- Last night’s crop condition report was pretty much as expected with corn rated good/excellent unchanged week on week at 76%, which is up from last year’s 63%. The crop is 56% silking, which is ahead of the five year average of 55%. Soybeans rated good/excellent stand at 73%, up 1% week on week and ahead of last year’s 64%. Spring wheat is 70% good/excellent, as was tha case last week, and compares with 68% year on year. Winter wheat is now 75% harvested, which is the five year average pace. Whilst there was no surprise, the data shows crops at their best in 20 years although they still have to get through August – and possibly more important, the market remains oversold and liable to correction, which we saw to some extent today. CBOT markets, into the close of trade, capitulated and gave back earlier gains and traded largely in the red in the final 15 minutes.
- Wheat output forecasts for Russia are steadily increasing as early yield data is above expectations. Wetter weather across the Volga, Ural and Siberian regions (apart from the far west fringes of the Volga valley, which is a marginal production region) is the main driver of better yields. The upper range of estimates now stands at 57 million mt, which is 4 million mt over the USDA’s latest forecast and will likely be a key driver of global price direction given the influence that the Russian exportable surplus has in pricing. Russian domestic prices are in the process of falling sharply as the winter crop is harvested with prices reported to have dropped as much as 20% in the last two weeks. Black Sea and Russian output has been critical in the recent downtrend in wheat prices (amongst other factors) and it is difficult to see the bottom until we see global cash markets displaying some stability.
- Reports of poor quality in the French wheat harvest continue to circulate, which is not good news for quality buyers. However, this does play into the hands of feed consumers as the available supplies of feed quality grains continues to grow, this stockpile includes not only wheat but also corn (maize). Lodged crops and sprouted grains appear to be the main culprit in the quality arena in France right now. From a UK perspective, French feed supplies are looking for buyers by offering at a discount price that appears to be in the region of €4.00/mt below UK feed wheat levels. The logical outcome would suggest that UK prices will drop in order to compete for export business in an already pressured over-supplied market.
- Finally, the much discussed El Niño appears to be continuing to weaken, which is assisting the Indian monsoon and providing reduced threat to Australia, which has seen little impact so far this season. Given the lack of adverse weather in the US and the outlook for bumper crops there, the reduced threats in India and Australia as well as SE Asia as a whole hardly suggests we should change our bearish stance at this time.