30/10/14 -- EU grains trade higher again, with the wheat market looking to extend its winning run to four out of four for the week so far.
Just after noon, May 15 London wheat is up GBP1.20/tonne to GBP130.75/tonne, Nov 14 Paris wheat is EUR1.25/tonne firmer at EUR174.75/tonne, Nov 14 Paris corn is up EUR1.00/tonne to EUR146.00/tonne, whilst Nov 14 Paris rapeseed trades EUR0.50/tonne higher at EUR335.00/tonne.
The HGCA's contention that much of the current world record production forecasts are already "priced in" appears to hold some water. The trade is already starting to look at crop production prospects for next year, and the don't have to look any further than Russia to find a potential problem.
IKAR yesterday usurped SovEcon's suggestion that Russia's 2015 wheat crop could fall below 50 MMT with comments that production could fall as low as 46.5 MMT, even if they did throw in the "rider" that this number was preliminary and pessimistic.
"Serious drought developed last summer continuing in September. The Southern District is Russia’s most important winter wheat area, accounting for 40-42% of the national harvest. It is made up of 4 districts Krasnodar, Stavropol, Rostov and Volgograd.
"The 6-month rainfall time series confirms very severe drought in the Southern District, where a 120 mm soil moisture deficit has accrued. Rainfall has increased recently, denting drought, though record heavy rain would be needed to fully restore ground moisture," said Martell Crop Projections.
"Very poor conditions in winter wheat are confirmed by remote sensing. An updated satellite image, valid September 20-October 15, reveals widespread vegetative stress," they add.
Spec money appears to think that it's spotted and opportunity to get involved in the grains sector again, being acutely aware that weather-related problems in Russia have sent global wheat prices soaring twice in the last 5 years. Is history set to repeat itself in 2015? It's too early to say with any degree of confidence, but it certainly can't be ruled out.
It also needs to be considered that the acute weakness of the Russian rouble - down 21.7% against the US dollar since the beginning of July - will be a factor in grower's decisions whether or not to replant in the spring. It will also affect their ability to purchase spring seed and fund other agricultural inputs. And this is a scenario that could also be replicated in Ukraine.
MDA CropCast don't seem to believe the hype though, they released a world wheat production estimate for 2015/16 today of a record 720.4 MMT, a 7.8 MMT increase on their figure for the current season.
They are also not as bearish on wheat production prospects in Australia as some other analysts, standing by their forecast from last week of 24.04 MMT.
The pound slid below 1.60 against the dollar today, following last night's announcement from the US Federal Reserve that quantitative easing is to end this month. As we head into what some analysts call "Naughty November" it is worth noting that sterling has fallen against the US currency during the penultimate month of the year in 10 of the last 14 years, and in 14 of the last 20.
Talking of seasonal trends, there are also ones for London wheat, and Chicago corn and soybeans all to move higher in the last quarter of the year, a pattern that all three seem to currently be conforming to.
In other news, Euronext announced the launch of a Paris rapeseed meal and oil contract starting Nov 14th. The first delivery positions will be for next season's harvest.
30/10/14 -- Today's question comes from Brian Sausage of Steeple Bumstead:
Q: Dear Nogger, I'm at my wits end and don't know who to turn to, so please help. I've sold all my wheat at the bottom of the market, my herd of prime pedigree beef cattle have all got TB, the wife has run off with the captain of the local rugby club and my son came home from agricultural college at the weekend and announced that he's gay and now wishes to be called Doris. My question is this, the binmen are refusing to take my recycling bin after the lid blew off it in a storm, what can I do?
A: That's a tricky one Brian, as legally binmen can do whatever the hell they like. Try painting your other bin the same colour as the recycling one on a bi-weekly basis, that's worked for me in the past.
29/10/14 -- Soycomplex: Beans and meal closed sharply higher once more. "Logistic woes getting meal via railcar into eastern processor market has the feeder double booking needs with trucks while the exporter needs to keep pipeline moving to meet record pace of meal export sales," said Benson Quinn Commodities. Heavy fund buying, estimated at around 15,000 contracts on beans and a further 5-8,000 on meal was also a bullish factor. Dec 14 meal is now up almost $100/tonne since the beginning of October. Reuters report that US sellers have sold a record 6.245 MMT of soymeal for export this season, of which only 230 TMT has been shipped so far. Argentine farmers have only sold 65% of their 2013/14 soybean crop versus 75% a year ago, said the Ag Ministry there. Planting of the Argentine 2014/15 soybean crop is now underway. Brazilian weather is improving, with good rains in the forecast to aid delayed planting there. Trade estimates for tomorrow's weekly export sales report for beans are in the region of 1.0 to 1.5 MMT. Oil World said that they expect soyoil prices to rise in the Oct-Mar time frame, further increasing demand for beans. Nov 14 Soybeans closed at $10.43, up 35 cents; Jan 15 Soybeans closed at $10.49, up 34 cents; Dec 14 Soybean Meal closed at $397.20, up $22.10; Dec 14 Soybean Oil closed at 34.18, up 139 points.
