Was the move lower in US futures yesterday a needed correction triggered by the USDA report or was it a good old fashion bear trap. Well last night saw futures for wheat, corn and soybeans recover well wiping out the previous sessions losses.
The thought before the release of the USDA report was that the funds were short and ready to roll or clear this position in the near term. Now a day later the market sentiment is one suggesting that the USDA have it wrong and demand for all three grains is going to be much higher than the USDA suggest in the latest WASDE.
In the case of soybeans this is an easy argument, China continues to buy US beans hand over fist but what about wheat and corn. Corn is seeing a few more export sales put on than normal but only time will tell if this is a trend or phase.
The weaker USD helped fuel the rally but fundamental news was crucial to the strength of bids.
With Egypt picking up another 180kt of wheat from the Black Sea and Saudi Arabia entering the market for 600kt of wheat, Japan ordering 100kt of US / Canadian wheat and Syria picking up 1mt of Russian wheat at €150 / tonne, yes I wrote that right, it was bought in Euro’s not USD and Algeria in for 50kt of wheat you can see the demand is there. BUT and this is big but, the take home message from last night’s Egyptian business is that the US was the cheapest wheat, although they were disqualified from the tender for offering HRW, that’s right the wheat offered was actually better than the wheat required, they were still the cheapest on offer.