EU Rapemeal Prices

24/07/14 -- Rapemeal prices on the continent are a bit firmer, in line with higher soymeal levels last night and again this morning.

Latest guide prices for EU rapemeal today, basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:

Aug14
192.00
+4.00
Aug/Oct14
192.00
+5.00
Nov14/Jan15
196.00
+6.00
Feb/Apr15
197.00
+7.00
May/Jul15
197.00
+7.00
Aug/Oct15
191.00
+2.00

Chicago Grains Move Higher

23/07/14 -- Soycomplex: Beans closed with some decent gains on talk of a drier pattern developing in the 6-10 day and 8-15 day weather outlooks. August is the most important pod-setting month for determining US soybean yields. The weather has been kind up until now, and prices have slumped to 2 1/2 year lows, so even the slightest hint of a weather scare will be enough to cause a few ripples. China only sold sold 54,945 MT out of the 354,470 MT of soybeans on offer in yesterday's government auction. With US soybean prices having tumbled lately I suspect that Chinese buyers would prefer to buy "fresh" supplies rather than government stocks that have been around for some considerable time. Doane’s crop tour continues to indicate very high yield potential in the western belt. Dr Cordonnier was said to have estimated US 2014 soybean yields at 45.0 bu/acre, unchanged from his previous estimate. Lanworth were said to have estimated US yields at 45.2 bu/acre with production at 3.671 billion bushels. Ag Canada estimated the canola crop there this year at 14.5 MMT versus a previous estimate of 14.8 MMT and down 19.4% versus 18.0 MMT in 2013. They now see 2014/15 canola ending stocks at 1.1 MMT versus a previous estimate of 1.7 MMT and compared to 3.0 MMT at the end of 2013/14. Trade estimates for tomorrow's weekly export sales report for soybeans are 150-250 TMT of old crop and 1.2-1.4 MMT of new crop, with China buying the latter quite heavily. Aug 14 Soybeans closed at $12.01, up 17 cents; Nov 14 Soybeans closed at $10.76 1/2, up 18 3/4 cents; Aug 14 Soybean Meal closed at $391.50, up $9.70; Aug 14 Soybean Oil closed at 36.20, up 27 points.

Corn: The corn market closed a couple of cents higher in sympathy with beans. The potential for a drier beginning to August isn't seen as much of a threat to corn, as July is a more important month in determining final yields. The ongoing Doane crop tour is reporting back some fantastic yield potential. Lanworth upped their forecast for US 2014 corn yields to a record 172.8 bu/acre versus a previous estimate of 172.1 bu/acre. They see the average Illinois corn yield at 204.9 bu/acre, with Iowa coming in at 193.8 bu/acre. They now forecast the US 2014 corn crop at a record 14.635 billion bushels versus a previous estimate of 14.562 billion, despite lower plantings this year. Dr Cordonnier was said to have gone for a more modest 167.0 bu/acre, unchanged from his previous estimate. IMEA estimated Mato Grosso’s 2013/14 corn crop at 17.1 MMT versus a previous estimate of 15.0 MMT. They said that the state's safrinha corn harvest is about a third done. Ag Canada forecast the 2014 Canadian corn crop at 11.3 MMT versus a previous estimate of 12.4 MMT and compared to 14.2 MMT in 2013/14. They now have 2014/15 ending stocks estimated at 1.9 MMT versus a previous estimate of 2.7 MMT and compared to 3.1 MMT at the end of 2013/14. The US Energy Dept said ethanol production in the States this past week was 959,000 barrels/day, up 16,000 bpd from the previous week and the second largest week of the year. EU corn closed at 4 year lows on ideas that a greater proportion than normal of the EU wheat crop may only be suitable for animal feed this year. Trade estimates for tomorrow's weekly export sales report are around 300-500 TMT of old crop and 400-600 TMT of new crop. Sep 14 Corn closed at $3.62 1/2, up 2 1/4 cents; Dec 14 Corn closed at $3.70 3/4, up 2 1/2 cents.

