- Another day of massive short covering saw soybean prices push to strong gains. Further rainfall in the forecast for the wettest parts of the Midwest and concerns over another drop in crop ratings were the fodder for the bulls. US export data was uneventful, but what has been significant for some while now is that China has been absent from the US market for new crop soybeans. The chart below shows that China has secured only 2.5 million mt this year vs. 5.8 million mt a year ago and 8-10 million mt in the two preceding years. S America is a cheaper seller as far forward as the end of the year, pressuring further US sales at this time. Oct/Nov traditional US business is being picked up by both Brazil and Argentina as we have previously mentioned, and if the US is not to be left with massive unsold stocks, something has to give – prices maybe?
- Crop ratings have dropped in a few states, but the majority of the US crop continues to hold up well above average right now. Currently, the US crop look on track to make 3.75 billion bu and with such a crop the US can ill afford to lose out on further export deals.
- Corn rallied sharply with wheat and soybeans as 1-3” of rain appeared in the forecasts, which leaves the weekly gain around 24 cents so far and open interest in the market has declined significantly. The upcoming USDA report will have had a large degree of influence on this move as traders reposition and reduce risk but it feels like the move has been mostly weather related, in the context of a huge fund net short. There is talk of a sizeable increase to the Brazilian winter corn crop in coming days and S American corn remains some $2-6 below US Gulf into Aug/Sep whilst Ukrainian corn is offered $10 below US for Oct on an FOB basis. Additionally there is a good rain forecast for Ukraine in coming days which has the potential to boost their crop still further. Our view is that the weather has to remain significantly adverse in the US for this bullish move to persist.
- Wheat traded in sympathy with its neighbours, as would be expected and talk of heat and dryness across the spring wheat regions of Kazakhstan and parts of the Russian Volga region as well as Canada lent some support. The Black Sea forecast contains beneficial rain. US exports for the week were nearly on the pace to match the USDA’s forecast, however total 2015/16 commitments rest at 201 million bu, down 65 million, or 25% from a year ago, whereas the USDA was forecasting an 8% increase! Ongoing price competitiveness of the US Gulf remains an issue, is there a theme going on here!!!
- Brussels has issued weekly wheat export certificates amounting to 370,195 mt, which brings the season total to 32,851,776 mt. The season to date total is now 3.499 million mt (11.92%) ahead of last year.