- Probably the biggest single issue which stands out over the last week is Wednesday’s fall in CBOT grains, wheat in particular, which saw up to a 3.5% drop as improved weather across the Plains and Mid West gave funds further reason to add to their net short positions. This drop was also reflected in EU grains, which declined, albeit in a slightly more subdued manner.
- Current wheat prices are far from discouraging demand, and in spectacular style, once again, Brussels issued wheat export licences for 661,000mt bringing the season total up to 15,215 million mt. The increase on the same time last year now stands at 3.731 million mt, which represents close to a 32.5% uplift. We continually wonder at this level of exports and where late season grains are going to be sourced to meet demand; and we continue to draw the same conclusion – which is that we are unsure!
- That said it appears that demand and homes for the UK’s lower specific weight wheat is easing somewhat. As we approach the summer grazing season and feed demand starts to decline it is feasible that the long holders will be in a weaker position and something of a price decline kicks in. There is evidence that some of these grains are being hauled much greater distances from the surplus regions in the South into the tighter supplied North West. Once livestock are turned out this demand will ease somewhat and we could see a situation where sellers are looking for outlets.
- From a more global perspective, Egypt announced that its strategic stocks were in excess of 2 million mt, more than enough to last well into May; the prospect of the world’s largest importer being well stocked has added to negative sentiment. Additionally, the Egyptian Pound has fallen in value by some 8% this year (since Jan ’13) and Government reserves, necessary to support GASC’s (General Authority for Supply Commodities) letters of credit when purchasing, have dropped in excess of 30%. Maybe it is this rather than large stock levels, which is leaving them absent from tenders in recent weeks; or is that us being cynical once again?
- There has been some pre USDA report positioning in the lead up to the figures, which are due to be released at 17:00 (UK time) today. It is widely anticipated that soybean stocks will be reduced as a result of greater than forecast exports as well as larger domestic crushing. Corn stocks are predicted to rise following lower export numbers, and wheat is not expected to change materially. The USDA’s March figures do not have a strong track record of significant or unexpected numbers; consequently we have to wait until 28th March for the grain stocks and prospective plantings report which is likely to have greater market significance.