- The ECB has indicated it is on hold despite uneasiness over the Greek situation and looming credit payment deadlines on Friday. It has suggested that QE is producing the desired results and the market responded in bullish fashion. As can be seen from the above chart the €uro has appreciated over 4% since the low set in late May. European stocks and equities rallied, and this has spilled over into raw materials and commodities, which has in turn prompted additional short covering as far afield as Chicago.
- Additionally there is a slight raising of concerns over dryness in parts of Europe and increasing temperatures in the forecast is triggering some nervousness over wheat crops in particular. Much of the EU wheat crop is now in the grain filling stage but finishing rains are still desirable. Corn crops within the EU are more vulnerable and there is little doubt that rains will be required in coming weeks. It is somewhat comforting to note that European droughts are difficult to maintain with drought conditions only really impacting about every 20 years, half the frequency of the US. Regardless of today’s market reaction the 8-15 day weather forecasts include significant precipitation across the driest regions.
- Dryness in W Canada is also being watched closely by the global wheat trade. Seeding is not currently an issue but the arid profile of W Canadian weather is in stark contrast to recent years.
- On a less pessimistic note, US corn and S American soybean selling has been noted on the current rally as anticipated and this appears to be limiting gains. Record large US old crop corn stocks offer plentiful supplies and shortages are not a market moving issue.
- Later trade saw early gains given back as news of Chinese soybean meal defaults were reported, which impacted not only soybeans and products but also the grains which closed on (or near) the session lows.
- Informa Economics today reduced its forecast for US 2015 winter wheat to 1.481 billion bu from 1.486 billion previously. Their all wheat projection stands at 2.143 billion bu vs.the USDA’s latest figure of 2.087 billion, of which the winter wheat crop is 1.472 billion. The USDA’s figures are due for update on 10 June in their next release.
- Argentine corn output for 2014/15 was projected 1 million mt higher than a month ago at 25 million mt, whilst soybean output was also increased by 1 million mt month on month to 60 million mt. The Brazilian soybean crop for 2014/15 was estimated 1 million mt higher month on month at 95.5 million mt. By way of comparison FC Stone left their soybean estimate for Brazil unchanged at 94 million mt whilst increasing their estimate for the corn crop by 2.15 million mt to 80.19 million mt.