To download our summary of today’s WASDE report as a PDF file please click on the link below:

USDA-Recap-12-Apr-16

• Above normal temperatures and near to slightly above normal rains will continue to benefit winter and spring grain crops in Europe and the Black Sea for the next two weeks. The maturity of the EU and Russian winter wheat crop is well ahead of normal, but there is no evidence of any threatening cold temps that would cause concern. European and Russian wheat production is off to a solid start.

• Today has seen Chicago grains fall sharply whilst soybeans an meal have pushed to fresh 2016 highs and we have to say that we currently see no good fundamental reason for the recent soy complex rally. It feels as if funds are taking a long side stab at the soybean market without due regard for the global oversupply position and negative Chinese crush margin situation. We had expected losses in grains as rain across the Plains were well forecast and Midwest corn seeding is likely to advance rapidly in the coming week. We struggle to see the soybean rally lasting as US soybean meal basis prices ease and the abundant S American supply pressures the market.

• It has been suggested that funds are pushing fresh money into the soybean complex on the back of chart technicals and seasonal historic considerations, which tend to see the market turn higher at this time of year. Doubtless there will be some spillover support from political issues in Brazil, the Real rallied to almost 3.51:1 vs. US$. There is anticipation of further impeachment proceedings against President Dilma and if a two thirds majority vote would allow the senate to ask Dilma to step down pending investigation. The Real rally is based upon the vice president taking over and providing an improved economic outlook. Will it, or won’t it happen? A big question with no certain outcome at this time, but one which is pushing bearish fundamentals to one side – for now.

• We see little longer term bullish input at present.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 8 April 2016

Our weekly fund position charts can be downloaded by clicking on the link below:

Fund positions

• We saw US winter wheat crop conditions pegged at 59% good/excellent, which was considerably above expectation and some 15% above this time last year. Prices have reacted accordingly with Chicago wheat futures some 10 cents (2.2%) lower on the day. There is additional confidence that forecast rains will fall and ease the dry conditions that have added recent weather premium, and it also feels that lower US wheat yield forecasts are a touch early too and more evidence of loss/damage is required to substantiate early rumours.

• Informa Economics have released their latest S America 2015/16 crop estimates  as follows:

Argentina corn 27.5 million mt, 500,000 mt above last month.
Argentina soybeans 59.5 million mt, 500,000 mt above last month.
Brazil corn 83.7 million mt, 1.2 million mt above last month.
Brazil soybeans 100.5 million mt, 800,000 mt below last month.

• The soybean complex has gained today on the back of crude oil price rallying with wheat lower on better than anticipated US crop conditions and corn has been caught between the two.

• It is interesting to note that Brazilian export commitments for the first week of April are record large, US exports declining as a consequence?

• The soybean complex continues to reel from oversold territory in late February, but buying interest is beginning to wane. There is no need for additional acres in the US, and it is difficult to be overly bullish on export prospects amid record S American crops. More important that record Brazilian shipments nearby is that S American soybean exports are expected to be extended into the gut slot of the US harvest. The top end of a trading range is being formed in soybeans and we look for lower levels going forward.

• We looked at early trade this morning and saw low volumes and a mixed approach that suggested markets were searching for fresh news input. Central US weather forecasts look warmer with showers promised for the parched and dry areas within the W Plains and from a purely weather perspective we see a slightly bearish input. Global cash wheat prices also suggest bearishness as Russian and EU farmers look to empty bins/stores before the new harvest arrives and pressure the merchant trade with volume offers.

• Vegoil markets have been pressured higher by Malaysian palmoil but early trade saw prices ease a touch as the June contract failed to make new highs. We await March Malaysian production and stocks data as trade expectations suggest a decline to 1.98 million mt, plentiful on an historic basis but low in recent terms. There is potential for a seasonal “top” to be seen forming right now and this could impact soybean oil and the soybean complex in general if this is actually the case.

• EU/Russian/Ukraine weather forecasts suggest that a mixture of rain and sunshine will aid and assist crop development in the next fortnight and Russian sources hint at 2016 wheat output in the 61-63 million mt range given normal weather into the end of May whilst EU grain and oilseed crops have high output potential as weather conditions remain favourable. Our view is that we are seeing a seasonal top forming in global vegoil prices unless weather conditions intervene.

• Tonight has seen mixed fortunes with soybeans lower and the grains either side of unchanged. US farmers are watching soil temperatures closely, currently they are too low for germination but fieldwork is under way and it is now just a question of timing before planting gets going in earnest. We know from an historic standpoint that when the US farmer wants to plant he can now cover huge acreages in quick time.

• There is a question mark over dry conditions that may be starting to impact Brazilian winter corn output although, although the corn crop is reported to be in good/excellent condition in adequate soil moisture. Latest estimates suggest that even if there is a 4-6 million mt hit to current output we will be looking at a crop of 80-81 million mt, which would still allow for sizeable export volumes.

• We see little in the way of fundamental change in market direction at this time.

• Monday’s Chicago trade shows us to be both lower and slower as we approach the close. It seems that fund support is waning somewhat and we would question their appetite for long positions at this time. Should this be the case our question remains, “Where are the buyers to sustain the current price uplift?”

• We are awaiting NASS’ first weekly crop condition report later today, and this is expected to show US winter wheat conditions to be well above last year.

• There is a possibility of a small (5-15 cent ??) rally in corn should we see weather induced planting delays although we continue look for prices to decline in the longer term in light of global stock levels.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 1 April 2016

Our weekly fund position charts can be downloaded by clicking on the link below:

Fund positions