- Midday comments:
- The morning after the holiday weekend started with weaker grains as rain across Kansas proved a bearish force and provided Russia and Ukraine leave their ports open for business, their exports should help to keep world prices low and possibly lower. Thursday’s CBOT price gains, which were not sustained into the close, were fully given back (and more) on Friday. Regardless of other issues, it it the Russia/Ukraine issue which grabs the attention, and Ukraine says it is seeking NATO protection following what both Kiev and its western allies describe as open participation by the Russian military.
- The IGC forecast 2014/14 global wheat output at 713 million mt, an increase 702 million mt Monday, the USDA’s latest figure is 716.09 million mt for comparison purposes. The key drivers for the IGC’s increase include larger output in Russia, EU and China as lack of significant weather issues has left crops to develop well.
- Corn markets this morning remain in something of a sideways pattern, traders are viewing it as cheap in relation to alternatives. Thursday’s gains aided by the Russia/Ukraine inspired wheat gains were largely given back on Friday. There has been positive weather over the weekend in key corn growing regions, and the IAG crop tour across some of the biggest corn producing states has seen what has been describes as “massive yield potential”.
- The IGC 2014/15 global corn forecast came in at 973 million mt, an increase from 969 million mt month on month, compared with 985.39 million mt as forecast by the USDA in its latest report.
- Soybeans posted early gains as the markets reopened after the holiday weekend as some were suggesting that there was too much rain across Iowa and Minnesota, but our belief is that the warmer, wetter trend is almost ideal and adding to yield rather than detracting from it. The longer term outlook feels even more bearish as S America looks set to add to planted acres (at the expense of corn).
- Evening update:
- Data today shows Ukraine’s 2014/15 season grain exports to date at 5.01 million mt, of which wheat accounts for 2.75 million mt, barley 1.89 million mt and corn 377,000 mt, and compares with 3.3 million mt year at the same time last season. This gives little reason for concern right now, so what price “risk premium”?
- As the US awoke and returned to trading desks following the holiday extended weekend break, it is probably fair to report that some surprise exists that grains are down and soybeans are up! Most expectations were the reverse basis Russia/Ukraine, yet wheat has posted double digit losses and soybeans double digit gains, the latter appears to be on the back of continued strong soybean meal demand.
- In general, there are some reports of money exiting the commodity space on account of poor returns, gold, silver and crude oil all posting sharp losses and risky assets have lost some of their former shine.
- Weather reports continue to suggest a lack of cold/freeze risk into September 18 or 20, which will keep the bulls at bay, and early harvest data from the Delta and Gulf states remains record large and well above expectations. As an example, Louisiana and Mississippi soybeans are reportedly yielding 65-90 bu/acre leading to a question as to whether national yield could hit 49-50 bu/acre by the time harvest is done. Early corn yield reports across the Delta and S Midwest are equally impressive with 190-240 bu/acre yields being reported, well above producer expectations.
- Closer to home, despite fresh one year low in the € Paris wheat ended with little changed. Anecdotal evidence is suggesting that Swedish/Baltic/Polish wheat is trading specifications equivalent to Algerian requirements at substantial discounts to French, which must be cheesing off the French–big time! The next Algerian tender will be at telling one, whether Algeria supports its long time ally, or price – we will watch with interest.
- In corn, closer to home, Ukraine premium decline is significant, jeopardising US exports. Given the likely US harvest in the US this development must come as a worrying development to US producers, exporters and (maybe even) government forecasters!