Though the larger fundamental themes remain the same due to the supply and demand balance sheet’s makeup, few fundamental inputs and outside influences pushed the prices outside their current trading range in some commodities, past week.
In deed, we have seen mixed price action with corn, soymeal and soybean closing higher a bit on the week, while soybean oil and wheat settling at lower levels week on week.
Really, grains markets showed some signs of a bull market potentially starting to fade.
Inside the numers, May corn prices were up 18.25¢ and May soybean prices were only up 1.75¢, for the week ending March 19.
May wheat prices were down 12¢.
Soybean oil did decline, due the energy complex’s weakness spilled over all to the vegetable oils values, pushing soybean oil value lower over the week.
We also note sunflower oil prices in Ukraine have eased significantly since their peak recorded on the 11th of March.
On a spot FOB Odessa basis, prices have fallen by almost 200 $/t since that date.
This movement recorded for nearby deliveries also affected new crop oil prices, which have fallen by 150 $/t after having reached a high of 1400 $/t, for October/November delivery.
This mainly dued to crude oil that after reaching $65 a barrel it was down over $4 per barrell last week.
It went down $5 one day and broke the trend.
About soybean prices, they were esitant on a hand as soybean harvest pace continues to disappoint in Brazil while on another hand, the estimates on total crop size continue to increase.
In fact, even if Brazil harvest is only 50% done, with the increased flow from brazil and resulting in lower basis levels, China’s demand is shifting away to Brazil pressuring US prices.
Meantime also Argentine rains have improved the context.
Therefore, now traders are looking toward and positioning ahead of the March 31 reports on stocks and US prospective plantings, as this report will be the first view into how the new crop is balance sheet is expected to develop.
Therefore, this is a crucial report for soybeans such as for corn.
Corn prices and spread rallied last week, indicating of the tightening balance sheet in the US.
The increase in the May corn price, indeed, was mainly in reaction to the rumors that China was going was had made some purchases.
And in fact we had four successive days in a row of large purchases, that helped that old-crop corn.
However, we note that while old-crop prices were even or higher, new-crop corn and new-crop soybean prices were both down for the week, 8.25¢ and 24.75¢ respectvily.
In add, there remains a constant risk of long fund liquidation-led price action due to they sizeable long position, which increases the chance of a sharp pullback if there is fundamentally bearish news.
Wheat prices, on the contrary, traded lower past week, with improving weather in the US.
French wheat conditions dipped a little overall crop condition, but remains at high levels compared to last few years of corp.
In any case, most of the northern hemisphere crop will be established only in the yield sensitive period between April to June and till then, we expect wheat prices to follow corn prices generally, even if past week they did not move in the same direction.
Consequently, the spread of wheat to corn prices creates support under wheat values, so we don’t expect wheat prices to fall unless something changes on the corn fundamentals significantly.
Therefore, wheat price action will be mainly a function of the next North American crop in the coming months.
The current world supply and demand balance sheet, indeed, do not leave any room for adverse weather, as any impact on the supply side of the equation would push the wheat values significantly higher.
In this context, another wheat market’s key demand driver will be the pace of Russian exports in new crop given the new export structure and the implication of potentially increased demand on the rest of the world crop.
Last week FOMC left the interest rate outlook unchanged, giving no clear indication if inflation again starts the rise, adding short-term volatility to the USD direction.
A weaker USD would usually support commodity price value and vice versa.
On the political international scenario, China hopes to reduce corn, soymeal use in feed as grain imports soar.
Meetings between the US and China in Alaska are reported to have been “tense,” prompting new concerns about the potential for future conflict, and there’s possible flow through into agricultural commodities.
Argentina’s crush worker strike will remain on hold until after meetings today with management.
It is yet to be seen whether workers will support further strike action if today’s meetings do not favour the unions.
On the international trade stage, Pakistan was poised to have bought 300 000 t of milling wheat in a tender last week.
