- We have today seen wheat prices slip still further, hitting prices last seen some six years ago and the Chicago market has seen an upsurge in put option purchasing (giving the buyer of the put option the right, but not the obligation, to sell at the strike price – namely a bearish trade) in the May contract. In addition,there has been further fund selling and the cumulative net position will be worth keeping an eye on when this week’s figures are released on Friday evening. There have been many who suggested that fund short positions could not and would not grow in size, and they may be forced to eat their words!
- Financial markets have shown something of a bounce, which may add some support into tonight’s close and crude oil’s attempt at recovery may well help recovery.
- The Paris wheat market saw a dramatic price drop with fresh contract lows once again and physical prices equally weak with fob levels reported at $164/mt. German 12.5% protein wheat is reported to be offered as much as $12 below Russian, and any lingering Black Sea buying interest has evaporated. Feed grade wheat is offered as low as $151/mt with buyers nowhere to be seen.
- In the southern hemisphere we are seeing further non-threatening weather conditions with forecasts suggesting that N Brazil will receive heavy rains in the 8-15 day window, which would favour harvest and boat loading in central Brazil (Santos & Paranagua). Near to below normal rains across S Brazil and Argentina this week with sunshine predicted looks good for Argentine crops, according to some it is almost ideal. At present we do not seem to be looking at S American crops reducing in size.
- In summary, wheat markets continue lower in their attempt to find export demand and a place in feed rations. Corn and soybeans are following but we are yet to be persuaded of their ability to materially break out of the long established trading range. Normal spring planting conditions in the US will see the wheat pressure replicated in soybeans and corn although we will have to wait and see if this becomes the actual position.
- Without looking back into our archives, we recall current Chicago wheat prices are now at our initial downside target levels ($4.30 – $4.40 basis March ’16 futures). Where now?