Jonathan Lane, Gleadell’s trading manager, comments on grain markets …

WHEAT 

• US weather forecasts remain dry and hot – a worry for corn and soya crops.

• Despite rains in parts of Russia, the major production areas in the southern regions remain dry.

• Pro-bailout party victory in Greek election caused a short rally in outside markets before it ran out of steam – no major change to currency across the week.

Summary

Wheat markets this week have remained driven by the global weather situation, with continued concerns regarding the US and the Black Sea. In the US Midwest, the corn crop ratings were downgraded by three percentage points following hot and dry weather. Although there are conflicting forecasts and the outlook changes day by day, the general consensus is that this weather pattern will continue over the next week at least.

The US corn crop is coming close to its critical time for soil moisture requirements and these forecasts have brought concern to the market. Russia has benefited from rains this week, but the crop is still in danger as most of the rainfall was seen in the north-east of the country, while half of the production and almost all the exportable wheat is in the southern regions, leading to questions as to the size of the country’s new crop exportable surplus.

Despite concerns last week regarding the outcome of the Greek election and its effect to global markets, there was very little movement following the success of the pro-bailout party, New Democracy. Initially, markets reacted favourably to the news, seeing it as the best chance of Greece staying in the Eurozone and fix its debt problem. This lasted until lunchtime when traders decided the sticking plaster was no cure for the Eurozone’s problems.

Grain markets remain catchy and volatile. In short, it’s a weather market with political/economic overtones. Next stop the USDA report on 29^th June.

OILSEED MARKETS - Willie Wright, Oilseed Trader

• Soybeans have, once again, been the main story in the Oilseeds sector with hot and dry weather in the US over the last week driving prices 80 cents per bushel higher. The weather market coincided nicely with external investors looking to enter commodity markets once more and take more of a ‘risk on’ position with the Greek elections behind us once more. The USDA report their quarterly stocks at the end of next week, which should give the market better direction on Soybeans and corn.

• Old crop rapeseed prices have lost most of their premiums over new crop prices as the season draws to a close. UK export figures for rapeseed remain strong with 145,000 tonnes being shipped in April, with the majority of this going into the German market place. This demand into the German market looks set to continue, with buyers keen to book more harvest as available business. Fundamentally, rapeseed is tight and, unless we see a large drop in crush demand, then prices should continue to move sideways / higher.

• Crude oil prices tried to consolidate under the $100 per barrel mark, but it wasn’t long before sustained selling took prices lower. There is definitely greater concern about falling oil demand as the Eurozone crisis continues to unfold. Saudi Arabia’s production increases have also had a greater impact on prices in recent weeks, but may look like a clever decision later in the year.

• Macro-economic factors continue to throw the markets off track, although the results of the Greek elections have provided the market with a little comfort. This, however, has not helped Spain’s borrowing costs that have jumped substantially over last month’s levels. It would appear that there is no silver bullet in sight for the Eurozone crisis with most central banks resisting further rounds of quantitative easing.