US markets have remained in their downward spiral as spill-over selling following the bearish USDA report continues. Chicago corn has recently traded at contract lows, although pressure may ease as farmer selling slows, with harvest nearing completion. US wheat continues to test the recently-set contract low and, with only routine export trade being registered, it is likely that this next target will be breached. Fund managers continue to extend their short position, seeming more than comfortable with current market dynamics and US crop prospects.
EU prices have eased on the week, trading down €1/t as slow exports, falling Russian export prices and a weaker US$ continue to weigh on values. The main talking point this week has been the court ruling in Egypt reinstating the zero tolerance of ergot contamination in wheat imports. It will be of interest in today’s tender what the reinstating of the zero tolerance, and confusion over Egypt’s intake criteria, actually means in US$ terms. Offers, if there are any, will carry a level of protectionism against the risk of increased costs imposed on shippers.
UK futures have also eased, down £2/t on the week, although there has been little change in physical prices, especially in the nearby positions. Reports that one of the country’s ethanol plants has brought forward its annual maintenance shutdown, and indicated a prolonged time period, has the trade talking of spot prices easing due to lower demand.
UK wheat exports rose in September to 75,284t, down 78% y/y, and although imports for the same period were reported at 419,093t, down just 2% y/y, this still leaves the UK supply and demand forecast very much in balance.
In summary, the US markets are looking to retest market lows along with the Matif. Egypt has thrown confusion into the market with its now unclear import policy and will only mean they paid higher prices, and market dynamics in the UK show little signs of easing. Funds continue to extend their short position, and current market fundamentals give little evidence why they should change their current stance, except to bank profit!