- Midday comments:
- The early news today was rejoicing the fact that Russia had not invaded Ukraine over the weekend and added to Friday’s lower market it was enough to see the wheat market start on a lower note. Additional downward momentum came from suggestions that Ukrainian farmers who are lacking financial support may well be forced into selling in order to facilitate their cash flow in order to pay for next season inputs. Early news that drier conditions are heading into mainland Europe placed some of the quality issues to the back of the queue for the time being.
- Early corn markets picked up on the bearish lean from wheat as well as market participants building belief that recent rains have “made” the crop. Tomorrow’s USDA numbers are largely being ignored in favour of opinions that crop yields will grow bigger in coming weeks and months in the run up to harvest.
- For soybeans it would appear that unless there is some bullish news tomorrow the market will resume their downward trend with vigour. Front month August is expected to see some fireworks as expiry looms large this week and participants are squeezed, although this is unlikely to impact new crop contracts in any way. Firmness in the market can easily be attributed to strong new crop demand although it still appears that new crop supplies, from a global perspective, are more than adequate.
- Evening update:
- Despite weekend optimism over the Russia/Ukraine situation we received news that 45,000 Russian troops were on the border and this pushed wheat prices higher for a time. The jump was not long lived, but clearly illustrates the “jitters” which exist over this particular issue. Whilst “in the region”, wheat exports from Russia in July (assisted by a 5% drop in the Rouble) were a record 2.4 million mt. Government assurances (Russian government that is) current tensions will not affect grain exports (from Russia that is) helped the currency regain 2% from the lows of Friday. The 2014 wheat crop in Russia is expected to be the largest in six years, and it will be interesting to see quite how high the USAD take their forecast in tomorrow’s numbers.
- Dry weather in Algeria has adversely impacted their wheat harvest where 3 million mt is their likely output compared with an average of 5 million mt. For comparison, the USDA’s latest forecast output is at 5.2 million mt. The significance of such a small crop is that Algeria could well be an importer of as much as 8 million mt in the coming season.
- CBOT markets have been (unsurprisingly) quiet in the run up to tomorrow’s USDA report, which is to be released at 5:00 pm UK time. Tonight’s crop condition report is expected to show an unchanged position which would produce the best rated corn and soybean crop conditions since 2004. Last week’s rainfall in the US saw an estimated 65% of the corn and soybean crops receive ½” and 45% seeing at least 1.0”. These rains will stabilise the crop ratings and warmer temperatures and better midwest rains are now what is required in the latter half of this month.
- Tomorrow will see focus on the EU SnD for both wheat and corn; in wheat the feed volume could well be increased – maybe significantly, and exports may well be reduced by a similar amount in a juggling act! This could easily be mirrored by reduced corn imports as well as reduced overall corn feeding – time will tell. Regardless of the EU position it is almost guaranteed that the report will have the biggest long-term pricing impact that we have seen for some time, particularly in corn and the knock on impact on wheat.