- Our early view on the US wheat market could not be construed as bullish as the surge in the US$ and outside markets look weak as does other grains. There seems to be further doubt about longer term prospects for US wheat exports, due to lack of competitiveness, and it feels as if this is beginning to weigh on sentiment and in turn prices. It should be noted, however, that early US wheat prices remained within their recent upward price trend channel, and it remains to be seen whether they can break out of it, to the downside, before we can say that the latest upward price move is over. Concerns still linger over reports of the poor start to the Russian wheat crop and its pre dormancy status, which is potentially a limiting factor on next year’s output.
- In corn the initial thoughts, as with wheat, focus on the strong US$ as well as the newly built fund net long position, which could both point to lower prices in coming weeks. There is evidence of technical weakness starting to build in corn and this, coupled with producer hedging, suggests further weakness is likely.
- Soybean prices have been pressured by fears of additional producer selling now that the short covering bout seems done, farmers are keen to capitalise on prices that have improved significantly from recent lows. Farmer selling in S America is also reported to have been huge in recent days, and the feeling right now is that the only supportive factor is the lingering US logistic issue. Weakness in crude oil prices, which have fallen to levels not seen since 2011, is adding to negative tone in early markets, as is recent news of bird flu in China.
- Egypt’s GASC purchased a further 235,000 mt of wheat for mid-December shipment, with 55,000 mt from Ukraine and the balance, 180,000 mt, from France. This tender follows hot on the heels of last weekend’s single cargo purchase secured from France. The only unsuccessful offeror today was Russia, and today’s traded level was a touch lower than the last weekend trade. Given what was offered/traded today it feels as if Egypt will have a very limited choice going forward, and with question marks hanging over French quality it may be that they are not going to be too thrilled with that!
- In terms of Russian wheat, aside from the GASC tender, the news that the Central Bank’s decision to limit its intervention in currency markets has sent the Rouble crashing to 45 vs. US$. That is a 35% decline since the summer. As a consequence it seems the Russian farmer may well begin to behave like Argentine farmers and hold onto crops, and we will likely see acreage expansion in coming years. (Good news or bad? That really depends upon your perspective – grower vs. consumer)
- Prices have rallied as the day progressed, ostensibly on an oil pipeline explosion and fire in Saudi Arabia which some have suggested could be terrorist related although the Saudi government have stated that the incident was a “mishap” during maintenance work. Regardless, crude oil rallied sharply and corn markets followed higher with other CBOT markets following. Continued US$ strength has seen an influx of capital into the US with equities strengthening and gold and commodities pressured.
- The next USDA report scheduled for release on Monday is suppressing fresh risk positions.