The USDA report released yesterday, again did little to shake the markets from their current bearish trend. Although US wheat stocks were lowered, these were in the hard wheat classes and mainly reflected the recent Iraqi trade. Chicago wheat, which competes with European supplies, continues to struggle to attract additional domestic or international demand, not helped by the surprising rise in US corn yields to a new record of 175.4bpa. This equated to around 7.5mln t of additional production and should limit any additional feed or food demand for US Soft Red Winter wheat.
EU prices are mostly stable on the week, with a level of support coming from a weaker euro/US$ rate. Brussels reported EU soft wheat exports a/o Nov 7th at just over 7mln t, down 25% on the year, and with the current rate projecting a yearly figure of around 25mln t (all-wheat exports), the current USDA projection of 28.5mln t is looking increasingly unrealistic. Egypt again purchased only Russian wheat (120,000t) at its recent tender. No French or Ukrainian supplies were offered, and Romanian wheat is unlikely to feature much more, given that the Russian business traded at $8-10 below Romanian replacement values.
The UK market, showing great resistance given the global situation, is actually trading marginally higher on the week, supported by a lower currency and a continued ‘more buyers than sellers’ scenario. Market dynamics continue to trade a fairly balanced supply/demand position with limited demand in the deferred positions as end-users look for global conditions to pull values lower.
In summary, USDA continues to project abundant supplies of coarse grains, which gives US fund managers, the major market short, little incentive to excessively trim their short positions. Northern hemisphere weather continues to post non-threatening prospects onto winter sowings, which leaves the markets mainly open to bouts of short-covering, as and when the funds decide to move. Until then expect the sideward price action to continue with further re-testing of both US wheat and corn contract lows.