Corn: The corn market closed with strong gains, aided by spillover sentiment from the soya pit. The US Energy Dept reported weekly ethanol production up to 937,000 barrels/day versus 896,000 barrels/day a week ago, that's the largest weekly grind since mid-August. Ethanol stocks fell to 17 million barrels, down from 17.9 million barrels a week earlier. Increased production, but lower stocks leans bullish for corn. Ukraine said that it's 2014 grain harvest was now 90% complete at almost 55 MMT, including 18.4 MMT of corn to date. Russia said that it's 2014 grain harvest was 95.5% done at 107.7 MMT. The Russian corn harvest is now almost 80% done, producing a crop of 9.6 MMT to date. The Argentine Ag Ministry reported that growers there have sold almost 82% of their 2013/14 corn crop versus 80% a year ago. Delayed soybean planting in Brazil still fosters the belief that plantings/yields of second crop corn could also now be affected. Fund buying in corn was estimated at a net 7,000 contracts on the day. Trade estimates for tomorrow's weekly export sales report are in the region of 700-900 TMT. Dec 14 Corn closed at $3.75 1/4, up 10 3/4 cents; Mar 15 Corn closed at $3.88 1/2, up 10 1/2 cents.
Wheat: The wheat market closed higher, with fund money buying an estimated net 3,000 lots in Chicago. The jungle drums continue to suggest that all is not well with wheat prospects in Russia for next year. Their 2015 wheat crop could fall to 46.5 MMT from 58.5 MMT this year, said IKAR - echoing recent comments made by SovEcon that next year's crop could be below 50 MMT due to poor establishment leading to increased winterkill possibilities and reducing yield potential. The Russian Ag Ministry said that the 2014 wheat harvest was now 95.5% done on 23.5 million hectares, producing a crop of 61.4 MMT in bunker weight to date. Jordan bought 100 TMT of optional origin feed barley for April/May shipment in a tender. They are also tendering for a similar quantity of wheat. India announced that it was increasing the price it pays local farmers for wheat by 3.6% for the 2015 harvest to encourage plantings and increase it's food security. They already pay growers well in excess of world prices for wheat. Trade expectations for tomorrow's weekly export sales report are a modest 300-400 TMT. Dec 14 CBOT Wheat closed at $5.38 1/4, up 7 1/2 cents; Dec 14 KCBT Wheat closed at $6.06 1/2, up 4 1/2 cents; Dec 14 MGEX Wheat closed at $5.82 1/2, up 5 3/4 cents.
29/10/14 -- Today's question comes from Joe Farmer of Ponteland:
Q: Dear Nogger, why eye like, I know the wheat markets gone up a bit like in the last few days an' all that, but I still cannae make ends meet like. And to make matters worse like me missus is like reet ugly like. And the council only come round to empty the bins once a fortnight now, and I've got eight bairns and me missus is as fat as a hoose like. And they only give us one bin, and that's usually full by Monday like. Can you explain to me what a stochastics oscillator is?
A: I get asked this one all the time Joe. Simply write to the council and tell them that you have a clinically obese partner, take a photograph of her if necessary, and tell them it is a basic human right under section 74 of the Geneva Convention to have a bin for every day of the week if you want one. Explain politely, but forcefully, that you want 13 extra bins delivered to your house first thing in the morning or some gypsy gentlemen of your acquaintance will be calling round to the council offices to "rearrange" a few things. No. Next.
29/10/14 -- EU grains staged another day of decent gains. "Some of the (recent) support has come from a later than usual US maize harvest and drier than normal conditions in key wheat growing areas of Australia," said the HGCA.
At the close Nov 14 London wheat was up GBP0.70/tonne at GBP122.10/tonne, Nov 14 Paris wheat finished EUR4.00/tonne higher at EUR173.50/tonne, Nov 14 corn was EUR1.25/tonne firmer at EUR145.00/tonne and Nov 14 rapeseed ended up EUR6.50/tonne to EUR334.50/tonne.
Open interest in front month Nov 14 London wheat was down to 172 lots as of last night's close, following heavy deliveries against the contract in the past couple of days.
The HGCA also noted dryness in South America delaying summer plantings there, and suggested that "these are the first bullish sentiments in some time after an almost continuous flow of bearish news over the past six months or so."
