- After the close on Friday Egypt tendered for wheat once again. They ended up paying their highest purchase price in some seven months and secured 300,000 mt with all but 60,000 mt from France. Russia picked up the remaining cargo with what turned out to be just one offer. France offered more than was purchased potentially signalling better availability than has been previously thought. The USA soft red wheat offer was notable by its price, which was some $40.00/mt above the best French clearly signalling its total lack of competitiveness.
- Egypt has now purchases more than 2.9 million mt so far this season and France has secured the bulk of this at just over 1.1 million mt. Potentially the aggressive French sales have resulted from the Egyptian specification which is below that of another of France’s key customers, Algeria.
- Russian wheat continues to dominate the news with early trade digesting all that had hit the headlines last week and a feeling that “the worst was over”. However, news that an export tax rumour on Friday had become a quasi-fact on Monday added to market confusion and early losses were regained (although late trade saw the CBOT market close over 1% lower). Is the tax a replacement for the phytosanitary and rail issues of last week, or an additional measure? No-one seems to know the answer right now – and more importantly no-one in Russia is letting on! The level of tax is unclear, whether it will only apply to new sales is unknown and to which products it will be levied is also a mystery. The situation is a complete mess!
- The outcome could well be along these lines; 1) Russian domestic prices ease allowing government intervention purchases to be made. 2) The world (at last) realises that the “lost” export volume from Russia is only about 3 or 4 million mt and the rest of the world, and EU in particular, can take up the slack. 3) Prices ease as the current risk premium is seen to be overdone. 4) Russia returns to the export market (possibly to late to be effective) and markets decline still further. This is only a thought, and may turn out to be pure fantasy!
- US soybean exports for the week ending 18 December were, once again, well above expectations as well as the pace required to reach the USDA’s annual forecast. Corn exports however were below expectation and wheat numbers were unsurprisingly light. The soybean market picked up on the data whilst corn read the numbers as somewhat bearish. In the US markets have ample supply and each CBOT rally is eliciting producer selling which is, in turn, easing cash basis and pointing towards the tail off in US export demand – particularly in soybeans. The S American soybean harvest, which we hear has just got under way and will speed up into January, still looks to be big and possibly record large. Weather patterns continue to be favourable although it is reported that some additional sunshine would benefit crops in N and C Brazil.
- As we move towards the Christmas break markets appear to lack both direction and volume. Funds appear happy to protect longs although cash markets seem to be very vulnerable on volume producer selling and good volume availability.