- The start of the new week saw a degree of confidence returning but it was short lived. CBOT wheat futures declined as technical levels on charts were breached to the downside; this added to the break of the technical downtrend last week giving the chart traders a further selling opportunity, which they took with both hands. To add to the CBOT wheat woes we also received a forecast of rainfall in the drought stricken Plains. The cumulative effect was to see the contract close below its 200 day moving average for the first time since late June.
- London and Paris markets followed Chicago lower assisted by a higher Euro vs US$, the US$ being troubled by budgetary deficit and “fiscal cliff” issues. US wheat, in FOB terms, looks to be about the most competitive in export markets (even accounting for freight differentials) and we would expect to see the next Egyptian tender focus very strongly on US origin material.
- A statement from Ukraine’s State Statistics Service that their domestic wheat stocks are at 6.5 million mt, just enough to cover the rest of the season, left the government urging traders to cease further exports. They did not go so far as to formally ban exports at this time. Export pace has been brisk so far this season in a year which saw the wheat harvest decline from 56.7 million mt in 2011 to an estimated 46 million mt this year.
- The prospects for Ukraine wheat crops this winter were questioned recently as severe frosts reportedly hit key growing regions. However, insulating snow cover would appear to have done its job and provided adequate protection against temperatures which have reached below minus 22℃. Regions not yet covered with snow have not experienced temperatures low enough to cause damage according to the the state weather forecasting centre.
- One area of concern is the potential “cap” on Argentine wheat exports. Last week we reported that export licences would be limited to 4.5 million mt, down from 6.0 million previously. Seemingly exports have already hit 4.8 million mt and loaded vessels are being delayed, awaiting licences! There is talk that output could be further reduced leaving stocks tighter still. The S&D for the S Americas is becoming interesting with the potential for significant volumes to be imported (from where) to meet domestic needs. With Black Sea and EU well sold at present it would point to the US and possibly Canada as the likely sources.
- CBOT Soybeans touched the $15/bu mark yesterday before easing lower, strong exports and crush pace were cited as the key reason. As global soybean demand continues to grow we hear that the proportion Brazil’s GM acreage is to increase to nearly 90% of the total planted, a 14% increase. Conditions appear more favourable as reasonable rains have fallen across the main growing regions leading to forecaster AgRural raising its crop forecast to just over 82 million mt
- Argentine weather continues to plague their farming industry. Continued rains have significantly delayed their wheat harvest and left both yield and quality below hoped for levels. The prospects for soybean and corn sowings have suffered similarly as ground conditions in many regions remain waterlogged and unworkable. Precipitation over the coming two weeks is likely to determine to fortunes of soybean and corn output, which global consumers are reliant upon in the prevailing tight supply conditions.