Daily Comments August 3rd 2011

Morning Comments:

Well today should be interesting. Corn traded steadily higher all session dragging wheat along for the ride. With corn locked limit up tonight we'll see expanded limits. Funds were big buyers, picking up 2.5mt of corn and 680kt of wheat at Chicago. Soybean futures were also higher and dragged ICE canola up by almost $10 / t.

I'm not convinced this kind of rally is sustainable given the fundamental and global price competition of grain but if you believe the US markets are attached to reality than you are a little deluded aren't you, you would probably believe a carbon tax is the way to go too.

Some analyst are saying this rally is based around US weather and the rain that is helping corn is hurting wheat, ok if so then why would corn rally.

I'm a little inclined to think that someone is assuming that the US corn and wheat acres are going to be amended in the WASDE next week, inside running ? who knows, let's just see what the day brings here, we should be able to get close to some sale values that were indicated two weeks ago, it may take an extra dollar or two to see those offers now though thanks to a complete lack of July rain.

The European markets were not as convinced that the market should rally, instead they were happy to see another session end in the red across the board. All but rapeseed posted modest losses or in the case of malt, substantial losses. Paris rapeseed was up a couple of euro in a lethargic market. The Europeans are still consumed by their own debt crisis and finished trading before the US senate made it rain $100 bills and fixed the US debt crisis, this also fixed the climbing aussie dollar which posted a loss of almost 2% through the session.

Today could be one of caution or a selling frenzy, take your pick, but keep an eye on the sky.

Weather:

A strong low in the southern ocean will push into the bite and drive cold conditions into SA by the weekend. The associated low will push into western Victoria through the weekend producing rain across VIC and SNSW. A trough line is expected to develop across much of NSW producing falls of 5 - 10mm from Saturday through to Monday across the NSW wheat belt. Dry after the change.

Afternoon Comments:

Well sorghum almost done a hammy getting out of the blocks this morning, old crop has traded at $200 ex farm Liverpool Plains throughout the morning and track has been bid up to $228 or $227 on seven day terms, Newcastle less rail.

Old crop wheat is firmer bar APH which seems to be reflecting some of the sentiment that grade spreads may reduce as hot weather in the US is more inducive to higher protien wheat this year.

Feed grades are all firmer as is new crop milling wheat on a multi grade, shame the rainfall forecast wasn't as bullish.

I've scoured the internet and wires looking for a good reason why the US markets rallied so strongly last night, so far I've not found one, one analyst has gone as far as to call it a "fat finger trade", remember the chaos when that merchant punched in too many zero's on a CBOT wheat order in early 2008.

The guys at the ASX seem less than convinced that this market is going to get up and run away with the spread between the bid and the offer in milling wheat blowing out to $7 this afternoon, $260 / $267.

The e session at Chicago isn't giving anything away either with corn flat and wheat slightly softer.

If you are a seller of old crop sorghum off the Liverpool Plains give me a call, I know it is dry but this may just be an opportunity to scale up sell into this market.