The Morning Vibe: When Is Milling Wheat Not Milling Wheat?

01/08/14 -- The answer to the question appears to be "when it's MATIF milling wheat than we are talking about".

The finer details of the MATIF milling wheat contract are surprisingly lacking in finer detail: "Sound, fair and merchantable quality of the following standard: Specific weight 76 kg/hl; Moisture content 15%; Broken grains 4%; Sprouted grains 2%; Impurities 2%" - that's it. Not even a mention or protein in there, let alone Hagbergs. After that it's down to the silos themselves to "refine" the contract specifications to accommodate the grain that they are prepared to accept.

Soufflet, whose Socomac silo becomes a new approved delivery point against the MATIF contract in November, say that they haven't even decided what quality specs they will accept themselves yet, according to a report on Reuters. "The Matif contract is designed to be representative of the French market in general, and this year French wheat is tending towards feed quality," one trader was quoted as saying in that report.

There's the answer then to why the MATIF contract (-5.1% as of last night's close versus last Friday night) has fallen out of bed even more than London feed wheat (-3.3%) this week. See, there's always someone worse off than yourself isn't there? And it's always extra nice when they're French!

In other news, a Canadian wheat crop tour found yield potential in spring and durum wheat there to be the second highest ever (only beaten by last year's record crop). Quality also looks good at this stage, although persistent cool temperatures does add the caveat of getting the harvest in before any possible early frost strike.

It seems a tad bizaare than with EU grain prices at 4-year lows we're letting cheap Ukraine kit into Europe at preferrential duty-free rates, but that is exactly what we are doing. This loop-hole is currently open until the end of October, and Brussels yesterday confirmed that they'd issued 336,625 MT worth of corn import licences this past week alone, along with approving 191,600 MT worth of Ukraine wheat imports.

Now let's have a look at Russia: there are two options here. Either a) they are lying or b) their harvest is going to be much larger than official estimates have suggested up until now.

ProZerno yesterday estimated Russia’s 2014/15 grain crop at a large looking 102.6 MMT, up from a previous estimate of 98.9 MMT and compared to 92.4 MMT a year ago. That total includes 58.2 MMT of wheat, a figure larger even than IKAR's hitherto largest hat in the ring of 57.5 MMT from earlier in the week.

This morning the Russian Ag Ministry say that the country has harvested 48.2 MMT of grain off little more than 30% of the planned area, with yields currently up 22% on a year ago. Final production in 2013 was "only" 92.4 MMT. Let's half that gain and sat that yields eventually come in 11% up on last year, what production number would that give us? Blimey, it's 102.6 MMT!

They're said to have harvested 38.5 MMT of wheat off 10.6 million ha - 42% of the planned area, with yields averaging 3.62 MT/ha so far (+19.5%). OK, most of what's left to be harvested will be coming from the less productive areas, and be lower yielding spring wheat so that average is going to drop off. Note though that the USDA are using an average Russian wheat yield estimate exactly the same as a year ago - yet the Russian Ministry are telling us that yields are currently almost 20% up on last year.

Say they end up 10% higher, using the USDA's harvested area estimate of 23.75 million ha (the Russian Ministry's figure is higher, but we don't trust them right?) we'd end up with a Russian wheat crop of guess what? The answer is 58.1875 MMT - ProZerno and me (wasn't that a film starring Richard E Grant?) must definitely be using the same calculator!

And you could easily make out a case for production potentially being higher than that.

It's a good job that the Russian quality seems to be OK. You can always rely on the French to let you down can't you?

