- Markets have been somewhat slower after yesterday’s frantic pace and surge higher with corn, soybeans pacing the way lower and wheat catching up into the close and entering negative territory to join remaining markets. Next week’s USDA report is a non-topic right now as everyone anticipates little, if anything, in the way of fresh news.
- The way forward will be interesting, S American outlook, as we reported last night, looks as if Brazil is slightly down and Argentina slightly up, the US Outlook Forum will be the next piece of significant news to suggest longer term price trends. The US’s 2015 corn and soybean acres will be the focus for market watchers.
- Cash markets have producer sellers with active orders just above yesterday’s highs – just in case the market decides to move higher, and this is seen as an effective cap to upside right now. Brazilian g=farmers in particular saw opportunity with a drop in the Real and the Chicago rise presenting an attractive proposition, which may look even more so in coming weeks if we see the old trend resume.
- S American yield data remains “stellar” according to some with Mato Grosso, Goias and Parana reporting big numbers. According to our contacts most fields are yielding near or above their previous 2011 record levels, which points towards national output over 94 million mt. Key, will be the level of output in RGDS, MDGS and Santa Caterina and this is unknown right now, anything approaching record harvests will see national output pushing above 95 million mt.
- This week’s US ethanol report was seen as bearish as stock levels rose to their highest since 2012 , almost 880 million gallons, production fell to just under 280 million gallons utilising 99 million bu of corn. To reach the USDA’s annual forecast a weekly grind of 97.7 million bu is required and this is viewed as optimistic given rapidly filling storage.
- The US lineup to load soybeans for China is declining, and fast, with fewer vessels presenting, clearly the seasonal shift to S America is under way. However, Chinese interest is minimal, surprising given yesterday’s price action which we would have expected to trigger some sort of response. Our guess is that a $9.00/bu price target is the aim of Chinese buyers at present, and we would be among the last to argue that level right now. Chinese crush margins, both spot and forward, have slipped as ongoing weakness persists in their domestic meal market.
- S American weather forecasts continue to be favourable and we would expect to see a resumption of the downtrend in prices as the Brazilian harvest progresses.
- The Russian wheat debacle continues; the race to ship before the 1st February tariff deadline may well be repeated as we move towards the end of the month because many believe the rumours of a more prohibitory tariff which will leave the farmer with no other option than to sell to the government intervention buyer. Globally this is not a significant issue but it is a huge spanner in the works for the exporter/end receiver who gets caught up in the red tape!
- StatsCan reported their 31 December stock levels, and the all wheat figure of 24.82 million mt was a touch short of the trade’s estimate of 25.1 million mt. Canola (rapeseed) was above estimates by 400,000 mt at 11.1 million mt, whilst soybean stocks at 3.48 million mt hit a record level.
- Finally, Stratégie Grains estimated 2014/15 EU soft wheat exports sharply higher at 31.9 million mt, which is 2 million mt above the 2013/14 record volume. Demand for French and British wheat in Asia is cited as the main driver for the updated figure with an increased volume of shipments anticipated in February and March. Germany and Poland were also expected to see increased demand, particularly from Saudi Arabia.
- In conclusion, in the light of an unchanged fundamental situation and no follow through on yesterday’s spike higher, we see little reason to change our long held bearish viewpoint.