Jonathan Lane, Trading Manager at Gleadell, offers insight into the global grain market, where the United States is benefitting from positive forecasts whilst residual weather worries persist elsewhere.

US markets have moved lower over the past week as increased planting activity, good crop ratings and talk of excellent yield potential/early harvests led traders to bank profits. The markets had been ramped up over the past few weeks on increased talk of tighter US supplies, on demand from China and declines in South American production due to adverse weather. However, the current bearish crop data, and thoughts that new ‘crop supplies’ may be available in the ‘old crop year’, have eased concerns.

On new crop prices, there are good reasons why they are at the levels they are – but we have a USDA report on 10^th May with many expecting a bearish tone as corn and soy plantings in the US romp ahead in perfect conditions. Farmers have basically been out of the market on wheat for up to two months, and may end up chasing a market where EU grain is expensive and buyers very wary and largely absent.

Even though there is still a way to go to harvest, the bearish sentiment is likely to continue, and there is certainly no guarantee that the market has to move up again.

Summary

• The USDA report corn plantings are 53% complete, 28% last week - 27% average, and spring wheat plantings 74% complete, 57% last week - 32% average.
• US wheat tour - record yield potential forecast on Kansas wheat - potential also for early harvest.
• Indian grain output for 2011/12 raised to 252.6mln t – 2012/13 marketing year wheat crop raised to a record 91mln t.
• Russian AgMin keeps 2012 grain crop forecast at 94mln t, export could match the 27mln t forecast for 2011/12.
• Russian wheat prices stable on weak export demand – domestic supplies being covered by state inventories sales.
• EU zone economic concerns are raising their head again. French and Greek elections are looming, Spanish unemployment reaches 1 in 4 and Sterling has firmed versus the Euro.
• Morocco’s wheat harvest falling to 3mln t, including 2mln t of soft wheat.
• IGC cuts forecast for 2012/13 world wheat crop to 676mln t, stocks falling to 206mln t.
• EU weather woes depress prospects for world wheat harvest – increased spring plantings offsetting winter wheat area losses.
• Spain’s 2012 cereals crops again cut to 11.79mln t – soft wheat production projected to decline 28% to 4.275mln t.