- We have seen a mixed market today with soybean oil featuring heavily as funds pitch in and push prices higher in the wake of the US’s EPA biofuel revelation last Friday. Some short covering in wheat has been noted whilst corn has been lacklustre and soybeans and meal eased on the Argentinian strike resolution.
- The new month, and the start of meteorological summer (not that summer is much in evidence here today) has seen a number of new inputs, which may prove to be market “triggers”.
- The new Russian wheat tax appears to depend upon the Rouble/US$ exchange rate (although we believe it may well be more dependent upon Russian politics), which has been volatile to say the east since mid-2014. One commentator said, “wheat now has the element of Russian roulette”, which seems entirely appropriate right now. July 1 sees the introduction of the new export tax, which Russia suggested was intended to stop exports surging if the Rouble declined substantially. The 2014 decline in the value of the Rouble saw Russian export volumes grow sharply, and its value has not yet fully recovered. For the technically minded amongst us the new tax is set at 50% of the customs price per tonne minus 5,500 Roubles ($105), but not less than 50 Roubles per tonne according to government information.
- Egypt announced that it had purchased 5 million mt of local wheat so far this season, which began in mid-April, and is significantly above its 3.7 million mt target. Attractive prices offered by the government is cited as the reason for the increased volumes. Traditionally the government fixes a local procurement price, above global levels, in an attempt to encourage local production, and it seems to be working this season so far. Changes to the subsidised bread sales programme methodology are also encouraging farmer selling rather than holding onto their crop for personal consumption.
- The Argentine strike appears to be resolved as a pay deal is agreed and sees the end to the three week long strike that has delayed some soy export shipments. Government approval is reported to have been granted, and as they act as mediator in such negotiations it seems that the strike action is now over. Chicago reacted accordingly as far as soybeans are concerned.
- Closer to home the €uro tumbled after Greece missed a self-imposed deadline for reaching agreement with its lenders to unlock aid, and the fear of debt default remains very much alive as does the potential for a Greek exit from the Eurozone.
- Southern Russia has received some welcome rains in the Krasnodar, Rostov and Vogograd regions over the weekend which will alleviate some of the concerns that have been raised over recent dryness within the region.
- Finally, Reuters report that the risk of frost damage to the canola (rapeseed) crop in Manitoba is “severe” with significant acres in need of reseeding. Damage was reported to be worst in western Manitoba with many fields written off and in need of reseeding although it is too early to place an exact acreage on the damage. Canadian canola futures jumped on the news and Matif prices followed. Seed supplies are said to be tight which may well have added to market reaction.