Wheat: The wheat market closed with modest gains in consolidation trade following recent heavy losses. Egypt's GASC bought 235 TMT of Black Sea wheat. They booked two cargoes of Russian origin, along with one each of Romanian and Ukraine wheat for early September shipment. The average price paid was around $4/tonne cheaper than the price they last bought at two weeks ago. US wheat wasn't offered, and neither was French origin. There's widespread talk of this year's French wheat crop suffering quality downgrades. There's rumblings that German's crop may also see some rain-related damage. Earlier this month the USDA said that this year's poor US winter wheat crop production would be more than compensated for by a rise in spring wheat output. A crop tour in southern parts of North Dakota (which produces around 46% of the US spring wheat crop) found an average yield potential of 48.3 bu/acre versus 43.3 bu/acre in 2013 and the tour’s five-year average of 42.9 bu/acre. "I think we have seen an extraordinary crop," said one tour participant. The USDA currently rates spring wheat crop conditions in the state as 82% good to excellent, whilst neighbouring South Dakota is 80% G/E. Russia's 2014 wheat harvest is said to be 30.7% done at 28 MMT, with average yields up 16% at 3.6 MT/ha. Ag Canada estimated the 2014 Canadian all wheat crop at 27.7 MMT versus a previous estimate of 29.6 MMT and compared to last year's record crop of 37.5 MMT. They have all wheat ending stocks estimated at 9.2 MMT, unchanged from their previous estimate and down from 10.9 MMT at the end of 2013/14. Trade estimates for tomorrow's weekly export sales report are a fairly modest 350-500 TMT. Sep 14 CBOT Wheat closed at $5.30 3/4, up 6 1/4 cents; Sep 14 KCBT Wheat closed at $6.23 1/2, up 2 1/4 cents; Sep 14 MGEX Wheat closed at $6.21, up 2 1/4 cents.

French Crop Concerns Support EU Wheat And Rapeseed Markets

23/07/14 -- EU grains closed mixed with Nov 14 London GBP0.05/tonne lower at GBP127.60/tonne, Nov 14 Paris wheat was up EUR1.50/tonne to EUR179.50/tonne - although just failing to stay above the important EUR180/tonne level. Aug 14 Paris corn was down EUR2.50/tonne at EUR157.75/tonne and Aug 14 Paris rapeseed jumped EUR7.00/tonne to EUR321.75/tonne.

Continued talk of widespread problems with the quality of this year's French wheat harvest supported the Paris market today. The wetness that is causing the problems for wheat is viewed as beneficial for corn however, and it also potentially means that there will be more feed wheat on the market in 2014/15, in direct competition to corn.

Could the London and Paris wheat markets go in opposite directions? In dollar terms tonight's close puts the spread between the two Nov 14 contracts at around $24/tonne. That's the largest differential since May 2013. However "back in the oft-cited year of poor quality of 2007 we saw the spread between the two jump to $60/tonne, so we’re not seeing anything historic just yet," says my Twitter chum Tregg Cronin at Halo Commodities in the US.

"The currency influence and the lighter volume can make these spreads volatile, but the Paris Wheat/UK wheat spread is worth paying attention to," he notes. It may also be worth keeping an eye on the wheat/corn spread too.

Reuters report a French exporter this week buying Polish milling wheat to cover existing sales that they would have expected to fulfil with French material. French traders have also been said to be seeking/buying German wheat this week.

Egypt's GASC bought 235 TMT of Russian, Romanian and Ukraine wheat in their tender for Sep 1-10 shipment. The prices paid were said to be around $256.60 C&F, that's down from around $260-261 C&F paid for Romanian wheat for late August shipment a fortnight ago. Some might see the fact that there were no French offers made as being significant.

Jordan passed on a tender to purchase 100 TMT of optional origin hard milling wheat and immediately re-tendered for the same, in their usual way. Iran is said to be looking for 50 TMT of Black Sea wheat for prompt shipment.

Russia's 2014 grain harvest is now 20.8% complete, producing a crop of 33.6 MMT to date, with average yields of 3.47 MT/ha, an 18.8% increase on this time last year. Wheat accounts for 28 MMT of that total off 30.7% of the planned area. Wheat yields are averaging 3.6 MT/ha versus 3.1 MT/ha a year ago, say the Ag Ministry.

