- We return to another holiday shortened week to witness a sharp fall in CBOT soybeans and products on the first trading day of 2014, triggered by non-threatening weather in S America together with weak, and weakening, technical signals that have sparked off a degree of selling taking prices lower. Front month (Mar ’14) wheat in Chicago also closed below the psychologically important $6.00/bu level on Thursday, which could also pave the way to lower levels. Early trade on Friday witnessed a degree of recovery, as might be expected following Thursday’s sharp losses.
- The run up to next week’s important USDA report is also another factor that, in conjunction with weaker fundamental and technical pictures, is allowing markets to decline.
- Major news items are somewhat lacking, however over the holiday period it has been confirmed that China has rejected a number of consignments of US DDGs following the detection of the non-approved GM event, MIR 162. This has effectively halted further sales and prices in the US have dropped by almost $30.00/ton. The impact upon protein markets has been felt with some reduction in soybean meal and corn demand for livestock feeding as DDGs are pricing themselves into what was a price stressed feed ingredient market place. This particular fact has not yet made its presence felt in the EU, where feed manufacturers and livestock producers alike would welcome anything that brings nearby protein supplies down in price. For what it is worth we hear that approval of the MIR 162 trait, by Chinese authorities, will be either late in Q1 or possibly in Q2. Clearly there is plenty of time for the issue to continue to disrupt international trade before “normality” is restored!
- Egypt’s GASC has once again returned to the wheat tender market with two new tenders, shipment in late Jan ’14 and early Feb ’14. The results of the tender are scheduled to be released later today. A slight change to GASC’s Russian terms on this occasion will permit offers down to 55,000 mt, as opposed the usual 60,000 mt cargo limit which they usually insist upon.
- To conclude this brief return from the holiday season we continue to look for lower levels. The old adage that “big crops get bigger” will, no doubt, be tested in next week’s USDA report, which is scheduled for release on Friday. Interestingly the outflow of monies from commodity funds during 2013 is reported to be a record $46.1 billion (according to Bank of America). The year has seen a number of high profile exits from the agri-commodity trading space due to “relative lack of financial attractiveness”. Clearly, this stance cannot be construed as supportive and adds to our longer term outlook.