- As we make a start to the holiday shortened week we look back to the weekend news of a move to far right politIcs across much of Europe and the election of a new President in Ukraine. The former has made the media headlines but had no impact upon markets whilst the latter has resulted in a view that progress is being made and that “risk premium” could well erode in coming days and weeks. We live in the sincere hope that this becomes the case.
- Chicago markets have traded lower today as has London wheat, both having been closed on Monday. Paris wheat initially traded lower before closing around the unchanged mark for some reason we are yet to understand.
- In general terms, Central US and world weather conditions are seen as favourable for crop development, the EU has been described as near perfect and the forecast for Central and Volga regions of Russia, which are in need of rain, contains even more than was the case yesterday.
- There is continuing talk of LC (letter of credit) issues impacting Brazilian soybean exporters, and this news added to pressure on values.
- Interestingly, we are advised that selling volume in Chicago has been moderate, possibly “black box” originated and the surprise is that the funds are retaining their longs. One possible explanation is that they are looking for a “Turnaround Tuesday” as an opportunity to reduce length or even take on short positions as the fundamentals begin to look more compelling as we move closer to new crop harvests in the northern hemisphere.
- There is further evidence the the projected El Niño phenomenon is developing more rapidly, so much so that NOAA (National Oceanic and Atmospheric Administration) is expected to formally announce its arrival within a couple of weeks. The correlation between El Niño and trend or above trend corn and soybean yields in the US is well documented.
- From a technical chart perspective we would look at a close below $12.50/bu basis Nov ’14 soybeans to confirm a bearish outlook and that we have seen the season highs. At the time of writing the contract is trading $12.40/bu.
- Finally, wheat crops in Europe received upbeat reports in recent days, France’s AgriMer reported their soft wheat crop to be 75% good/excellent, an improvement of 2% week on week. In Germany, trade house Toepfer forecast their 2014 wheat crop at 24.77 million mt, an increase from their previous estimate of 23.95 million mt a month ago.