Chicago Ends Higher On Beans And Wheat, Lower On Corn

31/07/14 -- Soycomplex: Beans closed with mostly small gains. Weekly export sales of 187,400 MT of old crop and 1,268,700 MT of new crop trumped expectations for combined sales of 1.0-1.2 MMT. Meal sales of a combined 751,100 MT were also at the top end of trade estimates of 550-750 TMT. As per usual China was a featured buyer on beans and unknown destinations was the leading taker on the meal. The IGC raised their forecast for global soybean production in 2014/15 by 4 MMT from last month to a new record 304 MMT, which is a 7.8% increase on the previous year. The US 2014/15 soybean crop was raised from 98.9 MMT to a new record 103.4 MMT, in line with the latest changes from the USDA. China's imports in the year ahead were upped 1 MMT to a record 72 MMT. Global consumption was increased by 3 MMT, ending stocks were raised 2 MMT. In addition "with a record EU crop set to partly compensate for declines elsewhere, notably Canada, the 2014/15 global rapeseed/canola out-turn is still expected to be the second largest of all time," they added. Separately, China’s Ministry of Commerce estimated July bean imports at 5.87 MMT and Aug bean imports at 3.84 MMT. The Argentine Ag Ministry said that Argentine farmers have sold 49.23% of their 2013/14 soybean crop versus 57.2% this time last year. Argentina defaulted in its debt for the second time in 13 years today, which may further discourage farmer selling. Aug 14 Soybeans closed at $12.24 1/2, up 4 cents; Nov 14 Soybeans closed at $10.82, up 3/4 cent; Aug 14 Soybean Meal closed at $391.30, up $3.70; Aug 14 Soybean Oil closed at 36.11, up 6 points.

Corn: The corn market closed with losses of around 3-4 cents despite another good set of weekly export sales statistics. These came in at 173,800 MT of old crop and 1,093,200 MT of new crop. That was towards the top end of trade estimates for sales of a combined 800 TMT - 1.2 MMT. The IGC raised their estimate for the global corn crop in 2014/15 by 6 MMT to 969 MMT, which is just shy of last season's record 974 MMT. Consumption was only increased by 1 MMT, ending stocks rose 7 MMT to 187 MMT, a 10.7% hike versus carryout at the end of 2013/14. These higher corn stocks take global grains inventories in 2014/15 (including rice) to a 15-year high of 419 MMT, they said. The US corn crop in 2014/15 was estimated at 353 MMT, up 3 MMT on a month ago and 1 MMT above the USDA's latest estimate. Separately, MDA CropCast upped their forecast for this year's US corn crop by 4.5 MMT from a week ago to a record 361.9 MMT. In other news, China were said to have sold 95.7% of the corn on offer at today’s auction. CEC estimated South Africa’s 2014 corn crop at 14.0 MMT versus a previous estimate of 13.9 MMT and up 18.6% on the 11.8 MMT produced last year. The Argentine Ag Ministry said that Argentine farmers have sold only 53.47% of their 2013/14 corn crop versus 71.07% a year ago. Remember though that the harvest is well behind last year's pace. The USDA attaché in Indonesia estimated the country's 2014/15 corn imports at 2.6 MMT versus 3.1 MMT in 2013/14. US weather forecasts remain non-threatening, with rain forecast for much of the corn belt starting Sunday and lasting through to the middle of next week. Ideas that there could be a much larger volume of feed wheat on the world market in 2014/15 could keep corn under pressure for a while yet. Sep 14 Corn closed at $3.57, down 4 3/4 cents; Dec 14 Corn closed at $3.67, down 4 1/2 cents.

Wheat: The wheat market closed higher, aided by weekly export sales of 801,000 MT which beat modest trade expectations for sales of 350-550 TMT. Nigeria (167,000 MT), Panama (128,500 MT), Brazil (116,100 MT), Mexico (88,800 MT), Japan (74,600 MT) and the Philippines (50,000 MT) were featured buyers. The IGC raised their forecast for global wheat production in 2014/15 by 3 MMT to 702 MMT. Consumption was up by 2 MMT to 699 MMT and carryover reduced by 1 MMT to 193 MMT, although that's still 3 MMT higher than in 2013/14. Australia's 2014/15 wheat crop was raised 1 MMT from last month to 26.5 MMT. Europe's wheat crop (excluding durum) was increased from 139.2 MMT to 140 MMT. Russia's wheat crop was increased significantly, from 51 MMT to 55 MMT, and Ukraine's was raised from 20 MMT to 21.5 MMT. There were decreases for Argentina (down 0.4 MMT), the US (down 0.5 MMT) and Canada and Kazakhstan (both down 1 MMT). In other news, Taiwan bought 84,800 MT of US wheat for Sept-Oct shipment. Tunisia are tendering for 184,000 MT of optional origin wheat and 125,000 MT of optional origin barley, both for Sept–Nov shipment. Bangladesh are looking for 50,000 MT of optional origin wheat. The Argentine Ag Ministry said that Argentine farmers have only sold 64.03% of their 2013/14 wheat crop versus 96.20% a year ago. Ukraine's Ag Ministry said that the country had exported 2.03 MMT of grain in July versus 853,800 MT in June. ProZerno estimated Russia’s 2014/15 grain crop at a large 102.6 MMT, up from a previous estimate of 98.9 MMT and compared to 92.4 MMT a year ago. That total includes 58.2 MMT of wheat, which is 0.7 MMT more than IKAR estimated at the beginning of the week, and far higher than the USDA's current forecast of "only" 53 MMT, even if they are referring to a bunker weight total. Sep 14 CBOT Wheat closed at $5.30 1/4, up 3 cents; Sep 14 KCBT Wheat closed at $6.25 3/4, up 8 3/4 cents; Sep 14 MGEX Wheat closed at $6.16, up 3 1/4 cents.

