap prices the end user is fast building forward cover and not waiting (entirely) for lower prices. This could well put a floor in prices, until such time as buyers become scarce once again.
- Overall today it still feels as if the path of least resistance for prices remains lower.
- Other news today includes the latest Australian 2015/16 wheat estimate from ABARES (Australian Bureau of Agricultural and Resource Economics and Sciences) at 24 million mt, which is down from their early September figure of 25.28 million mt. El Niño driven dry conditions and above average temperatures were cited as the main reason for the month on month reduction.
- India has raised its import tax level on wheat to 25% (from 10%) to cap imports of cheaper supplies from Australia and even as far afield as the EU.