Another day of profit taking followed yesterday’s rally with the soy complex taking the brunt of the drop in prices. We have yet another day with no real fresh news and consequently the market feels somewhat directionless. The falls are not sustained and chop both ways in a sloppy decline.
US weekly export sales were poor in corn with under 70,000 mt, well below the estimated 350 to 400,000 mt; wheat was well within estimate and soybeans were at the upper end of expectations with soy products both above estimates. The key here is that soybeans show no sign of rationing and the current price drop is simply encouraging further consumption which can not be sustained. Consequently we anticipate price strength before harvest is completed, particularly in soybeans.
Yesterday’s wheat tender by Iraq highlights the structure of pricing on a global scale, with Russia offers succeeding purely on a freight advantage and only marginally below both Australian and US offers. Our view that Russian offers will soon cease to feature in export markets appears to be closer than before.
At home ADAS’s latest figures suggest that the UK output is at a 20 year low despite the fact that harvest is not yet finished. Estimated output sits at 6.9 to 7.2 mt/ha subject to final figures from yet to be gathered crops in northern regions. This is a reduction from previously estimated levels of 7.1 to 7.4 mt/ha and features particularly low specific weight grain. The ADAS figure is broadly in line with the figures released by Strategie Grains last week.
As the US markets draw towards a close we note that news of better than expected soybean yields abound, dragging values lower. Similar news circulates on corn yields with the same price impact. Fund selling appears to continue as does selling by elevators to hedge their intake and this weighs on prices.
We continue to restate our dogged view that the current price decline is not a reflection of long term fundamental supply demand change, and that we will see new price highs before the season is over.