- Midday comments:
- The purchase by Egypt of US wheat for the first time this season appears to have provided some confidence to the trade that US wheat IS competitive in the global market place and may just be sufficient to give some support – short term. There has to be a degree of caution though, how far up can wheat move given the abundant supplies in France, Germany and the Black Sea and with new crop harvest just around the corner in Australia and S America. It has been suggested that Russian wheat has to shed as much as $10/mt to be competitive into Egypt going forward.
- In corn continuing news of huge global supplies continues to weigh heavy on the market and the increase in EU import tariffs on corn, sorghum and rye to €10.44 from €5.32 previously suggests strongly that domestic feed grain supplies are more than adequate. The level of competition between the USA, Ukraine and Brazil is likely to ramp up into the likes of Japan and S Korea. US harvest progress will continue apace as the weather window in the coming week looks favourable, adding pressure.
- Soybeans traded up and down in early markets before making new lows basis Nov ’14 once again. Chart patterns can only be described as bears, which when coupled with favourable harvest weather makes for “happy bears”. On point to bear in mind is that the record fund net short position hangs over the market almost like the Sword of Damocles, the market has shed over $1.00/bu in the month of September alone as beans are viewed expensive in relation to corn. Brazilian planting conditions, which look favourable right now, add to overall bearishness.
- US crop condition and progress was reported after the close last night and showed corn condition to be unchanged week on week at 74% good/excellent vs. 55% last year and 57% as the ten year average. Corn was reported to be 7% harvested, up from 4% a week ago and below the ten year average of15%. Soybeans were rated good/excellent were 71%, a point below last week and compares with last year’s 50% and the ten year average of 56%. Soybeans are reported to be 3% harvested, as was the case a year ago and compares with the ten year average of 10%. Spring wheat is 86% complete vs. 74% last week and com pares with the ten year average of 92%. Winter wheat is25% complete, up from 12% a week ago and compares with the ten year average of 25%.
- Evening update:
- Markets have moved back and forth throughout the day in uninspired volumes with some hedge selling offset by some short covering. Harvest continues to both gather momentum and attract more attention, but one story remains fairly constant, and that is yield statements such as, “off the charts”, “astounding”, or from the more reserved “better than expected”.
- Our anticipated “Turnaround Tuesday” has not materialised despite an early attempt, and it appears the market is awaiting more solid harvest data before deciding “how low is low?” It is likely that harvest will have to reach 25% before confidence in above trend-line yields is truly established.
- The ability of the US to gain an increased share of world markets is compromised by aggressive competition from elsewhere, and this looks likely to continue for the foreseeable future.
- In Paris, the Matif wheat market flirted (briefly) below the €150.00/mt level before staging a recovery into the close. It feels very much as if it is only a matter of time, and maybe not much of that, before resistance is firmly breached and the level gives way as the next price leg down gets under way. There is very much a feel of, “don’t buy today what you can put off until tomorrow” which will continue to see the market grind lower.
- Matif corn slumped again to its third straight day of contract lows and has now shed €10.00/mt (which equates to $0.35/bu) in four trading sessions, double the losses in Chicago, and this is despite € weakness! Harvest data in France is scant but follows the US trend with yield reported as “off the chart”. Russian data follows suit with suggestions that last year’s crop will be exceeded by as much as 3 million mt. The conclusion is simply that the world is awash with corn – in addition to wheat – feed grains show no sign of supply problems in the foreseeable future.