The wheat markets are abuzz at the moment, with a flurry of tenders coming to the international market as prices hold the mid 500 USc/bu level. Large production forecast, particularly India are continuing to weigh heavily on the market, whilst Australian, US and Canadian wheats have all been competitive into the middle east for reasonably prompt delivery. Another cold snap is affecting the US, whilst the east coast states are taking the brunt, there is an expectation that further cold could be causing damage through the central states of the US. The corn market continues to hold its ground, with a sale into Japan seen as supportive. With Japan usually a large sorghum user, the switch to corn maybe a reaction to the harvest quality we have so far seen here in Australia – along with our high prices.  The ethanol demand in the US has also reduced during the cold conditions, helping to weigh heavily on the market, given its production is the single biggest user of corn in the US. The Soybean market continues to watch the South American weather market unfold, US stocks are beginning to dwindle and the constant buying interest from China is relentless, this seems to be capping the downside in the market at the moment.

The cotton market had some consolidation overnight losing 10-20pts across the important months of March, May and July. 6 days of rallies saw the market put on nearly 600 points on the March contract, as the funds took hold of last weeks export sales report. Tomorrow sees the next instalment of export reports from the US which should set the seen for the markets direction. Anything that indicates that supplies are continuing to tighten for prompt shipment will give the market the kick which could see futures head towards the 90 USc/lb level.

The dollar seems to be holding a slightly firmer tone following the much better than expected CPI data for our economy. Some think that the improvement will push the RBA to hold a rate cut in the near term, given inflation has also snuck to the higher end of the RBA’s 2-3% range.

Domestically, the forecast for rain has seen the market a couple of dollars lower than the start of the week. Ultimately, if the forecast becomes a none event, prices will push higher again, keeping in mind that the market is now filled with the rumour that merchants will bring wheat and barley around from South Australia via boat, & or rail, which is the theoretical cap on pricing. Wheat in Northern NSW and Southern QLD, continues to be flat priced for the feed market.  The sorghum market is continuing to hold its ground with most market participants now short Sorghum 1. Given the majority of the crop harvested so far has been Sorghum 2 or Sorghum 3, we expect demand to emerge for these grades, but not before the sorghum 1 shorts have their heads handed to them. The chickpea market found a new level yesterday, on the back of concern for the Pakistani pulse crop, but interest appeared limited as merchants took their fill, and pulled the book shut early in the afternoon.  Pakistan is a dangerous & limited market. Without further demand, we see this market coming back. Having said that, if Pakistani crop development continues to deteriorate, they will be back to buy, & prices will be supported & likely rise. It’s another weather market, like at home here. We recommend selling in to the rally & averaging your sales up.