The Ukraine early grains harvest (which excludes corn) meanwhile is already 60% complete producing a crop of 19.1 MMT. Yields are averaging 3.22 MT/ha, up more than 9% on a year ago. Wheat accounts for 13.1 MMT of that total with yields at 3.49 MT/ha. The Ukraine Ministry say that 63% of the wheat harvested so far is of milling standard (versus around 70% a year ago).

The French rapeseed harvest has progressed to the north east of the country, and yields so far are disappointing and seed sizes are small. Wet weather in Germany means that the rapeseed harvest there has stalled, giving rise to yield and quality concerns.

The UK rapeseed harvest meanwhile is said to be around halfway done, with yields "slightly above average" but with the prospect of better yields to come, according to ADAS. Even slightly above average would be a big improvement on a year ago. Earlier in the week MARS increased their forecast for UK yields from 3.76 MT/ha a month ago to 3.81 MT/ha. That's 28.1% up versus 2013 and 11.4% above the 5-year average.

Wheat prospects in the UK also still look promising. After a couple of poor harvests in a row, maybe we were due a change of luck in 2014?

EU Rapemeal Prices

23/07/14 -- Latest guide prices for EU rapemeal today, basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:


Aug 14
188.00
+3.00
Aug/Oct14
187.00
+3.00
Nov14/Jan15
190.00
+3.00
Feb/Apr15
190.00
+2.00
May/Jul15
190.00
+3.00
Aug/Oct15
189.00
+5.00

Thoughts From The Frontline On The Milling Wheat Market

23/07/14 -- I'm going to shock you now. I'm starting to turn a little bit friendly to the wheat market, at least the milling wheat market anyway. I will try and quantify my reasons why, although many of the factors at play still very much fall into the "unpredictable" category, but I'll give it a go.

First and foremost we have the ongoing situation in Ukraine and rising tensions between Russia and the West. Exactly how this situation will be resolved is very far from being clear, but Big Bad Vlad is not a man known for his kowtowing to the West is he?

Further US and EU sanctions against Russia look likely, although we don't know in what form these will take. Only an idiot would expect no retaliation from Mr Putin, and he's not exactly short of some nice cards if it turns into a game of poker. For a start he could freeze Western assets in Russia.

Certainly Germany would want to adopt a softly, softly approach, and avoid an all out trade war. German exports to Russia totalled EUR38 billion in 2013 - the highest of any EU nation.

In addition, there's gas. Europe relies on Russia for 24% of its natural gas supplies, and in many countries closer to them than we are in the UK this percentage is very high - pretty much 100% in the case of Estonia, Latvia, Finland and Lithuania for example. In Belarus, the Czech Republic, Slovakia and Bulgaria it's said to be 80-100% reliance, and in Ukraine, Austria and Greece it's 60-80%.

An escalating trade war with Russia would be bullish for world wheat prices, as global demand switches to the West.

Meanwhile who knows what will ultimately happen in Eastern Ukraine? I'm hearing reports of farmers in the region considering it currently to be "too dangerous" to harvest their wheat.

I went to Ukraine a few years ago and remember then of being told stories of men with guns and lorries simply turning up at a farm one day and essentially saying that they'd come to take "their wheat" away. Unless you know bigger, more well connected men with bigger guns then that's the sort of thing that can happen over there I was told. And that was then, not now.

I don't imagine that it's too easy to get contractors in to harvest your crops if you're in the east of the country either.

All this, and the fact that your wheat/corn is/will only be worth less than the cost of production if and when it's harvested will also have your Ukraine farmer pondering "what the fcuk am I going to plant for 2015, if anything?" I'd have thought. "And where's the money going to come from?" Many that do plant will likely be using inferior home-grown seed too.

Right now you'd have to say that the prospects for Ukraine getting a third bumper grain crop in a row in 2015 look relatively low. Meanwhile, if I was a betting man (and I am), then I'd be tempted to suggest that Russia might be due a weather-related production problem of it's own next year. Let's make this clear, I'm not forecasting a Russian drought in 2015, I'm just saying that in a country that's had two market-moving droughts in the last 5 years, getting 3 bumper crops in a row there is also statistically unlikely.

