Grain wrap: Forward selling behind last year


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WINTER is well and truly here now, temperatures have dropped and southern NSW has another week of showers forecast.

WINTER is well and truly here now, temperatures have dropped and southern NSW has another week of showers forecast.

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Growing conditions for many areas could not be better, but the concern of El Niño has many on edge, concerned as to how the season could finish up.

This is being reflected by grower forward selling and to date this has been well below average year-on-year.

Since the start of May to the end of June Chicago Board of Trade (CBOT) wheat futures have taken a slide.

The CBOT July futures have lost US136.25 cents a bushel; from US721.50c/bu on May 1 to US585.25c/bu on June 23.

Fundamentals have not changed too much, but bullish drivers have disappeared.

Even though there are still weather concerns in the US with more news of weather damage from heavy rains and quality concerns in the Midwest of the US, the market is not too concerned at this stage as the forecast for the global supply of wheat is thought to exceed demand.

Corn has found some support due to the heavy rainfall in the Midwest of the US causing flooding.

However, the rally won't last as damage to the crop should be minimal.

Seasonally the US corn belt has received above average rainfall.

There may be more impact on the corn price when the US planting and stocks report comes out at the end of the month - positive or negative depending on the outlook.

Canola also continues to find itself under pressure with the large Canadian stocks hanging over the markets and current conditions continue to look good for this season.

The European Union crop is forecast to come in between 22 and 22.8 million tonnes which could be a record.

North American crops also look to be in good shape.

In Australia there are no production flags to date, the Australian Oilseed Federation has the canola crop forecast at 3.86 million tonnes.

Today the balance sheets for wheat and canola are both tight which continues to put pressure on prices, without any bullish news markets could remain this way.

We are seeing domestic demand and lack of grower selling hold up the east coast prices relevant to export prices.

We have a long way to go before harvest and things can change very quickly if the market gets spooked.

Take advantage of any market rally's that may take place between now and harvest as they may be short lived.

Chela Lamond is an AWB farm marketer at Wagga Wagga.

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