- Today (and likely tomorrow morning) was always going to be about tomorrow’s USDA report, Brazil’s CONAB report and the outcome of discussions between truckers and the Brazilian government. Consequently the vigour of downward price action in recent days has given way to some profit taking and risk-off mentality that has permitted the market to close higher, albeit off the highs of the day.
- In Brazil there has been a further threat of transportation blockages although many believe that this is a measure designed to turn up the heat in advance of negotiations/discussions tomorrow. The Brazilian Real has fallen to 3.1 vs. US$ and we have heard that farmers are upping their selling on the US$ rally. The last week has seen a considerable volume of soybean movement across S America, the advance of the Brazilian harvest doubtless prompting cash selling.
- In wheat we are aware of market concern over dry conditions across the US Plains, EU and parts of Russia. Whether this is justified at this time, given that much of the crop area is still in dormancy, remains to be seen. Suffice to say recent downward price pressure has been enough to allow the bulls a run at this one, any lingering threat of ongoing dry conditions could become an issue, so this is one to watch in coming days and weeks as the crops require an increasing precipitation volume during early vegetative growth stages.
- Stratégie Grains have updated their UK cereals output figures and state that in general winter cereal crops are in “very satisfactory” condition. The mild winter with generally above average temperatures have aided development, they said. It was also noted that spring planting was just getting under way. The UK wheat crop was reduced by 80,000 mt to 15.014 million mt compared with the mid-January estimate, and compares with 16.606 million mt in 2014. Area sown is down a touch and yield was forecast a touch higher although it remains early to be certain on the latter point.
- We expect trade to remain somewhat subdued in advance of the USDA data, scheduled to be released at 4pm UK time tomorrow, and our view is that we are unlikely to see any significant or startlingly bullish data. If this becomes the case we would expect to see a resumption of trend as the week progresses.