25 May 2017

Posted on by
  • Firmer markets in Chicago’s early trading were not sustained with an improved C US weather forecast pressuring prices lower. Weaker crude oil prices added to macro selling as the bulls decided to bank what profits they had ahead of another extended weekend break.
  • Soybeans were the leader lower as Chinese soybean meal demand slowed down, potentially weakening an already pressured (negative) crush margin. Other fundamental news has been limited today. Rangebound and choppy prices are expected into the long weekend break. Heat and dryness is not anticipated to any real degree this summer (as of today’s longer term outlook), and whilst not ideal right now as growers wish to see establishment and early growth pick up, the potential damage that heat and dryness can inflict in full summer would seem to be longer term yield/output positive.

24 May 2017

Posted on by
  • Wednesday has been dull with trade either side of unchanged and grain closing a shade higher with soybeans closing marginally lower. Clearly many are waiting for the verdict on whee weather will take us in June before making key decisions.
  • Choppy and indecisive looks to be the trend in the short term, with clarity awaited as far as crop making weather conditions are concerned Current forecasts offer cool and wet conditions across E Midwest US areas and variable but drier conditions across Plains and W Midwest regions. Prices remain historically low, at their lowest June numbers in six years, and this is leaving downside struggling as sellers are reluctant to say the least.

23 May 2017

Posted on by
  • It is probably fair to report that the corn market in the US is heavily short as we enter the heart of the N Hemisphere growing season, indeed, the funds are sitting on the second largest net short corn position on record. This does not lend itself to a bullish trend, however such a position does mean that in the event of a weather scare any rally will likely be more significant than would otherwise be the case.
  • Soybeans closed down in Chicago today on the back of weaker S America currencies and early strength was quickly attracting sellers, which saw prices capped early on and pressure remained in place until the close. The weaker currencies continued to see further availability of supplies coming to market. The Argentine Peso has dropped to all time lows whilst the Brazilian Real is at a five month low.
  • Some of the recently introduced weather premium in corn has been removed as fresh news is lacking and crop progress shows plantings catching up.The surprise is that the corn crop is so highly rated across the Delta and W Midwest which missed the recent flooding rainfall that affected so much of the cropped area.
  • Wheat markets ended weaker on the back of the latest crop condition report and a somewhat stronger US$. EU wheat followed lower on the back of US crop ratings. Aside from this the market is seeing lower volumes and the lack of fresh news is clearly evident. US wheat’s discount to EU origins is clear to see, and is now, in the case of SRW, is the world’s cheapest milling origin, albeit of lower quality than some competing origins. Discounts of as much as $15 to Bench are evident today. It feels very much as if, without above trend line yields in Black Sea and EU cops, downside in prices are very much limited.New crop Russian offers appear to be close to levels we would view as being potential season lows and whilst upside may be a while in coming, there feels limited reason to search for significant further discounting right now.

22 May 2017

Posted on by
  • US wheat crop condition data has been released as follows:
  • Today has seen weather premium being added as cool to cold conditions and further light rains have continued across the Midwest and remain forecast for much of the coming week. Concerns are growing that crop development delays will result in reduced yield and overall output.
  • Crops are struggling in the US right now and it will be June weather that will be the saviour, if improvements are seen. The crops are shallow rooted and any lasting heat or dryness will cause stress levels to rise. Fund short positions remain a point to watch with a wary eye as any change of heart could well see prices receive a sharp upward shock.
  • Soybeans continued higher as it seems selling that was tied to the Brazilian currency was largely done and dusted last week, and US weather has taken over trader’s focus. US soybean planting progress reached 53% vs. 56% last year and a five year average of 52%. Despite climbing ahead of the average there is no doubt the crop needs warmth.
  • Corn in the US added modest weather premiums today and US$ weakness added further support. The US corn crop reached 84% planted, the same as last year and almost on the longer term averages. Condition of the crop is mixed and we await official data starting next week. Warmer and dry conditions will go a long way to helping the crop develop its full potential/
  • US wheat futures were supported by US$ weakness and EU prices were buoyed despite €euro strength. Global exchange rates are assisting US demanding  with prices at multi yea lows it is tough to support a bearish outlook. Lasting heat and dry conditions in Europe and Black Sea would not be welcomed.

