- Markets have been somewhat mixed today with wheat taking up the running in afternoon (UK time) trade. As we approach tender on CBOT markets the clever money is sitting on little in the way of delivery for agri commodities (soybean oil excepted) due to stronger cash markets. Long-holders will likely wait and squeeze the shorts still further, leading to a greater inverse. This may be something of a trigger to higher levels, and the situation is only likely to be exacerbated when we get to May when the same situation is likely amid even tighter supplies.
- Today’s run up on wheat levels could well be a reflection of the volumes which are being fed in the absence of bountiful corn supplies. One commentator has already draw attention to this fact and coupled it with ever tightening global stocks as well as an increasing fund net short position – all pointing towards a potentially explosive situation.
- From a new crop US wheat perspective, the ongoing snows have undoubtedly helped the drought stressed wheat producing states, indeed Kansas, Oklahoma and Texas, the three leading hard red winter producers, are now talking of a surplus position as far as precipitation is concerned. How things change! That said, subsoils remain dry but spring growth prospects have improved significantly. It must be remembered also that no matter how much insulating snow cover has been in place and how much beneficial rain has fallen, if the plant was dead beforehand, it will still dead now! We commented months ago on the wheat acreage likely to be abandoned in spring, and we believe little has changed since.
- In Russia the strong pace of early wheat exports and disappointing harvest has left their domestic market tight to say the least. Domestic wheat and flour prices have reached record levels this year, although easing a little in recent weeks. Sales from intervention stocks are estimated to reach around 4.5 million mt leaving end of season intervention stocks depleted at an estimated 300,000 mt. The likelihood of a strong intervention purchase policy is high although this will be dependent upon overall production. It would appear likely that exports in 2013/14 will be closer to those of 2012/13 at 15 million mt rather than those of the previous season at 28 million mt. It is probably too early to speculate on the amount of winterkill this year but an estimated 12% of winter grain crops are reported to be in “poor condition.” How big an acreage will need to be resown, and with what, remains the subject of speculation at this time.
- Finally, the latest estimate on the volume of vessels in the Brazilian lineup is now over 11.7 million mt and time to loading in excess of eight weeks. Given the delays and associated costs, as well as the logistical nightmares in the interior, together with further threats of port workers taking strike action, it is little wonder that concerned consumers (China?) are looking back to the US for supplies; a situation the US can ill afford from its own tight supply position.