Afternoon Comments 1st August 2011

Egypt has confirmed Russia as the supplier for a 240kt wheat tender held late last week. Values appear to be roughly $230 FOB Black Sea, this is a very low number and would roughly equate to values closer to $150ish ex farm Liverpool Plains equivalent but it is almost impossible to do an accurate simple comparison as grade comparability, ocean rates, handling costs and many more unknowns can only be assumed.

The crux of it is that Russia continue to cover the middle east with ease and at values well below US or European offers, although their values have moved US$10 higher in recent tenders.

According to those on the ground W.A is looking pretty good, one consultant has actually described some locations around Geraldton as brilliant. There are a couple of average spots but it appears the majority of the Western Australian wheat fields are doing ok.

When we see a dry spell hit the east coast we often see the price of east coast grain move higher, often it's first cap is the cost of grain bought around from WA. Looking at new crop values from (let's pick) Viterra today one can see that new crop Esperance APW is bid at $264 on a multigrade contract while the bid for the same grain by the same buyer from the Newcastle port zone is only $244, so one might assume there is little to no "drought premium" factored into new crop wheat at the moment.

The AUD continues to be strong but did trade as low as 1.098 before heading back into the mid 1.10's this morning. Local prices are a bit of a mixed bag but track feed grain, apart from sorghum, does appear to be closing the spread to higher grades a little.

E session CBOT corn and wheat are a little firmer but with the charts so overbought it would be hard to even see technical support sustained.