They didn't (in that article) mention worries about poor emergence of Russian winter grain plantings. Agrimoney quoted one Black Sea farm operator as saying that "20% of (it's Russian) winter seeded area has emerged in a poor state and is not well prepared to face the winter."
Meanwhile the 2014 Russian harvest soldiers on, hampered by heavy snowfall in some areas of the Urals and Siberia. The former is only 77% harvested on 2.6 million hectares, versus 3.1 million this time last year.
Kazakhstan is also struggling to get the last of it's 2014 harvest in, with 12.5% of the crop still out in the fields as of Oct 27, as winter closes in. In the north of the country, the first snow fell in mid-October and prior to that it rained almost continuously, reducing the quality of this year's wheat crop. They are now said to be buying in better quality Russian wheat to blend in with their own domestic harvest.
Ukraine said that they'd exported 11.24 MMT of grains so far this year, up 25% from a year ago. Wheat accounts for 56% (6.27 MMT) of that total, with barley responsible for 29% (3.21 MMT) and corn an additional 14% (1.62 MMT). They are expected to soon start to major on corn exports, with harvesting of that crop around 75% complete. UkrAgroConsult said that Ukraine exported a record 19.87 MMT of corn in 2013/14, a 58% increase versus the previous marketing year.
Jordan cancelled a tender for 100 TMT of optional origin hard milling wheat due to lack of offers, and immediately re-issued another one.
Given recent price action I wouldn't be surprised to see Egypt's GASC back in the market again in the next few days.
Meanwhile it looks like speculative money is coming back in, and fund activity in the grains sector is increasing. Yesterday saw a record volume trade in Chicago soybeans and meal. Dec 14 soymeal in Chicago is up 28% since the first of the month, it is still however 25% below the highs of 2014, it is also 29% under the 2013 high and 30% beneath the highs of 2012. Incidentally all three of those annual highs were set in the summer months, this year it was June, last year it was July and in 2012 it was set in August.
Buying your summer soymeal requirements on the spot market has proved to be a very expensive mistake therefore in each of the last three years. Currently soymeal in the UK for next summer is around GBP60/tonne cheaper than spot material. I'll leave that thought with you....
28/10/14 -- Soycomplex: Beans closed with small gains, but well off the highs of the day. This could be attributed to month end profit-taking. Safras e Mercado said Brazil has planted 12.5% of their 2014/15 soybean crop versus 26% a year ago and 31% on average at this time. Leading producing state, Mato Grosso, is only 16% done versus 48% a year ago and on average, they said. Abiove estimated Brazil’s 2014/15 soybean crop at 91.0 MMT. Dr Cordonnier cut his Brazilian crop estimate for next year to 93.0 MMT versus a previous forecast of 94.0 MMT, although that would still be a record. He pegged Argentina's crop at a record 56.0 MMT, unchanged from his previous estimate. He said that Argentina’s bean crop is 2-3% planted. He forecast US soybean yields this year at a record 47.5 bu/acre, with production at an all time high 3.96 billion bushels, both unchanged from previously. Argentina's September soybean crush was said to be 3.344 MMT, down 6.6% from a year ago. "Brazil rainfall is expected to sharply increase in the coming days the 5-day forecast calling for above normal rainfall in all key soybean states. A few strong showers occurred yesterday and very heavy rain along the Atlantic coast in Minas Gerais," said Martell Crop Projections. Nov 14 Soybeans closed at $10.08, up 2 cents; Jan 15 Soybeans closed at $10.15, up 2 1/4 cents; Dec 14 Soybean Meal closed at $375.10, down $1.70; Dec 14 Soybean Oil closed at 32.79, up 56 points.
Corn: The corn market closed with modest gains, but ended closer to the lows of the day than the highs. The soybean and meal markets continue to lead the complex. "It still looks like the trade needs confirmation the soybean market is done going up and the process of putting new capital to work in corn is over," said Benson Quinn Commodities. Dr Cordonnier estimated US 2014 corn yields at a record 175 bu/acre, with production at an all time high 14.49 billion bushels, both unchanged from previously. He now has the Brazilian corn crop estimated at 73.0 MMT versus his previous estimate of 74.0 MMT. He also trimmed his estimate for the Argentine corn crop by 1 MMT to 21 MMT. He said that Argentina’s corn crop is 33% planted. Brazil's full season corn crop is said to be around 45% planted versus 65% normally at this time. The Russian Ag Ministry said that the country had harvested 2.1 million hectares of corn so far, or 78.4% of plan. That's produced a crop of 9.4 MMT to date (in bunker weight), with yields down from 5.29 MT/ha a year ago to 4.54 MT/ha. Russia said that it had exported 234 TMT of corn in Oct 1-22, and 544 TMT in the 2014/15 marketing year so far. Ukraine said that it had harvested 53.8 MMT of grains so far this year, including 17.9 MMT of corn. Dec 14 Corn closed at $3.64 1/2, up 1 1/2 cents; Mar 15 Corn closed at $3.78, up 1 1/4 cents.