EU Wheat Slumps To Yet New 4-Year Lows

31/07/14 -- EU grains closed mostly lower with Nov 14 London wheat down GBP2.50/tonne at GBP122.10/tonne, Nov 14 Paris wheat was down EUR5.00/tonne to EUR170.50/tonne, Aug 14 Paris corn fell EUR0.75/tonne to EUR162.75/tonne and Aug 14 Paris rapeseed rose EUR7.75/tonne to EUR325.00/tonne.

For both London and Paris wheat these were new 4-year lows.

The HGCA said that the UK grain harvest was already around 20% complete, double the norm for the end of July.

"Harvesting of winter barley and winter oilseed rape is nearing completion in the southern half of England and has started further North and into Scotland and Wales. Harvesting has commenced in Southern regions on wheat, spring barley and some oats," they said.

Nationally they said that the winter OSR harvest was now 75% done, along with 85% of the winter barley crop. Yields of the latter were described as "well above average".

"Winter barley yields are good, averaging 7.2-7.4 MT/ha, whilst winter oilseed rape yields are averaging 3.4-3.6 MT/ha," they reported.

It's still too early to suggest where winter wheat yields will end up. "There has been a great deal of variability in the early yields with some of the lightest land in the Eastern region yielding just 4.5 MT/ha, whilst heavier land in the same region is yielding 9.0-9.6 MT/ha. In the West Midlands and Yorkshire and Humber, some of the best crops have yielded up to 11-12 MT/ha," they added.

"Early quality data for milling wheat is showing some high Hagberg falling numbers," they said. That could be good news for milling wheat growers, with France (and possibly others too) said to be suffering problems with low Hagberg levels this year.

Note though that there is no sign of a minimum Hagberg level within the terms of the Paris milling wheat contract.

As was widely expected, there was no eleventh hour deal or last minute reprieve, Argentina defaulted on it's debt to the "hedge fund vultures" early this morning. The trade is still wondering what this means for global trade in wheat, corn and soybeans.

Argentina are expected to be the world's 7th largest exporter of wheat in 2014/15, and the 3rd largest for both corn and soybeans. They are also the biggest global exporter of soymeal, set to ship a larger volume than the US and Brazil combined in 2014/15, according to the latest projections from the USDA.

The trade is also considering the possible ramifications of an intensifying of Western sanctions against Russian banks, and how that might possibly disrupt global trade in wheat in particular. Russia are forecast to be the world's joint fourth largest wheat exported in 2014/15.

Certainly they look like having plenty of wheat to sell this year. The 2014 Russian wheat harvest is 41.3% complete, already producing a crop of 38 MMT with average yields up 19.8% at 3.63 MT/ha.

MDA CropCast today raised their forecast for the Russian 2014 wheat crop by 1.2 MMT from last week, saying that drier weather will favour winter wheat drydown and harvesting. Spring wheat growth will be finishing up, they also noted.

