Outside Elements (II)

July 7th, 2011 - The announcement of President Putin that Russia would lift the export ban and resume grain exports as from 1st July this year, caused the markets to stabilise and revert down slightly during early June.

By mid June very substantial fund selling emerged in Chicago wheat futures, leaving many to wonder what had actually changed, since the week before the USDA released a report which in fact was supportive on corn and thus grains in general. It should be noted however, that in this period the financial worries on Greece were reaching a climax, which fell together with first clear data confirming slowing US growth, as well as possible future Chinese interest rate hikes.

All together, it was thus time to take profits and put monies safely at the side-lines, irrespective of what grain fundamentals actually looked like.

During the second half of June and until now, the downmove was cemented by some positive elements, such as a slightly higher forecast for the Ukrainian crop, good progress of the US wheat crop and another USDA report which all of a sudden was positive on corn and wheat.

The result of the unexpected move lower was that amongst others malting barley reached attractive levels again, and with brewers on average still at about 40% covered for their next year's malt needs only, markets soon resumed activity with decent volumes traded.

As for the outlook from here on, we shall have a better view in the next two weeks when France's spring crops will have reached peak harvest activity. The worry was ànd is that yields are down and proteins up, all as a result of the historical dry conditions seen during April and May last.

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The above information is for general purposes only. Any reliance you place on the given information is therefore strictly at your own risk.

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