Now let's throw into the equation that fund money is short in wheat. Let's also consider that reports coming out of France suggest they might have a rather large crock of shit on their hands this year as far as milling quality goes. And there are rumours that there could be problems in Germany too when their harvest finally clicks into gear.

Now if the French wheat crop does turn out to be a pile of pooh, then we need to consider that 38-39 MMT of pooh is an awful lot of pooh. I haven't seen that much pooh since I last watched the Lenny Henry Show. Add in some extra German pooh, comparable with say the Vicar Of Dibley. And we potentially to have a large European excrement surplus in 2014/15, which isn't exactly over friendly to feed wheat prices though note.

The jury remains out on Romania's 2014 wheat crop as far quality is concerned, even if they have been picking up sales to Egypt's GASC of late (they are back in the market today incidentally, tendering for Sep 1-10 shipment). Incidentally, even if you feel comfortable buying Ukraine wheat for 2014/15, a greater proportion of their crop is only thought likely to be up to feed grade than normal this year.

French corn prices meanwhile are on their arse, currently down EUR2.50-3.50/tonne again this morning to the lowest levels in over 4 years. It seems like the conditions that have led to the French wheat crop downgrades are seen as positively beneficial for corn, at least for the time being. Another negative for those with feed wheat to sell, I'm afraid. I'd certainly fancy putting some milling wheat cover on at these levels though.

Chicago Markets Mostly Lower, But Downtrend Almost Done Says Analyst

22/07/14 -- Soycomplex: Beans closed mostly lower save for front end Aug 14. Oil World estimated the global 2014/15 oilseed crop at 505 MMT versus 488.4 MMT in 2013/14. That increase is down to soybean production, which they see rising from 284.6 MMT to 305.6 MMT. World rapeseed and sunflower output is seen slightly lower in the season ahead. Global oilseed ending stocks will rise from 85.9 MMT to 102 MMT, again this is essentially all down to soybeans, where world carryout is forecast at a record 88.4 MMT, up sharply from 70.9 MMT in 2013/14. The USDA announced 180,000 MT of new crop US meal sold to Vietnam, along with 225,000 MT of new crop US meal sold to unknown. They also announced 20,000 MT of new crop US bean oil sold to unknown. Argentina’s Rosario port workers ended their strike and went back to work yesterday. It's an uneasy truce though. Another port workers union in Argentina has threatened to go on strike today and customs workers are talking about strike action later in the week. Aug 14 Soybeans closed at $11.84, up 8 1/4 cents; Nov 14 Soybeans closed at $10.57 3/4, down 13 3/4 cents; Aug 14 Soybean Meal closed at $381.80, up $1.10; Aug 14 Soybean Oil closed at 35.93, down 21 points.

Corn: The corn market closed with losses of around 3-4 cents. The first day of a Doane’s crop tour reported largely excellent production potential in NW Illinois where a conservative yield estimate was said to be in the 190 bu/acre plus region, with higher probable. "Scouts in a couple of key corn producing regions report very little stress, high plant population with a chance to fill kernels to end of the cob and strong possibility of high ear weights," said Benson Quinn Commodities. Today is the second day, which will cover Western Illinois, Iowa, Southern Minnesota, Eastern Nebraska and Eastern Missouri. A Commerzbank analyst was quoted on Reuters as saying “We think the favourable US crop outlook should be priced in by now. Corn prices should not go down further, at least not on a lasting basis." He added "We think even the soybeans downtrend is more or less done." EU corn prices fell sharply on the day to set 4-year lows. The ongoing rain and warmth might not be helping the EU wheat crop much, but it will be doing no harm at all to corn, providing "hothouse" conditions. It may also mean that there's more feed wheat about, directly competing with corn. New crop Ukraine corn is said to be offered in the market at $188/tonne FOB the Black Sea for Oct/Nov shipment with bids around $182/tonne. Sep 14 Corn closed at $3.60 1/4, down 3 3/4 cents; Dec 14 Corn closed at $3.68 1/4, down 3 3/4 cents.

