GRAIN MARKETS - Jonathan Lane, Trading Manager

Wheat

Factor sending the market down

• Ukraine’s December exports are seen increasing to about 2mln/t (1.56mln/t maize/0.41mln/t wheat).

•  EU soft wheat exports running approx 4mln/t behind last season following strong competition from Black Sea region.

• Higher expected corn acreage may cap prices if weather remains supportive regarding yield.

• US prices ease on wheat crop condition – HRW in Kansas reported at 53% good/excellent, up from 47% at end-November.

• Currency moves to €1.21 on renewed worries about European sovereign debt.

Factors sending the market up

• La Nina weather phenomenon already impacting onto South American crops.

• La Nina may impact on southwestern US crops, aggravating the once-in-a-century drought last year.

• Chicago shorts have covered some of their position but they still hold a record short in wheat.

• EU wheat hit a 3-month high on the threat posed by La Nina.

Summary

Grain markets continued their strong rally through the festive period as weather concerns threaten to reduce corn and soybean crops in South America. In addition, funds moved to a long soybean position, reducing their record short in wheat at the same time.

As the New Year commences, Euroland debt concerns have arisen affecting the € which has fallen against both the US$ and Sterling.

The weather in South America is a concern, and it will be watched with interest how the USDA reflects this weather phenomenon in their January report next week. Analysts will be expecting a reduction in both Brazilian and Argentine corn and soybean crops.

In summary, the market is again in a state of uncertainty. Will forecast rainfall arrive in South America next week, how severe is the South American weather problem, and does that matter if the adverse macro-economics return to plague commodity/equity markets? 

Oilseed Markets - Willie Wright, Oilseed Trader

Factors sending the market up

• Soybeans have rallied 140 cents from their pre-Christmas low – much of the rally is down to dry South American weather or La Nina, with some forecasters predicting little or no rain until the end of the month. This will affect soybeans and corn more than wheat. 

• Crude oil has rallied over the holiday period. Some of this rally has been attributed to more economic confidence, although more likely to be threats from Iran regarding the blocking the Strait of Hormuz.

Factor sending the market down

• Sterling has rallied against the Euro, taking us to €1.21 at the time of writing.

• Macro-economic activity has slipped out of mind through the holiday period that has allowed a little confidence to enter the commodity market. There is a feeling this will be short lived once Eurozone countries start fund raising at their weekly bond/bund auctions.

On the back of a firm soybean market, rapeseed has rallied sharply over the holiday period with old crop rapeseed circa €25 higher ex-farm than pre-Christmas prices. Better prices have brought fresh selling in both old and new crop rapeseed that should satisfy demand in the short term.