- The week started lower with corn, wheat and the soybean complex all trading in the red – until NOPA (National Oilseed Processors Association) in the US published their October soybean crush data. The soybean volume, which was expected to be large, was higher than expected and the market caught a bid on the back of the numbers, pushing levels higher. Additionally, soybean meal exports were higher than anticipated which added to sentiment. That said, the market cannot have it both ways, higher crush to satisfy short term demand from both consumer and exporter alike equates with strong cash demand and premiums, equals higher prices in the short term. Bigger supplies to satisfy the demand equates to a reduced demand pattern and alleviation of the bottleneck, hence reduced prices longer term – QED! The impact of logistical issues has been felt, and should begin to calm down in coming days.
- US weather has turned colder, as forecast, and this has lent some support but the forecast points to more seasonable conditions though it should be added that light snow cover is expected to insulate new crops from any extremes of temperature and reduce the impact of any possible damage.
- The US$ continues its strength, crude oil is $0.50-0.70/barrel lower and US equity markets continue to flirt with last week’s highs. The latest round of fund investment in corn, wheat and soybeans looks likely to dissipate and for any lasting bullishness to be maintained we will need a severe S American weather issue to develop – which looks unlikely at this time.
- Japan has confirmed that its economy has slipped back into recession – even amid the trillions of dollars of QE and fiscal stimulus that has been offered. The news was seen bullish for the US dollar with the EU also on the brink of recession and global economic growth elusive looking forward into 2015. It is possible that this may become the point of focus in coming weeks.
- Western US rail rates continued their collapse on Friday which should help the movement of grain to the Gulf. W Midwest rail rates are now well below last year and their 5 year average. It’s just a matter of time before the E Midwest sees locomotive/rail car delivery improvement. For soymeal deliveries there is an improved outlook in coming weeks and basis weakness across the E Midwest is increasingly likely.