Jonathan Lane, Gleadell’s trading manager, comments on grain markets
WHEAT
- USDA reports US wheat harvest 20% complete, 9% last week and 7% last year.
- Rains halt damage to Black Sea grain crops.
- Rains halt damage to Black Sea grain crops.
- USDA attaché predicts Russian 2012 grain output at 88mln t, including wheat at 54mln t – with grain exports down at 19mln t.
- Egypt eyeing Georgia’s Poti port for shipment of Kazakh wheat – also adding Poland as potential wheat supplier.
- Egypt has purchased 2.6mln t of local wheat so far this season, up from 2.2mln a year ago – maybe able to reduced imports.
- USDA report winter wheat crop in good/excellent condition at 52%, down 2% on the week.
- USDA report corn crop in good/excellent condition at 72%, unchanged on the week – drier weather returning to Mid-west.
- Managed funds continue to shorten wheat position – reduce long in corn following record planting pace.
- Morocco’s poor harvest may prompt highest grain imports since 1981 – Algeria/Egypt expect lower imports after good local harvests.
- Potential Spanish bank cash injection/US monetary stimulus seen boosting appetite for risk – equity/commodity markets rebound.
Summary
With the UK just returning from the Jubilee holiday, markets have been mainly influenced by weather and macro-economic issues.
Dry weather is returning to the US and, until significant improvements in US moisture conditions are witnessed in corn fields, the market will remain concerned over yield estimates. Winter wheat ratings continue to decline, although the rapid pace of the US harvest may limit further reductions. Recent rains in the Black Sea have eased concerns, with the Russian ministry stating ‘drought worries have passed’ and it was ‘retaining its 94mlnt harvest forecast’.
The crisis surrounding Euroland over the Spanish banking sector saw the Euro dip to a 2-year low against the US$, although European policymakers were seeking a solution amid growing expectations for an additional monetary stimulus if major economics deteriorate further.
Hopes were supported after the Federal Reserve laid out the case for easing US monetary conditions from the Central Bank to shield the US economy from financial turmoil.
This talk has produced a rebound in oil, equity and commodity markets, plus a marked recovery in the Euro, now trading just below $1.26.
Markets will remained influenced by the ‘macros’ with any easing concerns over the Euro crisis increasing the appetite for risk, and therefore supporting values. There remain enough weather concerns to keep markets supported, although improving Black Sea prospects and harvest pressure in the US will limit potential gains.
