- Midday comments:
- After the closing bell last night Egypt’s GASC issued a further wheat tender for late November shipment, the results of which we should know before close of play today. The likely candidates for successful supply are expected to be Ukraine, Russia and France. See below.
- The US Crop condition report issued last night showed corn rated good/excellent unchanged week on week at 74% which compares with last year’s 60%. The crop is 31% harvested, which is 2% below expectation, an improvement over last week’s 24% but behind last year’s 38% and the ten year average of 51%. Soybeans rated good/excellent were also unchanged week on week at 73% which compares with last year’s 57%. The crop is 53% harvested, 2% behind expectation and up from 40% last week’s 40% but below last year’s 61% and the ten year average of 70%.
- Winter wheat in the US is reported to now be 76% planted up from 68% week on week but behind last year’s 77% and the ten year average of 79%. Emergence is being assisted by recent rains in the western Plains and the warmer trend for the remainder of the month will help early growth ahead of winter dormancy.
- Early markets saw support from a short-term uptrend in Dec ’14 CBOT wheat and stronger than expected demand in global wheat markets. In soybeans slower than anticipated S American plantings and slower harvest progress as well as further short covering supported prices despite prospects of yield improvement in the forthcoming November USDA report.
- It feels as if markets are at a pivotal point right now, they will either resume their downward slide and reach or breach their former lows, and this applies specifically to soybeans and corn, wheat will likely follow in the footsteps of corn rather than lead the way. Failing this, some are suggesting we have seen the season lows and the traditional harvest bottoming price action is complete as supplies have spiked and farmer hedging growth has been seen. We continue to favour the view that recent price upside has been fuelled by the slower US harvest and that farmer hedging pressure has been limited so far.
- One further macro(ish) factor is that index funds have been liquidating commodity positions as we approach the end of the year (yes, the year is truly flying by!). This is the third consecutive year in which index funds have performed poorly compared with other indices. The trend towards other investments with lower fees and commissions,whatever they may be, is reported to be growing. Consequently, any further move towards liquidation will likely pressure prices, limiting rallies and supporting the theory of lower prices.
- Evening update:
- The results are in! We saw a three way tie between France, Romania and Russia who managed to supply 60,000 mt each to Egypt in the latest tender which saw a total of 180,000 mt placed. The reported price was an average $10.00/mt higher than the last traded level.
- Markets have traded higher today with soybean meal leading the way as slower than desired harvest pace prevails. Suggestions of yield loss in Brazil as a consequence of slow planting progress has been denounced by Imea the Brazilian government crop reporter who suggested that it is far too early to draw such conclusions. Volume has been moderate rather than large suggesting a degree of hesitancy to follow prices higher – right now. The current “bounce” has now reached $0.70/bu for soybeans, $0.40 for corn and $$0.6 for wheat, and looking back this is not outside norms in the wake of a significant decline, such as we have seen this year. With US end stocks projected to be in excess of 2,000 million bu of corn and450 million bu of soybeans it still feels difficult to justify significantly higher prices or an about turn in price trend. If, in addition, S American weather is trending wetter and yield losses are being denounced, there is an even less supportive atmosphere to the market.
- Current market conditions encourage US farmers to increase soybean plantings at the expense of corn acres in the forthcoming spring planting campaign. The market has to attract corn acres, at the expense of soybeans, presumably falling soybean prices would achieve the desired outcome!