- Midday comments:
- As the UK returned to trading desks following the last holiday weekend before Christmas (did we really mention the “C” word?) Egypt’s GASC announced a further tender for wheat to be shipped in late September. Unsurprisingly, the clever money is on Black Sea suppliers to win the business with France, W Europe and the US very unlikely to offer, let alone win any volume. The results are due to be announced mid-afternoon, UK time, and we will comment in the latter half of today’s update.
- The soybean market has “gapped” lower on the overnight trade and has continued in negative territory as impending record large US crops weigh heavy on sentiment. The September ’14 contract, which is approaching first notice day on Friday, has traded wildly and it is reported that the spot cash basis is trading at record highs which has dragged sufficient supplies to cap upside price movement. News that the early soybean harvest in southern states is under way has also limited upside and it feels as if a “top” is in place in both beans and meal, weather conditions are also supportive of this view. Early yield reports from the lower Delta region are huge (50-70 bu/acre). A slight (1%) drop in soybean good/excellent rating to 70% from 71% last week (vs. the ten year average of 57%), was below an unchanged expected rating.
- The corn market lacks much in the way of fresh news right now, and last night’s condition report which showed a week on week improvement in the good/excellent of 1% to 73% (vs. the 58% ten year average) was maybe enough to trigger some downside price action. Weather conditions continue to support the improved yield theory, and much talk of 170 bu/acre continues. As harvest progresses northwards we would expect to see further downward price pressure.
- As the weekend came to a close we saw Ukraine/Russian tensions dissipate once again and the aggressive Black Sea sales campaign became a focus for the market. Romania has announced a record wheat harvest of 7.4 million mt and Russia’s gMin has forecast their 2014/15 grin crop at a minimum of 100 million mt with exports rising to as much as 30 million mt compared with 25 million mt last year. Some market support may come from the rain delays to the US harvest, but our view is that global grain supplies will ultimately prevail and pressure to the downside as US prices are currently uncompetitive from a global perspective.
- Evening update:
- Egypt purchased 175,000 mt of wheat, 115,000 mt from Russia and 60,000 mt from Romania with the latter priced most aggressively. France (surprisingly) offered but was (unsurprisingly) uncompetitive with their best around $5.00/mt more expensive than the dearest of today’s trades. In addition to Egyptian news, we heat that Algeria is reminding suppliers that mixed origin wheat will be rejected, and this is surprising purely because it is, a) extremely unlikely, and b) Algeria is in a tough place with France seemingly unable to fulfil existing sales, German and Blatic commitments are already high and Algeria can’t (won’t?) take Black Sea origin; all in a year when their import requirements look as if they could leap to a massive 8 or 9 million mt.
- Prices in Chicago have traded lower throughout much of the day, although as we approach the close we see soybeans and wheat moving to unchanged or just into positive territory. If this is a “turnaround Tuesday” it does not feel compelling!
- Given the overall bearish market tone, we continue to look for bullish news, with little success it has to be said. However, there is ongoing discussion of early frost damage although the chances of damage are currently viewed as extremely limited right now. Forecasts suggest that the likelihood of damaging cold conditions in the period to 15/20 September are remote at present.