Improved US weather outlook lifts volatility
By ODA UK | Published at
Grain markets faced another volatile session on Wednesday, with our LIFFE wheat contracts opening up £4/t, only to slip back to around unchanged once the US session started in earnest. The market is still trying to assess what progress US farmers have made in the corn and soybean plantings and what position (short or long) do the speculative funds currently hold. Have they bought back all their shorts and will they now look to build a long position? At the moment, Chicago markets
are very overbought and this may lead to some technical choppiness in the following sessions. Midwest weather conditions in the next fortnight appear to show a drier period developing, which should aid planting progress. What negative effect on yields has already been done, though, will keep analysts busy speculating for months..
In the UK, clients report mixed cropping prospects, depending on rainfall received. A warmer spell is due at the weekend and for those farmers on lighter soils, yield compromise cannot be ruled-out. On the Continent, crops are faring better, with the Commission raising EU wheat production forecast to 143.8Mt, some 2.5Mt above their previous estimate. This should act as a reminder that, right now the focus of attention is currently dominated by event in N.America. However, at our harvest time there will likely be more than 20Mt wheat in our region (Euorpe/Black Sea) than at the same time as last year. This additional wheat will need to find a home, and with very cheap and plentiful S.American corn supplies looking for a home at this time as well, the recent strong price gains may prove to be temporary.