Over the last week, weather concerns have taken a back seat for now, whilst the spiraling weak economic news from the US and continued concerns for the EU helped spark a long liquidation trend in the grain markets. Market fluctuations may have been further exacerbated by end of the month position squaring. But the oversold mentality of the market after it declined 110c in nine sessions may help to support futures going forward. Domestic new crop prices (helped by a falling dollar) have absorbed major losses, declining $4 - $5 over the week. Whilst canola was unchanged to +$5 in WA, as the trade starts adding in weather premium.
As the US winter wheat harvest gathers steam (20% already in the bin), increased selling has pressured the market. It seems fund traders are building another net short position in wheat and may again leave the market open for a sudden correction. Spring wheat conditions in the continue to be ideal with 78% rated good – excellent, with only 2% of the crop poor - very poor. Further north Canadian plantings are off to an excellent start after warm conditions have dried out previously soggy paddocks.
Conditions in Europe have since stabilised, whilst further east temperatures are warming up in Southern Russia and Kazakhstan (>30˚C) with really no meaningful rain over the last week. Winter wheat harvest should commence in Sth Russia/Ukraine by the end of the month, and will give indication on what impact the earlier dryness had on yields. Spring wheat plantings in the Former Soviet Union would be just about complete, with Ukraine reporting large acreage. Both Ukraine (high tariffs stifling competitiveness) and Kazakh (record harvest) old crop stocks should be at burdensome levels. In Ukraine’s case it could compensate for winter wheat losses and allow them to be aggressive in export, especially with corn. Russki old crop stocks will have been whittled down after an aggressive export year.
With anticipated bin busting crop of 375mmt US corn crop, the trade attention will continue to focus on this crop, as it ‘ll be a game changer in regard to prices for 12/13. Only passing showers continue to tease growers in the US Midwest. Heavy rain will be needed to recharge soil moisture especially before the critical pollination stage, as rainfall has been below average the last couple of months. Mostly dry weather for key growing US regions next week, with some uncertainty for ‘how much’ rain might hit the Midwest next week. This has kept the weather outlook slightly supportive, but if forecasts continue to be dry markets should get a lot hotter!
A revision higher in production from Brazil (record crop of 67.8mmt) and a lack of near-term demand for exports from the US helped continues to pressure. The Buenos Aires Grain Exchange left Argentinian corn output at 19.3mmt (USDA 21.5mmt). Harvest is at 62%, but with harvest making inroads into main production regions hit hard by the drought earlier in the year, total volume may fall further. Ukraine has finished corn plantings, and has exceeded the expected area by 3%, at 4.56 mha. With increased corn area the ministry is quoting total grain output could be 50mmt, the third largest on record
With the oilseed market still technically the bullish element of the grain complex, the potential tightening of new crop supply and thoughts that funds may aggressively be rolling longs out of old crop and to new crop will help to support new crop prices. Chinese domestic stocks are still at a high premium to imports, so will continue to fuel strong demand. Private forecast from Oil World show very strong export demand from the US for beans during the new crop period (Sept to Feb), as a result greater emphasis will be placed on an ideal US growing season. Whilst Brazil is exporting at a record pace, May exports were 7.3mmt. With cumulative exports in the local marketing year now total 17.5mmt in just four months..! The Buenos Aires Grain Exchange left soybean production steady at 39.9mmt, but still well below USDA estimate of 42.5mmt. Harvest is estimated at 92%, with the recent heavy rain and flooded paddocks further cuts may be warranted.