GAINS made in grain markets over the past three months have largely been given up in the past fortnight on the back of improved crop condition in North America.
Australian farmers made some moves in early June in selling their new crop through either straight forward physical sales or hedges but marketers have reported this activity has dried up as the price has plummeted.
Nick Crundall, assistant pool manager with MarketCheck said small tonnages of the new crop had been committed.
“For most people the June rally was way too early to commit, but some growers who run an annual hedging program took the opportunity to manage some risk,” he said.
“There were some growers who purchased MATIF (the major French grain exchange) puts and have done well, however that window has closed and farmers are now watching on.”
Peter McMeekin, originations manager with Nidera Australia, said a wholesale exiting of positions by American funds had wreaked havoc on the market last week.
“Last week alone it is estimated that funds sold 96,500 corn contracts, 37,500 soybean contracts and 17,500 wheat contracts, so it is no wonder we saw red for the entire week,” he said.
“It only took five trading sessions to wipe off more than three-quarters of the corn gains built over the previous three months.”
Australian wheat futures prices are now close to lows set in January, with NSW wheat at $265/t for the January contract.
All eyes will be on Thursday’s US Department of Agriculture (USDA) stocks and acreage report, which will have a big impact on market sentiment through early July.
Early conjecture is that the report will be supportive of prices with the market concerned about US supply and demand should the forecast dry weather set in.
Crop condition in North America is generally good leading into the crucial July-August period where yield is set for corn and soybean crops.
Mr Crundall said current crop conditions were bearish for grain prices, but added the market was closely monitoring the potential for dry weather concerns to emerge through July and August.
“The forecast is still out there for a drier than average July and August for key North American production areas, so the market is watching this closely.”
Malcolm Bartholomaeus, Bartholomaeus Consulting, said the oilseed complex had been hit particularly hard.
“The Canadian canola price just got too high given the season and there has been a correction back from these price levels.”
He said fundamentals in the wheat sector had weighed heavily on the market and had actually played a role in bringing corn prices back.
