C'MON, fair suck of the sauce bottle. In the past few weeks these grain markets have not been easy to trade, with speculators running for the exits on futures markets - largely in reaction to global macroeconomic uncertainty and associated risk off trade.
Sure, the USDA dished up a bearishly construed set of numbers for wheat and soybeans - and consumers haven't exactly been hooking in and purchasing big licks of Aussie (or US) grain in the past few weeks. But you only need to look at "outside markets" to see that the capitulation on grains and oilseeds was also exacerbated by the "shiny bums" on Wall Street.
From the date of the US Presidential election (November 6) through to the close of business on Friday last week, the Dow Jones Index lost some 5%, while CME wheat futures had dropped 4% and corn close to 1.5%. In the same timeframe - Australian APW wheat bids fell A$10/MT, while sorghum remained fairly stable.
Then markets reacted to weekend talk that the US might avoid the "fiscal cliff" and that the EU was feeling more benign toward a Greek bailout with a resounding "risk on" across the equity and commodity space. As a result, grain markets are showing signs of a heartbeat.
From a futures markets perspective, you would have to think that the speculative sector is now feeling more comfortable having liquidated a chunk of what had been unwieldy long futures positions in the past few weeks.
And on physical markets, there are signs that global consumers are already viewing US corn and European wheat in a more friendly light. Brussels granted another 696,000MT of EU soft wheat export licences last week - which is the largest weekly figure since September 2010.
US corn is also finding favour in various Asian markets - partially due to logistics issues for Brazilian corn and the outright cheaper values now in circulation.
And for US (and Australian) wheat, you would have to think that the recent narrowing in the wheat vs corn CME futures spread (and corresponding narrowing in Australian APW/ASW vs sorghum physical price spread) should start to buy some corresponding demand for wheat. Australian APW values now correspond to aboutUS$345-355/MT FOB East Coast ports, with US Soft Red Winter offered at about US$340/MT FOB and US Soft White Wheat at US$325/MT FOB the Pacific North West coast.
These values are very competitive - leading to optimism that Australian wheat will win at least part of the business in a recent Iraq tender to be announced later this week.
The trade is also anticipating that Egypt's GASC will re-enter the market imminently for January shipments - with the trade expecting US product should win business over European wheat at current values.
Thus, the volume of US export sales - for wheat in particular - will likely be a key driver for global grain markets in coming weeks.