Gleadell Market Report - 6 January 2012
GRAINMARKETS - Jonathan Lane, Trading Manager
WHEAT
Ukraine’s December exports are seen increasing toabout 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. La Nina weather phenomenon already impacting onto South American crops. La Nina may impacton 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 a3-month high on the threat posed by La Nina.
Summary
Grain markets continued their strong rally through the festive period as weather concernsthreaten to reduce corn and soybean crops in South America. In addition, fundsmoved to a long soybean position, reducing their record short in wheat at thesame time.
As the New Year commences, Euroland debt concerns have arisen affecting the € which has fallenagainst 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. Analystswill be expecting a reduction in both Brazilian and Argentine corn and soybeancrops.
In summary, the market is again in a state of uncertainty. Will forecast rainfall arrive inSouth America next week, how severe is the South American weather problem, anddoes that matter if the adverse macro-economics return to plaguecommodity/equity markets?
OILSEED MARKETS - Willie Wright, Oilseed Trader
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 ofthe 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 ofHormuz.
On the back of a firm soybean market, rapeseed has rallied sharply over the holiday period with old crop rapeseedcirca €25 higher ex-farm than pre-Christmas prices. Better prices have broughtfresh selling in both old and new crop rapeseed that should satisfy demand inthe short term.
Sterling has rallied against the Euro, taking us to €1.21 at the time of writing.
Macro-economicactivity has slipped out of mind through the holiday period that has allowed alittle confidence to enter the commodity market. There is a feeling this willbe short lived once Eurozone countries start fund raising at their weeklybond/bund auctions.
