- This week has proved difficult to interpret as we see a gradual return to normality within the US government and data flows improve our formerly blind condition. In general terms we have seen a stronger soybean and soybean meal market whilst the grains, corn and wheat, have seen more of a sideways direction to trade.
- For the first time in some months it feels as if there has been more influence being applied by “technical” market considerations than the fundamentals, which have been somewhat lacking in forcefulness. This could well be a consequence of the recent dearth of official data. We anticipate data tonight from the CFTC to confirm the fund positions, which should provide some further clues to market direction, and has been sorely missed given the influence they exercise over our markets.
- We, like the rest of the trade, are looking forward to the USDA report scheduled for release on 8th November; the big question we want to see answered is whether or not the reports of better than expected yield in corn and soybeans will be reflected in the report’s numbers. Until publication, it seems as if trade is rangebound and almost scared of stepping out of line for fear of getting it wrong. Consumers appear to continue with a hand to mouth policy of purchasing, which does little to break the price inverse seen in cash markets.
- Turning back to the facts, US export data for week ending 3 October showed wheat sales of 24 million bu bringing the season total to 705 million bu, which is an increase of some 45% over last year. Soybean exports at 34 million bu took the year to 1.01 billion bu, 15% ahead of last year whilst soybean meal sales exceeded expectations at 850,000 tons (three times trade estimates) and total season commitments stand at a record 3.9 million tons. Corn sales of 52.8 million bu brought the season total to 629 million bu, up 53% on a year ago.
- Demand for wheat by Brazil continues to underpin the market although it has once again been rumoured (strongly this week) that India may well consider dropping its export floor price by $40/mt to $260 FOB in which case it will become the world’s cheapest export parity. Having said that, there are suggestions that little will happen until mid-November, which in global wheat trade terms is close to a lifetime.
- The announcement by Argentina on Monday that their 8.8 million mt estimated wheat harvest figure, released only last week, was an “error” and did not fully reflect the entire crop, left some room for downside in prices. An updated estimate of output is expected to be released in coming days. Estimates for the crop range widely with Argentina’s BAGE (Buenos Aires Grain Exchange) at 10.35 million mt, the IGC (International Grains Council) at 11 million mt and the USDA’s latest estimate at 12 million mt.
- Stratégie Grains this week published their first forecast of UK 2014/15 cereal acreages. Unsurprisingly, following the poor planting conditions of autumn 2012, their acreage estimates are increased year on year. 2013 planting conditions have been significantly better and fields we have seen show excellent seedbed preparation, good germination and early weed control; all of which bode well (at this time) for significant improvements in overall output. In summary 2014 wheat acres were estimated at 2.016 million ha, up from 1.626 million ha last year, 2014 total barley was estimated at 949,000 ha compared with the prior season’s 1.215 million ha, which was boosted by an increased spring acreage to fill land unplanted to wheat.
- Brussels resumed their sprightly wheat export pace again this week, having drawn breath last week, with weekly certificates amounting to 406,473 mt bringing the year to 8.797 million mt. This total is now 3.275 million mt or 59.3% ahead of this time last year. The rate of export may well be reflecting some of the concerns emanating from the Black sea region, which was the usual early leader in securing export sales. News that contract execution is presenting some difficulties together with defaults and rising domestic prices as well as FOB offers would suggest that the region could well be finished for the season pushing trade west into mainland Europe as well as the US and Canada.
- In summary, we see the US harvest progressing well with limited weather disruption, limited (if any) freeze damage and yield reports continuing to surprise to the upside. What is necessary is for this information to translate into supply pressure and overtake the demand driven burden, which arose from overly tight US, end stocks. We do not believe that there is much question that this will eventually materialise, however the question is more, “When will it happen and relieve front-end price premiums?”