- Wheat futures have extended their overnight decline amid similar weakness in European futures, but overall the markets have been relatively inactive. Spot Paris milling wheat has posted a new contract low, which along with an unchanged €uro will push French wheat offers even lower.
- China’s monthly PMI updates did no favours to macro markets today,earlier crude was down $2.00/barrel at $31.50, and both gasoline and ethanol were following, and the DOW is down 100 points. Investors remain uneasy amid ongoing negative macro indicators – Japan’s negative interest rates, poor data from China, and the US Fed’s recognition that economic growth in the US has been a bit shaky.
- Brazilian trade data in January featured corn exports 4.5 million mt, which is another record for the month, and this suggests that the USDA is still some 2-3 million mt too low with their Brazilian corn shipment estimate, and surprisingly, a few cargoes of corn keep getting added to the vessel lineup. Brazilian soybean exports in January totalled 390,000 mt vs. near zero last year. We calculate new crop Brazilian soybean commitments as of last week at a record large 6.0 million mt, vs. 3.4 million a year ago. Weakness in the Real (compared to a year ago) will likely further boost early sales of Brazilian soybeans.
- A flood of data will be released through the rest of this week; grain and soybean crush is due after the close, Stats Canada’s tri-annual stocks of grain and oilseeds will be published on Thursday and monthly winter wheat conditions will be released later this evening. However, market-driving news is left to the USDA’s Outlook conference in mid-February and two-sided trading will likely continue in the weeks ahead.
- Non-commercial traders have embarked on slow but steady short covering since early January, and only now have they pared back their positions to more reasonable levels. Rallies in the short term will hinge more upon actually bullish data, which is not widely available, while declines await S American harvest results and early crop conditions in the far Southern US in early March. We expect the next leg down to be a function of fob corn and soybean offers from S America in late February/early March. Amid current Brazilian soybean production estimates, there’s still downside risk in global oilseed prices.
- Over the weekend it was confirmed that Egypt has, in fact, rejected the ergot contaminated wheat cargo that has been the subject of retesting in recent days. The longer term implications of this are yet to be felt, but there will doubtless be some reaction from traders (at least in France) in the next tender.