- Interestingly we have seen Chicago markets, which saw early gains, ease back with hedge related selling as the S American soybean harvest progresses. Wheat and corn were pressured early, and soybean related selling simply added to this pressure. Whilst there has been some scale down end user pricing the big fund buyers, which could add support, have been noticeably absent. The USDA’s Outlook Forum takes place on Thursday and Friday, and maybe the market is awaiting the outcome. The rapidly expanding S American harvest and export availability is undoubtedly going to impact and slow the pace of US export volumes.
- India is likely to impose new import duties on wheat based on their own record crop and to help protect farm incomes. On December 8th, the Indian government reduced its wheat import duty to zero, which is likely to allow some 4-4.5 million mt of wheat imports, which are the largest in a decade. The new wheat harvest will start later next month and continue into May. Some expect this year’s Indian wheat production to reach a record 97-98 million mt, which will break the prior record of 95.85 million mt set back in the 2013/14 crop year. Last year India produced a wheat crop of just 87 million mt due to a sharp fall in water availability from the monsoon. New duties will come in early March.
- Black Sea wheat prices continue to soften in the new crop position, whilst nearby futures are stable. The price of holding Russian wheat from now until late June is about $10/mt or in US terms some $.37/bu. So far that discount has not persuaded Russian farmers to dump old crop supply nor has government rail subsidies to move it. The reason is that Russia farmers are fat with cash and seem to be in no hurry to raise cash for the new growing season. We suspect that Russian old crop dumping will occur as the snows melt and the new crop greens, and farmers seek additional storage for another large crop. As and when this actually happens we will likely see significant cash market pressure.
- Chicago traders appear to be positioning long corn/short soybeans into the USDA Outlook meeting. However, even with a 2-3 million acre decline in US corn seeding, 2017/18 US corn end stocks look as if they will be well above 2.2 billion bu arguing for prices to decline to $3.75/bu basis December corn prior to planting.
- MARS, the EU’s crop monitoring unit have so far identified no major winter crop concerns in Europe, and that is despite less than optimal growing conditions in some regions. Below average rainfall since the start of the year has reduced soil ,moisture levels in parts of S Germany, S Sweden, Czech Republic and Baltic countries although it was reported that there is no immediate crop concern. Frost damage is also reported to be low, again that is despite lasting cold conditions throughout January in C and E Europe.
- It is, of course, still very early but the latest report supports suggestions that EU wheat and rapeseed production will recover in 2017. Stratégie Grains, yesterday, forecast EU soft wheat output at 143.8 million mt, an increase of some 6% from 2016.