- CBOT markets are all lower at the time of writing and European wheat markets also closed in the red.
- Technicals have driven today’s markets in Chicago; soybeans saw a price reversal on 14 July and short-term weather is leaning bearish right now. The recent upward price trend channel was violated on Friday and adds to bearish tone. In corn the weather is bearish, US exports are very slow and the US$ is pressuring prices. The recent addition to long positions by speculators and the fundamental chart damage is putting these guys on the wrong side of the market from the off this week. How long will they “hang in” in the hope that it goes their way? Our guess right now is “not very long”. However, it is extremely unlikely that we will see a full corn crop recovery even if the weather plays ball from now on but look for more downside to come even if we do not see fresh lows. Wheat’s short term downtrend looks set to continue regardless of other grains and outside forces, but with added negatives from elsewhere the downtrend looks steeper than it possibly would otherwise.
- Prices have fallen as long position liquidation and fresh short position taking has been in evidence from the funds. Today’s early soybean decline was countered midday as weekly export inspections were better than expected, but the grains have continued lower with wheat leading the way. Whatever weather premium has been injected into markets over the last few weeks is being extracted right now as conditions and forecasts improve. Globally, the only are of concern remains dryness in W Europe as production threats continue to erode across the E Midwest, Canada, Australia and China.
- Reports from Russia suggest that wheat exporters and customs officials are working on a resolution to the export tax debacle which is making forward export pricing difficult to say the least. Russian wheat exports are currently operating largely on a spot basis with exporters reluctant to secure forward business with such uncertainties and potential losses so close to home.
- Tonight’s crop progress report, released after the close, will likely dictate tomorrow’s price direction and any “turnaround Tuesday” effect. Whether any improved yield potential in the West will offset losses in the East remains to be seen. It remains our belief that we have seen seasonal highs made last week with improved and improving US weather, active S American farmer selling and an ongoing lack of US export competitiveness. Argentina remains the world’s lowest cost seller of corn and soybeans into early autumn.
- One final point, French wheat condition has stabilised with soft wheat rated 75% good/excellent, unchanged week on week and corn dropped 4% to 67% good/excellent. Their grains harvest is now well advanced and it looks as if France will lose out on last week’s Algerian tender on account of Baltic origin. Remember last year Algeria was forced to switch away from French and they now have a taste of better wheat! EU wheat price-wise shows France to be $15 above Russian and German is a further $10 higher – hardly encouraging from an export perspective! The supply position is one small part of the trading equation, demand profiles have been described as “awful” and there is a feeling right now that the EU will follow the US in struggling to sell wheat particularly as Asian feed demand is no longer there. Black Sea prices continue to ease and any favourable Russian tax resolution could well see an acceleration of this direction.