- The US wheat farmer excluding Government payments, is facing its largest net loss per acre in nearly three decades. It is forecast that US wheat farmers at current new crop prices will be facing losses exceeding $110/acre. Such losses are sizeable and reflect the reason behind the dramatic shrink in US wheat seeding since the mid 1990’s. This means an additional push into US corn and soy acres or other minor oilseed crops. Wheat is not a crop favoured by US farmers this autumn.
- We have seen Chicago markets mixed to lower with corn and soybeans trading lower as wheat attempts to rally on news that Egypt has (at last, and for now) approved ergot levels of 0.05%, the generally accepted international trade tolerance level. This will free the way for exporters to feel somewhat more confident in making offers to Egypt going forward. It is expected that Egypt will tender once again following the “cancellation” last Sunday in the face of zero offers.
- Corn and soybeans have sagged on improving US prospects and harvest acceleration as well as a slowdown in fund purchasing which has been a feature in the last few days. There is a view that the Stocks and Small Grains report, due for release on Friday 30 September, will be somewhat bearish with wheat likely to replace corn in feed rations through the June-August quarter. This data release and the October WASDE reports are likely to keep a lid on either rallies or breaks.
- US wheat exporters are getting more interest from overseas buyers as quality becomes more important and other world exporters struggle with protein and sprout damage. As we have been suggesting for some while the outlook for US soybean and grain demand is solid.
- It has been a day of waiting for the US Central Bank decision and it remains hard to get overly bullish on corn or soybeans at these levels with harvest dead ahead and yield trends improving. We maintain a trading view of buying sharp breaks and taking profits on rallies. It’s too late to be overly bearish due to large US crops. US farmers will probably store as much crop as possible and GASC looks to return as more routine buyer of world wheat. Unfortunately, we doubt that rallies can be sustained and one has to be quick to take profits when offered.