18 May 2017

Posted on by
  • US export data has been released as follows:
  • Stratégie Grains have cut their EU grain harvest estimate by 3.6 million mt to 301.6 million mt, which should also be noted as an increase of 4.5 million mt year on year, but still behind the 2015 crop of 309.8 million mt. Dry conditions have impacted Spain in particular as well as France, UK and Belgium where output is expected to be reduced somewhat. Stratégie Grains’ downgrade reflected a 1.1 million mt cut to 142.7 million mt for soft wheat, and they left the door open for further revision depending upon weather conditions going forward. Barley output was reduced by 1.7 million mt to 59.6 million mt, a multi-year low.
  • Chicago markets have seen soybeans trade sharply lower today, which has pulled the grains lower July ’17 soybean futures have tested, but not broken, key support at $9.40-$9.45. Soybean activity levels have been high, reportedly on the back of a corruption charge that is evolving against Brazilian President Temer, which it is suggested may well lead to his downfall in coming weeks. The news has left the Brazilian currency around 8% lower today, back at levels last seen in December 2016, around 3.38 vs. US$. The future of leadership in Brazil is once again far from certain, and as we all know – markets hate uncertainty! The falling Brazilian Real is prompting higher cash values in Brazil, which is prompting farmer selling, which is in turn pressuring futures prices.
  • If one thing is for certain, it is that trading Brazilian politics is a whole lot tougher than trading weather markets! Cash soybean selling in Brazil is prompting some large fund sales in Chicago. US crops are off to a less than ideal start and cold/wet conditions look set to persist into late May. We are struggling tom advocate either side of the market, bullish or bearish, at this time.

17 May 2017

Posted on by
  • When you think about the price of protein wheat, it’s just plain cheap! The chart below reflects HRS wheat futures dating back to 1992 and notice that last year’s fall to $3.85 spot futures tested a monthly uptrend line that extended back to 2002. If this trend line holds, it means that July or September MGE wheat could test $4.94-5.00, but amid a potential shortage of US protein wheat, we doubt that there is much additional downside price risk. In addition, with crop damage befalling the US HRW wheat crop it would seem that there is not much to be made of being bearish wheat! 

  • Today has seen higher grain prices in Chicago, and this has pushed through into EU prices in both Paris and London. Soybeans are currently trading around unchanged. Short covering in the grains has been the order of the day. Egypt’s latest wheat tender saw a massive 295,000 mt purchase with supplies being secured from Romania, Ukraine, Russia and the USA for mid to late June shipment. The lowest priced offer was for US HRW (basis fob) at $185/mt, highlighting the competitiveness of this origin on the latest price break. Seemingly, lower protein HRW prices basis US Gulf are also declining. Also of interest is the fact that Russia’s 240,000 mt offered price levels at $198-205/mt suggest that recent offers (well below these levels) were somewhat underpriced  and questions over Russian physical availability bear asking. The US competitive position, despite freight disadvantage, is not in dispute, and prices are reacting higher as a consequence.
  • Our view is that we are at a point  where it would be foolish to be bearish agri commodities today. US wheat is competitive, particularly (and importantly) with Black Sea and EU supplies through to mid-summer.

16 May 2017

Posted on by
  • US winter wheat crop condition data has been released as follows:
  • We have seen another day of mixed trade in Chicago with soybeans trading higher and the grains, corn and wheat barely changed. Improved US old crop soybean export prospects have been cited as the driver for today’s price action in soybeans.
  • It would be “normal” at this time of year for volume and/or market activity levels to be high based upon yield risks as we approach the summer period. However, it seems that these risks are not building, indeed they appear to be receding, and the only selling is coming from stale longs in Kansas wheat, which funds are shedding.
  • US corn planting is mostly on a timely basis, the key issue being just how much needs to be replanted due to wet conditions and/or flooding. Soybeans have a better ability to make up for early poor establishment, and are thus differentiated from corn. The question today is whether corn can grow out of its ugliness, and this will be watched closely in the next few weeks.
  • Below to much below normal temperatures will prevail across central US regions for the next few weeks. A peak in temperaturess will be seen in the next 36 hours with a decline thereafter. The cool to cold and wet Plains weather will add to the disease pressure in winter wheat. Soybeans have an export demand story for now with the US making new sales to China in July and August. At some point, and before too long, corn will need more warmth for growth.

15 May 2017

Posted on by
  • Monday in Chicago sees a stronger soybean complex and weaker grains, led by wheat a volumes appear limited on lack of fresh news input. The soybean rally appears led by strengthening on the Brazilian Real as well as continued uplift in US cash soybean oil values, which is supported by strong domestic demand as well as potential for improved US biodiesel demand on the back of a shutout of Argentine and Indonesian soybean oil due to rising US tariffs. Our explanation for falling IUS wheat values is fundamentally lacking and fund selling appears the only cause. Global cash wheat values are steady to directionless .
  • June and early July are key to Black Sea and EU wheat harvests and the weather in the coming six or so weeks will better define global supplies as US production in 2017 will see a substantial drop from last season.
  • Away from our usual topics, it is the cotton markets that has everyone talking as July futures rose to $0.87/lb, the highest level in three years. It was May 2014 when sport futures were last trading at these levels. The point is that one has to take care when dealing with old and long established bear trends, particularly when demand patterns are strong. Recall our aged mantra of “big crop” vs. “big supply”, and our suggestion that whichever side of the equation emerged the stronger would dictate the likely next price trend.
  • Spain’s cereal organisation has forecast their latest cereal crop at a mere 9.5 million mt, about half that of last year, which will leave them as potentially strong importers in the coming season. Dry conditions and lower pantings will continue to erode crop output. Weather in the next six to seven weeks will be important as further dryness will potentially see further output decline. The UK is also seeing dry conditions and rainfall in the coming six or seven weeks will be influential in  determining overall grain output.