• We have seen a classic Turnaround Tuesday trade today with ag commodities soaring higher in a countertrend move which has seen the bulls cheering for the first time in a while. Double digit gains have been seen and funds have exited from freshly established shorts in a panic, which added to upward momentum.

• Suggestions that the recent decline has been too far and too fast, and that today is a correction may well be true but today’s rally has been spectacular – and seems to be too much to be ignored for now and needs careful watching.

• It has to be said that there has been no fundamental change to the fundamentals outlook for commodities or the US$, markets cannot go down every day and our inclination is not to chase the rally, maybe this sets up yet more selling opportunities.

• In more tangible news, Egypt’s GASC tendered for wheat once again, this time for early March shipment. They secured 300,000 mt of, what seems to be, cheap wheat with France winning 120,000 mt and Romania 180,000 mt. The French offer when taking into account twin load ports, moisture allowances and other costs equates to $210 FOB, and compares with feed grade bids at the same level – have the French “choked” on this one?

• Regrettably, wheat farmers are going to see today’s price action and convince themselves that they have been right to hold off selling, and continue with the same course of action. Russian discussions to increase the export tax and intervention price will not change the market, all they will do is add to new crop supplies, where replacement prices are already low!

• In other news Informa Economics raised their forecast for Argentina’s 2014/15 soybean output to 57 million mt, an increase of 1.5 million mt on their previous figure. They also increased their estimate for corn output by 1 million mt to 23 million mt. Interestingly they left their figure for Brazil’s soybean output unchanged at 93.5 million mt. Their corn estimate was raised 550,000 mt to 72.8 million mt.

• All in all, today has been interesting albeit odd, and in the words of one commentator (who we respect hugely), “When the macros, black boxes and algorithms get a hold of the futures markets and move them significantly for little or no apparent reason, remember the words of Benjamin Disraeli (a famous 19th century English fund manager), “Never complain, and never explain”!

• The new month and new week has brought little in the way of inspiration to markets today as Chicago has traded in a mixed fashion. It appears that a very large buy stop was seen in corn in the early hours and this was sufficient to rally prices although not for long. Soybeans and wheat tried to follow but selling pressure has put a lid on upside and new crop hedge pressure from Brazil added to upside limitations.

• There is some support noted in crude oil, particularly stateside, as the biggest US oil workers strike since 1980 enters its second day. The union which represents around 10% of US refinery workforce has walked out. Some stricken plants remain open using non-union labour and this has escalated tensions and a national walkout is being discussed, which would likely pressure upside still further. This would also likely place support under bio-fuels and potentially support corn and soybean oil as a result. Whilst it is still early days, the fundamentals are unchanged, this is a “fly in the ointment” of the supply chain.

• The next fortnight looks promising in Brazil with soaking rains forecast across the dry regions of Bahia and Minas Gerais later in the week. The forecast appears to be bring a favourable mix of sunshine and rain across both Brazil and Argentina aiding soybean and corn development. Any weather related threat appears limited to beyond the next two weeks, and of little consequence right now.

• Saudi Arabia purchased a reported 690,000 mt of wheat, for shipment April/May, over the weekend and suppliers were given as EU, N America and Australia and sellers reserve the rights over origin. FOB prices are difficult to calculate as origin is unknown but CIF averages around $254/mt, if EU origin this would calculate back to around $238/mt. There are also rumours of some 5 to 8 Panamax size wheat vessels from the UK to Asia having been agreed. Russia’s export tariff is now in place and it seems their July to January total stands at 17.9 million mt. Seemingly a number of vessels did not make the date deadline and disputes will doubtless arise as a consequence, but this is largely immaterial to the rest of the marketplace.

• In corn, European futures hit fresh three-month lows, cash premiums were broadly unchanged and the corn vs. feed wheat spread into Eire is €15, but consumers can only purchase once, and most appear to have already done so. Black Sea prices are at season lows and carries are minimal at €1 or 2 per month and there are clearly some bargains around for those who can take advantage.

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Weekly Update 30 January 2015

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Fund positions