- Monday has seen markets lower both sides of the pond in limited trading volume as fresh trading interest has been limited.
- The impact of impending S American supplies can be seen quite clearly with Brazilian soybean meal offered for March shipment out of Paranagua at a discount of some $62/mt to US Gulf levels. This leaves global importers with little option from a financial perspective and at the same time makes any price uplift of significance in US meal prices difficult to sustain. The Brazilian soybean harvest is reported to be 35% completed in Mato Grosso, expected to reach 50% by the weekend, and supplies are flowing quite freely despite the odd interruption due to trucker’s strikes. Exports are freely available is the message to grasp!
- S American weather lends a bearish pressure as N & C Brazil is forecast to receive favourable harvest weather in the coming week, while S brazil and Argentina are forecast to get regular rains which will improve the later maturing crop. Near to below normal temperatures are forecast for Argentina and S Brazil, again limiting any crop stresses.
- The US$ has rallied to start the week, gold has eased $12/oz and WTI crude oil has shed just over $1/barrel.
- Price outlook for corn, wheat and soybeans in Chicago looks lower from a technical perspective, and we look for a resumption of the soybean downtrend if we see the July ’15 contract close below $9.97 support. Downside targets are $9.35 and ultimately $8.73. Corn could be building a “head and shoulders” pattern, which would be ultimately bearish if fulfilled, but it is early days yet. Pressure from wheat and potentially the soybean downtrend should, as a minimum, cap rallies. Dec ’15 contract support at $4.13¼ has given way today (the market needs to close below this level for it to be validated) and potentially paves the way lower. In wheat we should not lose sight of the fund net short position, also there is no weather premium (and nor should there be at present in our view) which could leave the market vulnerable to a bounce. However, without a weather problem July ’15 Chicago wheat looks likely to drift lower with $4.85½ our next target.
- With the USDA’s Outlook Forum data now consigned to history, and with US wheat and soybean export demand in seasonal retreat, where can bullish news that offers more than a paltry two or three day short covering rally come from? Many now fear a bearish 31 Mar stocks and seeding report and spring weather driving prices thereafter.