Chicago Grains Mixed, Weather Talk Dominates

30/07/14 -- Soycomplex: Beans closed lower as mid-day weather forecasts re-iterated a welcome rain event for the Midwest next week after a couple of weeks of dryness. "Upper Midwest field moisture has become depleted with sharply reduced rainfall. Less than half of normal moisture has accumulated the past 2 weeks over much of the farm belt, not only the Upper Midwest but also the Great Plains," said Martell Crop Projectons. Safras e Mercado estimated Brazil’s 2014/15 soybean planted area at 31.213 million ha, up 4.4% versus last year. Planting usually begins in late September. They forecast the 2014/15 Brazilian crop at a new record 94.451 MMT, up 9% versus last year's production of 86.613 MMT. There's talk that a possible Argentine debt default tomorrow would lead to a further weakening of the domestic peso, encouraging farmers to hold onto their beans as a hedge against inflation and the falling value of the local currency. Beans are essentially a dollar-based commodity. The trade is expecting that tomorrow's weekly export sales report will reveal another week of robust interest for US beans and meal, with bean sales forecast to be around 1.0-1.2 MMT and meal sales of 550-750 TMT. Aug 14 Soybeans closed at $12.20 1/2, down 6 cents; Nov 14 Soybeans closed at $10.81 1/4, down 13 3/4 cents; Aug 14 Soybean Meal closed at $387.60, down $7.80; Aug 14 Soybean Oil closed at 36.05, down 20 points.

Corn: The corn market closed with little change. There's some talk of this year's US corn crop almost being "made" now that we've reached the end of July, but there's still a fair way to go yet. "Corn crop ratings have continued mostly favourable in July due to prevailing cool temperatures. Soil moisture was conserved while corn was pollinating and for soybeans starting to set pods. Corn would be less damaged by August drought, should it develop," said Martell Crop Projections. Dr Cordonnier said that unusually wet weather in Brazil's Mato Grosso has slowed harvesting of their safrinha corn crop to around 50% complete. The USDA attaché in Russia estimated corn production there this year at 13 MMT, that would be an increase of nearly 12% on a year ago. There's some talk of heat/dryness issues developing for Russian corn. Ukraine Weather Forecasters estimated this year's corn crop there at 29.0 MMT, down 6% from last year's record, although still the second highest ever. New crop Ukraine corn offers continue to hover around the $188-190/tonne mark on an FOB the Black Sea basis. US ethanol production this past week came in at 954,000 barrels/day, a 5,000 bpd fall on a week ago, although that was the second highest weekly output of the year so far. Trade estimates for tomorrow's weekly export sales report for corn are quite robust at 800 TMT - 1.2 MMT. Sep 14 Corn closed at $3.61 3/4, up 1/4 cent; Dec 14 Corn closed at $3.71 1/2, up 1/2 cent.

Wheat: The wheat market ended around 2 to 7 cents higher across the three exchanges. Egypt bought all Russian wheat in it's tender, although US wheat was said to be the cheapest on an FOB basis, it was the freight that kicked it out. The FOB prices paid were similar to last week's tender, although freight rates were a dollar or two higher. The trade is pondering what effect increased Western sanctions against Russia might have on their ability to conduct "business as usual" on the international grain market. The trade is also weighing up what sort of wheat quality we will end up with in Europe this year. Germany's DBV released a crop update, but didn't forecast wheat yields or production. In what has been cut already yields vary "very strongly" they said. "The weather in the coming days is crucial for the remainder of the winter wheat crop," they added. There are said to be question marks over quality in Poland and Romania too, as well of course as France. A Canadian crop tour came up with potential yields of 59.0 bu/acre versus 55.0 bu/acre a year ago and 43.0 bu/acre on average. The USDA attaché in Russia estimated the wheat crop there at 52 MMT, unchanged on last year, but 1 MMT lower than the official USDA figure. The USDA announced 205,500 MT of US wheat sold to Nigeria. Trade estimates for tomorrow's weekly export sales report are around 350-550 TMT. Sep 14 CBOT Wheat closed at $5.27 1/4, up 7 1/4 cents; Sep 14 KCBT Wheat closed at $6.17, up 5 1/2 cents; Sep 14 MGEX Wheat closed at $6.12 3/4, up 2 1/4 cents.

EU Wheat Posts Modest Gains In Light Consolidation

30/07/14 -- EU grains managed a mostly higher close at the end of a mixed two-sided trading session. We can probably attribute this to light consolidation/profit taking following the recent slump to 4-year lows.

The day finished with Nov 14 London wheat up GBP0.65/tonne at GBP124.60tonne, Nov 14 Paris wheat ended EUR0.50/tonne firmer at EUR175.50/tonne, Aug 14 Paris corn was up EUR1.00/tonne at EUR163.00/tonne, whilst Aug 14 Paris rapeseed fell EUR2.25/tonne to EUR317.25/tonne.

