- Midday comments:
- Yesterday’s news that Ukraine may put the brakes on fresh milling wheat sales tempered wheat price downside early on as short covering was triggered and prices stabilised somewhat. History has shown us that both Russia and Ukraine have done whatever necessary in order to secure domestic supplies, and this is perhaps the reason for some nervousness. However, as we reported yesterday, the domestic supply audit ploy has been “used” before and we are largely discounting it at this time. MATIF Nov ’14 wheat scored a bullish “outside day” chart formation which is regarded as a bullish sign and traders will be keeping an eye on the direction of prices in the coming day or two. Following yesterday’s increased German wheat outlook, ADM have today forecast the German crop at 26.04 million mt, up from 24.6 million mt last year. About ⅓ of the crop remains to be harvested and weather conditions continue to present obstacles to the farmer and raise the prospect of further quality downgrades.
- Corn markets seem to have recorded a short term top and the prospect for lower prices looks improved, particularly if the crop tour posts further bullish yield prospects. Monday’s bearish “outside day” also paves the way for potentially lower levels. Lanworth, the Reuters owned research and analysis firm, has forecast US corn yield at a record 174.8 bu/acre following crop inspections in key states earlier this month. If weather continues cool and wet yield could well rise to over 175 bu/acre they added.
- Soybeans have had further confirmation of improving yield which will keep a lid on any upside, and likely keep the downtrend intact. The recent rebound in corn and wheat may leave sideways price action for soybeans in the short term despite the longer term bearish picture, and we do not believe that the longer term picture has changed. Lanworth’s soybean yield estimate was also a record at 46.4 bu/acre which would take end stocks to a massive 516 million bu. Any improved “finishing” weather for the crop could add to yield, and a 47 bu/acre crop would leave end stocks even higher at 567 million bu. (Both estimates assume no demand changes).
- Evening update:
- Despite some of the overnight suggestions that a bounce was in place we have seen afternoon markets in the red with Sep ’14 soybeans the only bastion of strength (just) and fundamental data pointing to subdued markets. The ProFarmer crop tour are suggesting large corn yields and an abundance of corn available to feed livestock, in addition to plentiful (and possibly growing) feed wheat supplies. Funds are reported to have been active sellers adding momentum to the downturn in prices today.
- In Ukraine there are reports of serious fighting in the Donetsk region as government forces push strongly to end the separatist uprising. The strength of fighting is giving rise to suggestions that the uprising could well be over in days adding to the downward pressure on wheat markets.