8 January 2013

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  • Today has not (as yet, with an hour to go in Chicago) shown any sign of the fabled “turnaround Tuesday” which so often plagues Monday direction. However, there is still time to go and with the start of fund rebalancing anticipated today we could well be in for a stormy close.
  • We believe that markets right now are all about cash prices rather than their more frequently discussed cousins, the futures contracts. Clearly futures prices are much more public and transparent but we are seeing further clear evidence in many places (globally) that cash premiums are at elevated levels as buyers are struggling to get farmers and merchants to part with their physical crop.
  • In the UK we hear wheat premiums for May-Jul delivery as much as £7 to £8 above “normal” and nearby supplies less than freely available. Despite the “abnormal” pricing of UK wheat in relation to French, by which we mean the premium as opposed to the historic discounts we have previously come to expect, we do not see a glut of sellers all rushing to take advantage of the “manna from heaven”.
  • In other wheat exporting regions we hear of similar circumstances; Russian domestic premiums have been referred to here on more than one occasion, Argentine cash premiums are high, France is displaying strong cash levels as are US markets. This situation could well point to a change in the current downtrend before too long unless some new information comes to the fore.
  • US export inspections released yesterday revealed soybean inspections close to 40 million bu with year to date numbers reaching 814 million bu, which is 36% higher than last year and a massive 61% of the USDA’s full year forecast. Seemingly US December soybean exports reached 190 million bu, the third largest figure on record.
  • Corn inspections were somewhat less impressive at 8 million bu brining the year to date figure to just over 260 million bu down 55% on last year. US pricing would appear to be competitive and could well become the source of choice for new purchases – which still could include large volumes to the EU to replenish the export depleted feed grain stockpile.
  • US wheat exports have reached nearly 530 million bu, which is 13% below last by year’s figure. We anticipate the pace to rise in coming weeks and months as US wheat remains extremely competitive in the global market – and traditional sources are either closed for business or extremely tight on stocks.