The German Farmers Association, DBV, said that the winter barley harvest there was almost complete, forecasting good yields of 7.3 MT/ha versus 6.9 MT/ha last year. They see production in 2014 at 9 MMT.

German winter OSR yields were estimated at 4.1 MT/ha, producing a crop of 5.8 MMT. The harvest is more than 66% complete, they said.

They also commented that early winter wheat yields vary "very strongly" and that the 2014 harvest is held up by repeated rains, without giving a production forecast.

Ukraine said that it's Jul 1-29 grain exports were 1.757 MMT, including 558 TMT of wheat, 896 TMT of barley and 286 TMT of corn. There's a further 332 TMT of grain loaded onto vessels waiting to sail, they added.

Belarus said that they are 42.9% through their 2014 grain harvest, which is expected/hoped to produce a record crop of 10 MMT.

Russia said that they'd harvested 45.4 MMT of grains off 28.4% of the planned area, including 37.2 MMT of wheat and 4.4 MMT of barley. Grain yields so far are said to be up 23% at 3.43 MT/ha.

The USDA attaché in Russia estimated the 2014/15 total grain crop at 94.0 MMT (excluding Crimea which could add a further 1.2 MMT to that total) versus a previous estimate of 92.0 MMT. That includes 52 MMT of wheat, 16 MMT of barley, 13 MMT of corn.

The attaché estimated Russia's 2014/15 grain exports at 26.0 MMT.

Meteorolgix Weather said Europe’s weather forecast calls for generally warmer and drier weather next week, which will be favourable for harvesting.

The US were said to have imposed extra sanctions on three Russian banks. These are the VTB Bank, the Bank of Moscow and the Russian Agricultural Bank. It's not clear at this stage how that will impact, if at all, on Russia's grain business in the year ahead.

Egypt's GASC were said to have bought 175 TMT of exclusively Russian milling wheat for September shipment in their tender today at a little over $260/tonne C&F.

Ukraine feed wheat is said to be offered in the market at $205/tonne FOB for Aug/Sep shipment, which is around GBP120.50/tonne.

Chicago Markets End In The Red

29/07/14 -- Soycomplex: Beans closed lower as the latest weather forecasts for the Midwest adopted a wetter outlook for the beginning of August, the key month for determining soybean yields. The USDA announced 135,000 MT of US new crop soymeal sold to unknown. China only sold 94,009 MT of the 353,843 MT of state-owned soybeans (26.6%) on offer at today’s auction. Dr Cordonnier estimated US 2014 soybean yields at 45.0 bu/acre, unchanged from his previous estimate. Goldman Sachs forecast US soybean prices to fall to $10.50/bu within the next 3-12 months. Although the USDA cut US soybean crop ratings by 2 percentage points to 71% good/excellent last night, these are still the highest ratings since 1994 heading into August. "The forecast continues very cool in the week ahead. Temperatures are predicted to be 5-7 F below normal in the Midwest and Mid South," said Martell Crop Projections. Aug 14 Soybeans closed at $12.26 1/2, down 10 cents; Nov 14 Soybeans closed at $10.95, down 12 3/4 cents; Aug 14 Soybean Meal closed at $395.40, down $7.40; Aug 14 Soybean Oil closed at 36.25, down 27 points.

Corn: The corn market closed around 5-6 cents lower, essentially reversing all of yesterday's gains. Whilst August is the key month for soybean development, for corn it's July. Benign weather conditions throughout the month mean that confidence is now pretty high that record corn yields will be achieved in the US this year. That said, there's always the nagging doubt that persistent much cooler than normal temperatures throughout the summer could mean that Jack Frost pays an early visit to the Midwest this year. Any sign of the F word in the forecast would have the shorts scrambling for cover. Dr Cordonnier estimated US 2014 corn yields at 169.0 bu/acre versus a previous estimate of 167.0 bu/acre. The USDA announced 147,000 MT of US new crop corn sold to Columbia under the daily reporting system. Egypt are said to be seeking corn for October shipment. Taiwan's MFIG bought 50,000 MT of South Africa corn for Sept/Oct shipment. Safras e Mercado said Brazil’s second corn crop is 38.2% harvested versus 37.1% this time last year. Sep 14 Corn closed at $3.61 1/2, down 6 1/4 cents; Dec 14 Corn closed at $3.71, down 5 3/4 cents.

