WHEAT market

The US market is about $4/t lower on the week, as beneficial rains in the eastern hard red winter (HRW) wheat areas triggered some profit-taking, encouraging new sellers to enter the fray.

Although parts of the southern plains remain in drought condition, which is expanding westward and will keep weather in traders’ minds, the recent price action was a correction from an overbought market condition, both in Chicago and Kansas City.

EU prices are up €1.50/t on the week, supported by recent tender activity and rising prices. Russian wheat prices rose sharply, supported by strong export demand and farmer retention, due to the strength of the rouble.

The Black Sea is expecting a severe plunge in temperatures over the next 7-10 days and the EU also expected to experience a return to winter. Concerns are mounting that emerging crops may be at risk of damage in areas where snow cover is non-existent.

European markets have consolidated on recent tender results and reports of another Algeria purchase yesterday, which on paper seems close to replacement values, will keep cash markets underpinned.

French farm office FranceAgriMer reported new crop wheat sowings 84% in good/excellent condition, lower than the 93% reported a year ago.

LIFFE is trading slightly lower on the week, with currency also slightly weaker.

Market dynamics remain tedious, with physical prices in most of the country hardly moving.

However, milling premiums are edging lower as supplies come to market and mills fill up in the nearby months.

In summary, the US has seen some rain and the market reacted accordingly, but weather concerns in the US, South America and now the EU and Black Sea are far from over.

Fund managers remain short of Chicago wheat, although this week’s price action seems to reflect they are still happy to hold a short position, but they have almost squared out their short corn position, and now hold a long soy position.

USDA in its Ag conference released the first ‘meaningful’ US acreage initial estimates yesterday. The all-wheat acreage showed little change and total acres including soy and corn were almost unchanged vs last year.

 OSR market

Soybean prices in the US continue to strengthen on the back of ongoing weather concerns in Argentina, as production prospects continue to decline.

The market now has to establish if the Brazilian processors are able take up the slack from the decline in soymeal availability, or if this demand is going to switch to the US.

Certainly, the investment funds have decided there is enough risk in the market for them to change their positions and have moved from a significant short to a long position, driving the market up in the process.

In Europe the rapeseed market remains flat with the firmer euro off-setting the upward move in soybeans. The record volume of third country imports that have come into the EU in the first half of the campaign continues to weigh on the market and a decline in crush looks likely to leave a significant carryout at the end of this season.

The growing crops are reported to be in good order with few issues to note and, with the additional stocks from this campaign, the current bearish tone is likely to be carried into new crop.