Wheat: The wheat market closed with decent gains of around 5-8 cents on continued short-covering. Rabobank cut their forecast for the Australian wheat crop from 23.5 MMT to 23 MMT. Other trade estimates are in the 22-23 MMT region versus the official ABARES estimate of 24.23 MMT in September. Taiwan bought 41,250 MT of US wheat for Dec/Jan shipment. Iran bought 60,000 MT of Black Sea origin barley for November shipment. Canada said that it had exported 4.1 MMT of common wheat and 1.1 MMT of durum so far this marketing year, a rise of 10% and 20% respectively compared to a year ago. Despite sharply lower production in 2014, the large carryin left over from last year means that Canadian exports will remain high in 2014/15. These are forecast at 18.5 MMT for common wheat (versus 18.4 MMT a year ago) and 4.7 MMT for durum (versus 5.1 MMT). Russia said that it had exported over 14 MMT of grains so far this season, including 11.62 MMT of wheat and 1.76 MMT of barley. The Ministry there said that the 2014 grain harvest is now 95.3% done on 43 million hectares producing a crop of 107.4 MMT to date. Wheat accounts for 61.3 MMT of that total and barley a further 21 MMT. Russian winter grain plantings are 99% complete. Ukraine said that winter wheat planting there was 98% complete on 6.1 million hectares. Spain forecast their winter soft wheat area at 1.87 million hectares, an increase of 100k ha from a year ago. Algeria bought 300 TMT of durum wheat in a tender. Dec 14 CBOT Wheat closed at $5.30 3/4, up 8 cents; Dec 14 KCBT Wheat closed at $6.02, up 7 1/4 cents; Dec 14 MGEX Wheat closed at $5.76 3/4, up 5 cents.
28/10/14 -- EU grains traded higher again Tuesday, extending the recent rally. There does seem to be an element of fund/spec money coming back into the grains sector, which could be a supportive factor going forward.
Currently Nov 14 London wheat ended up GBP0.95/tonne to GBP121.40/tonne, Nov 14 Paris wheat finished EUR4.50/tonne firmer at EUR169.50/tonne, Nov 14 Paris corn was unchanged at EUR143.75/tonne, whilst Nov 14 Paris rapeseed has zoomed EUR5.50/tonne higher to EUR328.00/tonne.
What might be tempting the funds back? Falling energy and equity markets are a couple of reasons being cited. The FTSE 100 is currently down 7% since early September, and NYMEX crude is down more than 16% in the same period. Meanwhile Chicago wheat, corn and soybeans have all risen by 10-13% during this time.
There's a whiff in the air that the grain markets are ripe for a quick buck still to be made. Even if we have seen the harvest lows, prices still aren't that much up from the lowest levels seen in more than 4 years in wheat, corn and soybeans. Some are clearly seeing that as opportunity.
Rumblings that all is not well with the crops in the FSU, suggest that there could be some decent upside potential ahead, particularly if they get a hard winter.
There's still 12.5% of Kazakhstan's 2014 grain harvest to bring in yet, which will be no easy feat with temperatures there now down to -10C.
Russia's winter grain plantings are all in, and in a timely manner too, but various reports suggest that lack of rainfall prior to the recent freeze leaves crops there poorly established and not in a good condition to make it comfortably through the winter.
The Russian rouble meanwhile has fallen to all time lows against the US dollar and euro today. Not only does that mean that spring seeds and fertiliser/agrochemical costs will be sharply higher in 2015, it is also encouraging growers to hang onto what grain they haven't sold from the 2014 harvest.
Ukraine also has currency troubles of it's own. As of Oct 24 winter barley plantings had only been completed on 838.4k hectares, 18% down on a year ago and a 5-year low. Weather conditions there are similar to those in Russia, with moisture deficits and cold temperatures reducing crop conditions heading into winter dormancy.
The Ukraine Ministry said today that the country's 2014 grain harvest is 89% complete.
The Russian Ministry said that the country had exported over 14 MMT of grains so far this season, a rise of a third on a year ago. Wheat accounts for the vast majority of that activity at 11.62 MMT, or 83%.
Elsewhere, the USDA's FAS in Morocco pegged the 2014/15 cereal crop there at 6.8 MMT, a 30% fall on a year ago. They also said that the prospects for 2015/16 had started under "unfavourable conditions" with a significant rainfall shortage and low water levels in the reservoirs.
At home, there were 27 re-tenders against the in delivery Nov 14 London wheat contract, taking the total number of tenders to 1070 out of a total open interest of 1217 lots.