- Today seems to be largely about the CBOT soy complex as China reportedly cancelled up to 300,000 mt of US soybeans which dragged the market some $0.20 lower in early trade. Later in the session we saw front month Jan ’13 at $0.18 down and forward months also down but not to the same extent.
- We had planned to write tonight along the lines of, “the Chinese market having remained firm yesterday means that the decline in CBOT prices was overdone and we expect a recovery, and quickly!” We are sure readers will empathise and understand how pleased we are not to have written that!
- However, wheat prices were sucked into the decline and, of course, both London and Paris followed suit. The Paris/US spread has maintained its differential with the US retaining its competitive edge. We picked up on small European “longs” exiting their positions as the market continues to display little sign of finding support. Presumably the prospect of growing margin calls in a cash strapped business environment has forced their hand.
- Following on from our Argentine comments yesterday, we heard that a two million mt cap has been placed on Jan/Feb exports. If we add this to the “all but empty” Black Sea and seemingly growing fund short in wheat we could well be heading into a massive bear trap.
- In summary, whilst we can only accept that, as always, the market is “right”, the fundamental position that we observe in global terms points towards prices moving upwards rather than, as currently, down. We need a trigger to reverse the decline, and at this time it is difficult to envisage what, or when, this will emerge.
- Back to the subject of soybeans, Hamburg based Oil World today reduced its outlook for Argentine soybean output to 53 million mt; this is the second 1 million mt reduction by Oil World having been at 54 million mt in November and 55 million mt in October. The decline is as a result of ongoing adverse weather conditions which are delaying and disrupting sowing. Whilst planting can continue into January in some regions, it is at the expense of yield. In the same report, the analyst left Brazil’s output unchanged at 81 million mt.