It should come as a surprise to no one but tensions and fighting have increased once again in Ukraine and helped spur buying overnight in the wheat market. Kiev has claimed that Russian troops have entered their territory and captured several villages but other news reports that I have read indicate this has been a counter offensive by the separatists. Regardless, with the trade already quite short in this market and a long weekend looming ahead it has been enough to entice some of the bears to the sidelines.
Also providing a little support this morning is a short-term dry forecast in the wheat growing regions of Australia. Unless we see the longer-range forecasts change this should have little effect on their crop prospects but when you add this to the other concerns from the Black Sea region, some traders will opt to error to the cautious side.
On the other side of the ledger is Russia. Granted, they play significantly into the situation with Ukraine but estimates for their crop potential continue to grow. More analysts are joining the crowd that believes the total wheat crop will be in excess of 60 MMT. The last USDA report has them at 59.
Wheat exports sales were uneventful and right in the middle of trade expectations at 403,600 MT or 14.8 million bushels. The top purchasers were Brazil at 94k MT, Nigeria at 93.7k MT and Japan at 89k MT.
The initial strength overnight in the wheat did push us into key overhead resistance but prices have cooled as we came into the daylight. As I have commented previously, I believe wheat has absorbed and priced in much of the negative supply information and with the speculative trade leaning to the short side, we could be poised for corrective rallies at anytime. I am not sure if the current news is enough to stimulate an extended run but will be watching closely to see if we can actually poke through the upper side of the range after the long weekend ahead.
The corn market has experienced a little two-sided action overnight and remains in a holding pattern. This very well could extend through the upcoming long-weekend but I expect to see us move out of the range after that and they way things stack up right now, it is difficult to imagine that being to the upper side. Early yield reports out of the south continue to be outstanding and it I have to imagine the trade will begin factoring in higher yields as we work out to the September 11th crop production and supply/demand estimates.
As we are right on the cusp of wrapping up the end of the marketing year, exports sales for this crop year reflect a balancing between old and new. As such, we registered a negative 32,700 MT or -1.3 million bushels. This places year to date sales at 1.9155 billion bushels, just below the targeted 1.92 billion. Sales for the 2014/15-crop year were towards the upper end of the estimates but nothing to write home about at 695,600 MT or 27.4 million bushels. Top purchasers were Columbia at 140.9k MT, South Korea at 125k MT and Costa Rica with 120.5k MT.
With the temperature forecast for the next 30 days predicting normal to above normal temperatures, little happening in the export scene, funds still long in the corn and promising early yield reports, it would seem that it will be increasingly difficult to see corn continue to hold this sideways pattern. I just saw a yield update out of central Illinois reporting a range of 230 to 270 b/p/a. As my associate Jake Wiener likes to say, the longer you have to hold your arms outstretched, the more likely you are to be come fatigued and eventually have to let them drop. Without a little assistance to prop up the arms of this corn market, they could soon give out.
The pattern in the bean market since July has been to drop into lower lows and then just track a bit sideways for a bit before grinding lower once again. That appears to be the case this past week as November futures pushed through 10.35 and reached the 10.20 level only to move flat from there. The bean bull has never given up easily this year.
For the second week in a row and of course the second to last week of the marketing year, we posted a negative sales number for the 2013/14 crop. This time the number was -62,800 MT or -2.3 million bushels. This still leaves us with sales of 1.691 billion bushels, which is 51 million above the USDA target. 2014/15 sales were down 9% for the week but still solid at 1,290,800 MT or 47.4 million bushels. Just over 50% of these sales were to China who took 655k MT followed by Vietnam at 112.2k MT and unknown destinations at 96k MT.
As with the corn market, with no serious weather threats on the horizon, increasing harvest activity and very solid yield estimates it is difficult to imagine that we will not see prices erode further as we move into the month of September. That said, after spending more than 35 years in this business I know that when everything looks obvious and one-sided it is time to be in the lookout for an unexpected event so you are not blindsided. That said as it stands right now, the path of lease resistance remains lower.