Barley and feed grain prices slowly grind lower last week, on lack of any fresh new headlines.
Bears argue that South American weather has somewhat stabilized and conditions aren’t worsening, which I disagree with, and bulls are a bit disappointed by the fact there’s been nothing new regarding Chinese trade. Also, expectations of a large Queensland sorghum crop are suppressing domestic feed prices, but that crop has a lot of mouths to feed. Maybe too many, and too much reliance is being place on it easing East Coast demand issues.
There’s also no new updates from the USDA. International feed bulls have been waiting on the USDA to reduce their final US corn yield estimate, and perhaps reduce production estimates for both Argentina and Brazil. Hence, there have just not been a lot of cards flipped over for the bulls to pick up, place in their hand, and raise their bets accordingly.
Adding to the lack of bullish cards, the International Grains Council raised its 2018-19 world corn production estimate by 3 MMTs and raised its world corn carryout estimate by 5 MMTs on Thursday.
There’s also more evidence of Ukraine exporters gaining more marketshare. The latest data circulating shows Ukraine exports up 60% compared to last year. We are also seeing stiffer competition from Argentina.
I’m of the belief that until the bulls have something fresh to chew on, the feed markets are going to grind sideways to slightly lower. For old crop however, I remain optimistic that in the long run we will see a rally in demand and prices respond accordingly. I still believe there are further weather concerns brewing in both Argentina and Brazil, which could catch some bears offsides, not to mention the domestic feed demand/supply situation across Australia.
Wheat prices continue to trade sideways and towards the lower-end of the recent range.
The International Grains Council just raised its 2018-19 world wheat production forecast by 8 MMTs. At the same time, they pushed their world wheat ending stock estimate higher by 1 MMTs to 263 MMTs.
Bulls have been hoping supplies out of the Back Sea region would be much more limited by this time. Headlines out of Russia seems as if the government is finally starting to limit exports to some degree, but marketshare isn’t flowing to Australia or the US.
There’s also not much in the way of a weather story that’s widespread enough to shake the bears. Of course, if China where to step in and announce plans to be sizable buyers of US wheat, then things could change dramatically. As a longer-term, bull, I’m also keeping a close eye on geopolitical tension brewing between Russia and Ukraine. There’s also some arguments being made that a fallout in the European Union could be bullish US wheat. As both a producer and a spec, I continue to believe the downside risk is more limited than upside potential. Hence, reason enough to stay patient for new crop sales.
Canola prices have essentially gone nowhere this week.
Soybean bulls are pointing to continued weather difficulties in parts of South America, particularly too dry in portions of Brazil, and too wet in portions of Argentina. Perhaps we will see something more positive in the soybean market this week after the Chinese delegation visits the US for extended trade talks.
Buyers locally aren’t as keener buyers as I’ve been expecting. I’m now wondering if the crop is bigger than expected, and maybe more has been sold than I have been thinking also. I’m continuing to assess the canola situation and will keep you posted.