Wheat: The wheat market closed sharply lower. CBH Group said that Western Australia's state grain harvest this year would total 15.4 MMT, including 9.4 MMT of wheat. The latter number is 1 MMT more than ABARES current estimate. WA is the largest wheat exporting state in Australia. South Korea's MFG passed on a tender for 65,000 MT of optional origin feed wheat for Oct-Dec shipment. Russia's grain harvest is progressing well, with yields said to be sharply higher than a year ago. Quality is also said to be good. Ukraine is also getting higher yields than anticipated earlier in the year, when all the talk was of reduced inputs cutting yield potential. UkrAgroConsult estimated the 2014 average Ukraine wheat yield at 3.42 MT/ha versus a previous estimate of 3.33 MT/ha and nearly 7% up compared to 3.20 MT/ha in 2013. They estimated 2014 Ukraine barley yields at 2.41 MT/ha versus a previous estimate of 2.39 MT/ha and up more than 6% compared to 2.27 MT/ha in 2013. The German statistics office said Germany had exported 14.6 MMT of grain between July 2013-May 2014 versus 12.4 MMT a year previously. Egypt's GASC are back in the market tendering for wheat, although US origin material is unlikely to feature. Sep 14 CBOT Wheat closed at $5.20, down 14 3/4 cents; Sep 14 KCBT Wheat closed at $6.11 1/2, down 14 cents; Sep 14 MGEX Wheat closed at $6.10 1/2, down 10 3/4 cents.

EU Wheat Sets New 4-Year Lows

29/07/14 -- EU wheat futures slumped to fresh 4-year lows on harvest pressure and rising production estimates coming out of Russia and Ukraine.

The day ended with new crop Nov 14 London wheat closing GBP1.55/tonne lower at GBP123.95/tonne, Nov 14 Paris wheat was EUR3.25/tonne weaker at EUR175.00/tonne, Aug 14 Paris corn was up EUR2.25/tonne to EUR162.00/tonne (although new crop months were mostly lower) and Aug 14 Paris rapeseed fell EUR0.50/tonne to EUR319.50/tonne.

UkrAgroConsult raised their forecast for the Ukraine 2014 grain crop to 57.4 MMT, a 4% increase on their previous estimate. The increase was largely due to the better than anticipated yields being achieved this year, they said.

They now see 2014/15 Ukraine grain exports at 31.7 MMT, a 2 MMT hike on their previous estimate. That includes wheat exports of 9.5 MMT versus a previous estimate of 9.0 MMT and up compared to 2013/14 exports of 9.2 MMT.

The Ukraine analyst also raised their outlook on corn production and exports in 2014/15 to identical levels to the records set in 2013/14.

The Ukraine Ministry said that the early grains harvest, which excludes corn, had been completed on 7.1 million ha, producing a crop of 23.6 MMT to date. That total includes 16.3 MMT of wheat and 6.8 MMT of barley. Yields thus far are averaging 3.33 MT/ha, up nearly 10% on a year ago.

IKAR yesterday estimated Russia’s 2014 wheat crop at 57.5 MMT versus a previous estimate of 56.3 MMT.

The Russian Ministry said that this year's grain harvest was 27.2% complete at 43.6 MMT, with yields averaging 3.44 MT/ha, a sharp rise of more than 23% on a year ago. The total includes 35.9 MMT of wheat off 38.9% of the planned area, with yields at 3.64 MT/ha, a 20% increase on this time last year. Barley adds a further 3.8 MMT, with yields at 3.05 MT/ha, up 33% on a year ago.

Morocco are said to be planning to lower their import duty on wheat from Sept 1, in a moved that seems to be linked to quality concerns over French wheat which could allow more grain into the country from the Black Sea.

Egypt announced a late tender for wheat for September shipment with the results expected tomorrow. Russia, Romania and Ukraine wheat all scored successes in the last GASC tender.

China is said to be buying large volumes of cheap foreign barley for import, to supplement it's virtual embargo on US DDGs. They've already taken more French barley this month than they did in the whole of 2013/14.