Wheat: The wheat market ended around 4-6 cents lower across the three exchanges. Japan is looking for 94,586 MT of milling wheat for September shipment in a routine tender, with 37,689 MT of if to be US dark northern spring wheat. SovEcon said that Russia had harvested around 22 MMT of wheat so far (to Jul 18) with yields averaging 3.6 MT/ha versus 3.1 MT/ha this time a year ago. Improved weather conditions mean that Russia will harvest 56.5 MMT of wheat this year, said IKAR. The USDA currently only have the Russian wheat crop down at 53 MMT versus production of 52 MMT last year. Kazakhstan said that they'd finished 2013/14 exporting 8.7 MMT of grains out of their 18.9 MMT harvest. Production this year is expected to be around 1 MMT lower. They said that they had exported 219,400 MT of grain between July 1-20 versus 374,100 MT in the same period a year ago. Ukraine said that they'd exported 1.2 MMT of grains so far this month, including 232 TMT of wheat. The Ukraine early grain harvest is now at 19.1 MMT, according to the Ag Ministry there. Persistent and heavy rain in France is said to have caused "widespread crop damage" according to a report on Reuters. French hagbergs could only average 150-160 this year whereas last year 99% of the crop made 220 or higher, they said. There are now also said to be similar concerns emerging in parts of Germany. Sep 14 CBOT Wheat closed at $5.24 1/2, down 5 1/2 cents; Sep 14 KCBT Wheat closed at $6.21 1/4, down 6 3/4 cents; Sep 14 MGEX Wheat closed at $6.18 3/4, down 4 1/2 cents.

Is The Rout Almost Over, Especially For Milling Wheat?

22/07/14 -- EU grains markets posted a mini "Turnaround Tuesday" event, closing mostly higher, consolidating from recent heavy losses that have driven prices to multi-year lows.

The day finished with Nov 14 London wheat up GBP060/tonne at GBP127.65/tonne, Nov 14 Paris wheat ended EUR1.75/tonne higher at EUR178.00/tonne, Aug 14 Paris corn was down EUR5.25/tonne at EUR160.25/tonne, whilst Aug 14 Paris rapeseed was up EUR5.75/tonne to EUR314.75/tonne.

Fresh news was relatively thin on the ground. Russia’s Ag Ministry said that as of Jul 21 the country had harvested 31.7 MMT of grain on 9.1 million hectares. Average yields are said to be 3.48 MT/ha, up 19% on a year ago.

Is all the good news coming out of Russia simply too good to be true and at least partly a reaction to the bad press that they have been getting from the West lately?

We still don’t know how this developing situation will pan out. A best case scenario would seem to be an edgy stalemate developing, with Russia pulling back on its apparent support for the rebels in the east of Ukraine.

A deepening of the conflict would cause further destabilisation in eastern Ukraine, with the possibility of greater/extended Russian intervention. That could even lead to Russia attempting to annex Eastern Ukraine- where the majority of Russian speakers and sympathisers reside.

They did after all take Crimea with barely a whimper from the West.

Such a move would undoubtedly lead to tough “level 3” sanctions from Europe. This would make it more difficult for Russian banks and major businesses to access global capital markets. Don't forget that Russia is already teetering on the brink of recession.

Putin would not want that, but climbing down is not his forte. If the country was to be pushed into recession then who better to blame than the West?

Back to the fundamentals. Ukraine said that they'd exported 1.19 MMT of grain so far this month, including 232 TMT of wheat, 660 TMT of barley and 284 TMT of corn. Their harvest is also said to be going well by the Ag Ministry with yields up 7.5%, but who's to say that they aren't also playing the same game as Russia?

Currently international buyers still seem relatively relaxed about buying from Russia, but that’s a situation that could change quickly. Ukraine could also soon be viewed as an “unreliable” supplier if there were question marks raised over its ability to honour its contractual obligations.

Meanwhile, there's growing chatter that all is far from well with France's wheat harvest. The volume might be there, but the quality may not be. Reuters report that premiums for higher quality milling wheat jumped yesterday after more heavy weekend rains. Quality premiums are now "close to levels seen during the poor quality harvest of 2007," they said. Some French buyers are now looking to Germany for their requirements, Reuters suggested.

That could still spell bad news for feed wheat of course, especially with a large EU and FSU corn crop potentially waiting in the wings.

That may also explain the poor performance by Paris corn today, relative to the other grains. The wet weather may be damaging to milling wheat quality, but beneficial to spring planted corn.