- Today’s CBOT price action has elevated an eyebrow or two! Soybeans and products have traded higher whilst the grains (corn and wheat) have settled lower with wheat declining more than 2%. MATIF may have taken a lead from Chicago, having ramped up swiftly yesterday, but London (which didn’t echo MATIF’s performance) was unchanged to a touch higher on the close. Last night’s MATIF/London differentIals have, as a consequence, narrowed.
- Interestingly we have seen a number of commentators remarking upon the Ukraine situation as a difficult one but few, if any, know how to trade it, particularly ahead of the long Easter weekend.
- Brazilian soybean FOB basis continues to fall away and added to weaker freight offers import profit opportunities into the US. Added to this there are unconfirmed rumours that up to ten further Brazilian soybean cargoes have been washed out by China.
- Given the former statement, it is an interesting dichotomy that the world is awash with soybeans and the US’s biggest customer (and the world’s biggest for that matter) is struggling to open letters of credit due to banking tightness and tight (negative) crush margins as well as major oversupply right now. Under such circumstances it is difficult to suggest anything other than a bearish longer term outlook.
- Brussels has kept up (and exceeded) the pace required to hit a season total of 29 million mt of wheat exports by granting weekly licences amounting to 455,195 mt. The season total now stands at 25.669 million mt, which is 7,655 million mt (42.5%) ahead of last year and requires a weekly figure of 302,775 mt for the remaining 11 weeks to hit the USDA’s 29 million mt target.
- In the same vein, we have seen weekly corn imports reach almost ½ million mt bringing the season to 11.3 million mt – a massive 2 million mt ahead of last year. Going forward, there are concerns over Ukraine despite the crop being broadly planted, the requirement for inputs through the growing season and harvest may well become an issue – at some time – unless we see a resolution to today’s current political situation. This could, if it all goes wrong for Ukraine, provide an opportunity for Brazil and possibly Argentina in coming months.
- Despite the latest MARS report suggesting EU wheat crops are well developed and advanced on account of recent benign weather (or even beneficial warmth and sunshine) rain is doubtless required before long. In Germany, farm co-ops are forecasting their 2014 crop at 24.74 million mt, a marginal month on month increase but down 1% year on year. By way of contrast, the German trade house Toepfer sees their crop at 23.95 million mt.
- Even in the face of unrest, the Ukraine AgMin reported 1 April grain stocks at 12.3 million mt, up 14% year on year to include 4.5 million mt of wheat and 5.9 million mt of corn. Grain exports for 2013/14 so far have reached 28.6 million mt, and are (according to AgMin) expected to reach 33 million mt, a year on year increase of 10 million mt, not a bad effort given the political issue – which appears to be not impacting trade flows, so far.
- Finally, according to Stratégie Grains Vireol has placed on hold its plans to develop its Grimsby based bioethanol plant, suggesting that US investment looks more attractive given political uncertainty over biofuel in Europe. They added that 2nd generation bioethanol production in Grimsby was still an objective.