- Midday comments:
- As EU wheat markets trend lower, export prices remain extremely aggressive and spread trading remains active the pressure remains to the downside on wheat. The global supply, which is looking large to say the least, is pressuring Chicago prices lower in order to maintain competitiveness against corn. Matif markets made four year lows yesterday and have dropped a further 3% today, Minneapolis and Kansas markets also pushed to new lows this morning. US weather conditions tend towards bearish with good rainfall expected across the western Plains in the next five to seven days.
- In corn, talks of higher yields and improved harvest weather are adding pressure to the market. For what it’s worth, an average yield of 175 bu/acre would add 275 million bu to end stocks which are already in excess of 2 billion bu. Weather over the ext seven days looks as if it will be favourable for harvest to progress into the central US, eastern corn belt and southeast. Seasonal barge freight on the Mississippi is rising and trucks are getting harder to find. Yields continue to surprise to the upside and moving the volume is becoming something of an issue as queues build at elevator reception points. This is the beginning, and we believe that cash basis will continue to weaken as the market leans further into the hands of the buyer leaving sellers with fewer options.
- Soybeans moved to new lows this morning and continue to remain under pressure into midday. Talk of yields reaching 48 bu/acre would mean an additional 118 million bu being added to the already high 475 million bu carryout projection. We are starting to see a massive supply coming onto the US market, planting is getting under way in Brazil and favourable harvest weather all point the market one way. As with corn, logistics are becoming something of an issue. Farmers appear to favour soybean sales over corn which will likely pressure cash basis. Brazilian farmers are awaiting a solid soaking rain in the central part of the country before plantings ramp up, whilst Argentine farmers report rains to date have left soil moistures in “great condition” for planting soybeans. Remember the heavy rains in August which saw some wheat acres lost. In a mild El Niño year, such as this, Brazilian condition trend towards above normal precipitation, which would favour soybean production.
- Evening update:
- Informa Economics today revealed their latest 2014 US wheat output forecast with all-wheat at 2,046 million bu vs. 2,030 million bu as forecast by the USDA. Their 2014 winter wheat figure came in at 1,392 million bu vs. the USDA’s 1,397 million bu. 2014 spring wheat, excluding durum, was forecast at 590 million bu vs. USDA’s 572 million bu.
- Matif wheat has shed almost €10.00/mt in the week vs. London’s loss of just under £1.00/mt (both basis Nov ’14 contract) making the Sterling adjusted differential between the two back to £9.28, which is a far cry from the £19.00 level seen earlier this month. Given the alleged tightness in milling availability it feels as if the differential, at these levels, is too low.
- CBOT grains and the soybean complex are all lower into the close tonight posting new lows on favourable Central US weather, huge yield reports and the fact that end users have cover into early 2015. All of the foregoing leave a potentially weak demand pattern, which is unlikely to support the potentially overwhelming supply position. Volume trade remains low and funds continue on the sell side of the market.
- Current “chatter” is now pointing to a corn yield surpassing the 180 bu/acre level and soybeans above 49 bu/acre as early Midwest yield data confirms the early Delta and Gulf States’ figures.
- In a surprise move the Argentine government has passed a law allowing the government and/or military to confiscate business and cash grains (read soybeans) for “the betterment of the nation”. Farmers, unsurprisingly, are less than happy, and have vowed to fight, our view is that this is a fight they are unlikely to win – how will they fight if armed militia arrive at a farm to “confiscate” grain. There appears to be a similarity between Argentina and Venezuela developing.
- Tonight’s questions are, “How big is big?” in relation to harvest, and, “How low is low?” in relation to prices.