Sean K. Treasure
Wheat market fundamentals took center stage this week with cold temperatures, an Egyptian tender and guidance from the USDA suggesting a marked oversupply of wheat in the coming year. The bitter cold that was fore-casted late last week materialized in the form of lows as cold as zero in much of the upper Midwest. The center of the HRW belt including Oklahoma, Kansas and Nebraska didn’t get as cold but with lows getting down to the mid teens, concerns for winter-kill are very much alive. The cold is expected to return next week; despite the chill other factors pressured prices lower. Early in the week Egypt announced a tender for US origin only. Unfortunately, they ended up passing on all offers due to high prices only to promptly announce a second tender with a variety of acceptable origins. Finally, the USDA’s bearish outlook on wheat supplies plagued the market all week, keeping a lid on the early gains only to see the board close lower today. They projected wheat reserves to rise by 10% for the 2015/16 marketing year largely on lackluster demand.
Nearby futures were mostly lower for the week with the exception of the March soybean contract which closed up 8 ¾ cents. March corn finished 2 cents lower. Price action was more negative on the wheat side with nearby Chicago wheat closing down 22 ¾, KC finished 29 ½ lower and Minneapolis finished the week down 20 ¼ cents. I’ve been preaching the importance of selling nearby long wheat and soybean positions and my opinion remains the same. The market isn’t paying to carry and the signal is clear: don’t hold a cash long position nearby.
Export sales were a mixed bag with wheat once again the dog. I mentioned last week that I expect export sales to come in at the high end of expectations but, at least for wheat that didn’t come to fruition. I believe the relatively strong dollar is at least partially to blame as US exports are less attractive than our competitors. With wheat readily available from a number of other suppliers it seems to be the laggard for the US. All wheat exports totaled a mere 266,600 MT for the current marketing year. Corn totals were good, but not impressive at 932,200 MT and soybeans came in at a decent 505,600 MT. Sorghum sales are finally taking a breather with net sales of only 35,800 MT.
The BDI closed 2 points higher today to finish the week at 513. It’s possible that shipping costs are bottoming out at last which would be a major relief for vessel owners. I’ve been saying for a while that importers have a distinct incentive to buy commodities as a result of the relatively low shipping costs but that won’t last forever. This feature is one of the few pieces of good news for US wheat exports.
Basis levels are largely unchanged this week. Even with weak demand, I wouldn’t be surprised to see wheat basis firm in the coming weeks if futures trends remain bearish. Despite the signals to sell nearby time slots producers will dig in their heels and hold out for better flat prices. Spot bids as follows:
Chicago Gulf PNW
Soybeans .05H .83 H 1.10 H
Corn: .10K .57 H 1.05 H
SRW: .05 H .80 H N/A
HRW: N/A 1.05 H (12 pro) 1.25 K (11.5 pro)
DNS 14 pro: 1.55 K N/A 2.80 K
SWW: N/A N/A 1.75 K
Other than the Egyptian tender, international business was relatively quiet. Here’s what happened:
· Japan announced an SBS feed wheat tender for 120,000 MT for July shipment.
· Egypt purchased 240,000 MT of French and Romanian origin wheat.
· Tunisia bought 59,000 MT of durum for Mar/April.
· ADM Sold 24,000 MT of HRS to the CCC bound for Tanzania at $308.27/MT FOB Destrehan.
· ADM also sold the CCC sorghum tender at $248.41 FOB Galveston.
· Iraq postponed their decision on a tender for 50,000 MT of hard wheat.
Please don’t hesitate to contact me with any questions or comments. [email protected]
Happy trading!
Sean K. Treasure
Disclaimer: Commodity trading involves substantial risk and may not be suitable for everyone. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this wire and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.
Wheat market fundamentals took center stage this week with cold temperatures, an Egyptian tender and guidance from the USDA suggesting a marked oversupply of wheat in the coming year. The bitter cold that was fore-casted late last week materialized in the form of lows as cold as zero in much of the upper Midwest. The center of the HRW belt including Oklahoma, Kansas and Nebraska didn’t get as cold but with lows getting down to the mid teens, concerns for winter-kill are very much alive. The cold is expected to return next week; despite the chill other factors pressured prices lower. Early in the week Egypt announced a tender for US origin only. Unfortunately, they ended up passing on all offers due to high prices only to promptly announce a second tender with a variety of acceptable origins. Finally, the USDA’s bearish outlook on wheat supplies plagued the market all week, keeping a lid on the early gains only to see the board close lower today. They projected wheat reserves to rise by 10% for the 2015/16 marketing year largely on lackluster demand.
Nearby futures were mostly lower for the week with the exception of the March soybean contract which closed up 8 ¾ cents. March corn finished 2 cents lower. Price action was more negative on the wheat side with nearby Chicago wheat closing down 22 ¾, KC finished 29 ½ lower and Minneapolis finished the week down 20 ¼ cents. I’ve been preaching the importance of selling nearby long wheat and soybean positions and my opinion remains the same. The market isn’t paying to carry and the signal is clear: don’t hold a cash long position nearby.
Export sales were a mixed bag with wheat once again the dog. I mentioned last week that I expect export sales to come in at the high end of expectations but, at least for wheat that didn’t come to fruition. I believe the relatively strong dollar is at least partially to blame as US exports are less attractive than our competitors. With wheat readily available from a number of other suppliers it seems to be the laggard for the US. All wheat exports totaled a mere 266,600 MT for the current marketing year. Corn totals were good, but not impressive at 932,200 MT and soybeans came in at a decent 505,600 MT. Sorghum sales are finally taking a breather with net sales of only 35,800 MT.
The BDI closed 2 points higher today to finish the week at 513. It’s possible that shipping costs are bottoming out at last which would be a major relief for vessel owners. I’ve been saying for a while that importers have a distinct incentive to buy commodities as a result of the relatively low shipping costs but that won’t last forever. This feature is one of the few pieces of good news for US wheat exports.
Basis levels are largely unchanged this week. Even with weak demand, I wouldn’t be surprised to see wheat basis firm in the coming weeks if futures trends remain bearish. Despite the signals to sell nearby time slots producers will dig in their heels and hold out for better flat prices. Spot bids as follows:
Chicago Gulf PNW
Soybeans .05H .83 H 1.10 H
Corn: .10K .57 H 1.05 H
SRW: .05 H .80 H N/A
HRW: N/A 1.05 H (12 pro) 1.25 K (11.5 pro)
DNS 14 pro: 1.55 K N/A 2.80 K
SWW: N/A N/A 1.75 K
Other than the Egyptian tender, international business was relatively quiet. Here’s what happened:
· Japan announced an SBS feed wheat tender for 120,000 MT for July shipment.
· Egypt purchased 240,000 MT of French and Romanian origin wheat.
· Tunisia bought 59,000 MT of durum for Mar/April.
· ADM Sold 24,000 MT of HRS to the CCC bound for Tanzania at $308.27/MT FOB Destrehan.
· ADM also sold the CCC sorghum tender at $248.41 FOB Galveston.
· Iraq postponed their decision on a tender for 50,000 MT of hard wheat.
Please don’t hesitate to contact me with any questions or comments. [email protected]
Happy trading!
Sean K. Treasure
Disclaimer: Commodity trading involves substantial risk and may not be suitable for everyone. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this wire and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.
