The grain rout continued in the US overnight with the trade still on edge over upcoming USDA data.
Egypt’s GASC came back to the market after close yesterday, announcing a tender for mid-March wheat. Russian wheat was still on offer, but the cheapest free-on-board (FOB) offers were some $5-7/t over Romanian and French wheat, although the spread tightens down after accounting for the $2/t premium in freight cost for French wheat. In the end, Egypt booked six cargoes, three French and three Romanian. Soft Red Winter (SRW) wheat made the offer mix, but at an extremely high basis, and the extra $15 in freight was some $5 more expensive in cost-and-freight terms. After earlier sales to GASC, SRW has gotten more expensive to originate for export, though the market was surprised by how firm the offer was. With Russian wheat pulling back from elastic demand, and unlikely to drop in price in the near term given tightening fundamentals, the question of how much wheat will work back to US balance sheets remans. At these basis levels, SRW is already pulling back from demand.
The USDA continues to gradually swing back into gear, with more information about updated report schedules trickling out. Flash export sales have started hitting again, but the catch-up plan that has been reported suggests we will not see a complete current update until mid-February. This is still to be confirmed officially. Similarly, CFTC reports will begin coming out on Friday, with weekly updates each following Tuesday and Friday until they are up to speed. There remains no word on a longer-term solution to the US Government shutdown, so background concerns remain about problems from mid-February on, after the three week window is over.
Each further day of hot and dry weather is causing further damage to later sorghum crops on the Darling Downs, where we have seen quite a few fields down 30 per cent on average yields already. However, the market has been slow to rally in southern Queensland, with increasing ration shifts back to barley, given cheap WA transhipment arrivals, helping to cushion the sorghum impact.
Source: Lachstock Consulting