- Midday comments:
- To start the day we see a good portion of the midwest forecast to receive between ½ and 3 inches of rain in the next week which makes any bullishness in the market difficult to hold on to. Talk of some crop regions needing rain has tempered the big picture somewhat and early season lows are hard to score right now so early in the season. Soybean markets came close to season lows once again only to be thwarted by the near record short position dictating that cover was taken later in the session (see Evening Update).
- Corn markets appear to have stalled ahead of next week’s USDA report despIte a 168-172 bu/acre analyst range, and the lower end bing forecast for next week’s report NOT for the final outturn. Regardless, anything within that range will mean a BIG crop by any standards and it may be appropriate right now to focus upon demand rather that supply going forward. The big question is, “Where is the demand going to materialise?” Potential for a reduced S American crop does exist as we have mentioned, but large global grain stockpiles will likely pressure prices for some time to come.
- Wheat has been the upside leader for a couple of days as tension escalated on the Russian/Ukraine border and appetite for risk reduced. The shorts have been unhappy to hold onto their position and covering has dictated the move to higher prices.
- Evening Update:
- Key today has been nervous short covering, particularly in the grains although the soybean complex has been pulled upwards, on worries over increased Russian troop movements along the Ukraine border. Suggestions that Putin is about to move troops across the border under the guise of a “peacekeeping force” are gaining credibility. Russian support for their cultural cousins appears to be gaining momentum and this could escalate the risks for a cross border conflict to erupt in more dramatic fashion. It has been noted that Putin has not sought parliamentary permission although his track record of irrational acts would suggest that this is not necessarily the way in which he would behave!
- Ukraine’s actions over the last couple of weeks have clawed back about half the territory that separatists formerly controlled, and it could be that Putin is merely “sabre rattling” and looking to cheer on the rebels in Ukraine. However, we are heading into a big weekend and an influential report next week, and “risk off” is the name of the game right now, particularly if there are profits to be booked.
- Black Sea wheat prices do not appear to have followed CBOT or Matif and to all intents and purposes is currently unchanged. Whether this remains the case will be interesting to see in the next day or so. As CBOT levels rise they become less competitive into export markets and potentially increase the likely US end stock position.
- Russia, in retaliation against recently imposed economic sanctions, has banned imports of agricultural products from those nations who have supported sanctions. At this time the US appears the loser as they supply (or used to supply) pork and poultry as well as soybeans.
- Discussions over the Matif wheat specifications for delivery have not reached agreement with one of the elevators involved looking to their board of directors for direction. The debate seems set to continue for a while yet leaving uncertainty, which markets (and traders) hate, and placing contract delivery into doubt – at least for the time being.
- All in all, we are looking at a fundamentally bearish physical position in global grains and oilseeds, which we have been writing of for some time – BUT – right now there is a fear over the geo-political situation which may intervene and disrupt the trend. However, our longer term view is that the big picture will prevail in the longer term and that prices will ultimately be driven by growing global stockpiles as well as potentially diminishing international trade.