The Morning Vibe
06/03/13 -- The market is starting to look a bit sloppy. Beans couldn't hold above USD15/bu last night despite their best efforts, and bullish (at least for US beans) S&D fundamentals.
Wheat meanwhile couldn't buy a rally at the moment.
India's PEC have picked up a best bid of just under USD297/tonne in a tender to sell 175 TMT of wheat out of the west coast port of Kandla for Mar15-Apr30 shipment, I read this morning. They've been turning bids away at around the USD300/tonne mark, but with harvesting of new crop less than a month away now will they continue to do so?
Yesterday's numbers from ABARES concerning production prospects for 2013/14 were almost universally bearish. If you're hoping for better prices to come for new crop grain then I think that back to back droughts in the US is what you need to pray for. And Mother Nature hasn't been on your side on that one this last few weeks either.
That and a rejuvenated fund appetite for commodities is what the bulls need, and they've been deserting the markets in their droves lately. Stocks appear to be offering them a better alternative, at least for the moment - the DJIA closed at an all time 116-year high last night.
You may have noticed I mentioned the other day that Bloomberg said that Friday's Commitment of Traders Report from the CFTC shows funds pulling a record USD4.23 billion out of commodities in the week through to Feb 26. Speculative long holdings, including positions in a selected basket of 11 agri-commodities from wheat to coffee, currently stand at the lowest level since March 2009.
I don't believe that they've taken their bat and ball away forever, but what (and when) might persuade them to come back out and play is far from easy to predict ahead of the event. Although in the case of Chicago wheat they are still playing a little, but playing from the short side.
Ukraine are looking increasingly confident of a big grain crop this year. Agrimoney said yesterday that it could be "on course for its biggest harvest since gaining independence 22 years ago" quoting UkrAgroConsult, although the 53 MMT figure quoted is a bit less than their record 2011 crop according to my records. Nevertheless, 53 MMT is a bit of a monster and one which they will not waste any time in dumping onto the market in the second half of the year.
If ABARES are right about production prospects in Kazakhstan and Russia too (although the vibes I am picking up re the latter are far less bullish on output than the ones coming out of Ukraine) then things could look a whole lot sloppier for wheat than they do now come August/September time.
Much as the rainfall cavalry appear to have showed up just in time for US winter wheat, they may be about to rescue Russia looking at this map from my chum Richard at World Ag Weather.
US farmers will plant big as far as corn and soybeans are concerned this spring, we can be pretty sure of that. What we don't know at this stage is whether Mother Nature will continue to play ball. If she doesn't throw her toys completely out of the pram then we can expect a record corn crop from the US this autumn, at a time when Brazil and Argentina will most likely still be fairly aggressively marketing their own record or near record corn harvest. Ditto soybeans.
Let's hope China stays hungry then.
