July soybeans closed at $11.79, down 34 ¾ cents, finishing the week 67 cents lower than last week. November beans finished at $10.06, down 37 ½ cents. This could be the beginning of the end for beans, certainly for new-crop beans. Informa Economics today project that the coming season's US soybean acreage will be 78.869 million acres, that's up sharply from the USDA's March estimate of 76.0 million and last year's acreage of 75.7 million. Allendale concur, coming up with a figure of 78.484 million, either figure would be a new record. Allendale say that their figure is due to some switching from corn and spring wheat, but principally double-cropping with winter wheat. The USDA are out with their official estimate on June 30th.
July corn closed at $3.99 ¼, down 4 cents, finishing the week 26 cents lower than last week. Allendale say that corn will decline just 211,000 acres from USDA’s March estimate of 84.986 million, Informa say corn acreage will come in at 83.111 million, a much steeper drop of 1.875 million acres. That's a pretty wide disparity. Last month, Informa projected corn acreage at 83.9 million. Certainly a USDA number on 30th June close to Informa's would be bullish for corn. A weak dollar was supportive for corn today, although crude oil crashed below $70/barrel which gave a bit of bearish pressure.
July CBOT wheat finished at $5.55 ¼, down 5 cents and 30 cents lower on the week. Harvest pressure and spillover weakness from beans had an influence today. Allendale see US spring wheat acres declining by 331,000 mostly due to flooding in North Dakota. Some foreign interest was seen for US wheat this week, with Iraq picking up 100,000 MT of US wheat and South Korea buying 22,400 MT, but more of these orders need to be picked up consistently now that the US harvest is underway in the top-producing winter wheat state of Kansas.
EU wheat ended a quiet day Friday modestly lower with November Paris milling wheat down EUR0.25 at EUR145.25/tonne, and London November feed wheat 25 pence lower at GBP117.25/tonne.
Volume was low, with some market participants celebrating Midsummer's day.
Wheat prices have fallen sharply since the beginning of the month, but at least the pace of those declines seems to have been arrested in the last few sessions, with downwards moves becoming increasingly smaller.
Barley harvesting has begun in some eastern European countries, and will quickly spread west and into wheat.
The wheat harvest is also underway in North America, having spread from Texas and Oklahoma as far north as Kansas.
Export demand is slack, with Egypt this week cancelling an import tender without explanation.
Farmers are reluctant sellers though at current levels, preferring to busy themselves with harvesting, hoping for better prices to come.
Around 1,100 workers at the not quite completed Ensus bio-ethanol refinery on Teesside have walked off the job in sympathy with workers at the Total Lindsey oil refinery dispute, according to media reports.
The wildcat strike comes as 200 contractors at the Drax power station in Selby also went AWOL. Unofficial action has now escalated to an estimated 17 energy sites across the UK. Others include Aberthaw power station in south Wales; Stanlow oil refinery, Ellesmere Port, Cheshire; Ferrybridge power station, West Yorkshire; and Staythorpe power station, Nottinghamshire.
The Ensus plant was also hit by walkouts in May, after Middlesbrough got relegated and contractors downed tools in a fit of pique in support of disputes over the (non) hiring of local labour at a liquefied natural gas terminal in Milford Haven, west Wales.
I'm tempted to say sack the work-shy, shell-suit wearing, relegation-plagued, Greggs-pastie-eating lot of them. But that would be unkind.
It's quite amazing who emails me from around the world that frequent this place.
Today, I've heard from a new farming chum, Almantas Liorentas, in Lithuania who has filled me in on the state of play over there where they produced a not insignificant 4.7 MMT of wheat last year.
Like just about everywhere else they had a bumper crop then, but things don't look quite so rosy this time round.
The main reason for running this story is that I'm sure it is being replicated all over eastern Europe (and significant parts of western Europe too) right now.
In Lithuania, the winter wheat acreage planted was similar to last season, says Almantas, but NPK fertiliser applications were cut back 'dramatically' in the autumn, and AN in the spring was also decreased due to the high prices being asked.
A more acceptable lower pricing structure didn't appear until after the main input period, he tells me.
Overall, winter wheat is looking quite reasonable, but will not match last season's record because of the late spring and drought in May. Rains have subsequently arrived, and most winter wheat has recovered reasonably well, according to Almantas.
More problems are visible with spring wheat however, he warns, where planting was delayed due to the late spring and the May drought limited germination.
With regards to inputs, many farmers in Lithuania are afraid to spend much money on fertilisers or pesticides because of uncertainty over wheat prices. This will ultimately lead to lower yields for sure, he concludes.
I suspect that you could probably replace the word Lithuania in this text with Bulgaria, Hungary, Czech Republic, Slovakia, Romania, Ukraine etc, etc.
Bulgarian farmers have begun harvesting winter barley according to UkrAgroConsult. The earliest fields were cut in the middle of last week, and this week they will make serious advance if there is no serious precipitation, they added.
At the same time, the market has slipped a bit, mainly driven by the drop of the commodities on the international markets. Nominal buying interest is already 10 euros less than 10 days ago. But at these depressed levels we do not expect to see many excited sellers, they say.
Export prices at the moment are not motivating the farmers to sell – the production costs this year are quite high due to the high crop input prices and lower yields. It will be very difficult for them to start selling below production costs, they conclude.
Accusations that the Egyptian wheat trade is as bent as a fiddlers elbow have already been angrily refuted by Richard Nixon, Bill Clinton and Jeffrey Archer.
Now, in a move that's shaken the whole of Toytown to it's very foundations, Pinocchio has thrown hit hat into the ring to defend the honour and integrity of the Egyptian wheat trade.
"I'm throwing my hat into the ring to defend the honour and integrity of the Egyptian wheat trade," he said at a packed Cairo press conference.
"The Egyptian wheat trade is not as bent as a nine bob note. You have my word on that. And you can bank my word. When do I get the money?" he was heard to say before being whisked away by officials.
The overnight grains were mostly a little steadier, supported by a weaker dollar and firmer crude oil.
Beans closed narrowly mixed, but mostly 1-2 cents higher, corn was also 1-2 cents firmer with wheat 3-4 cents higher.
Crude oil is steady at $72.15/barrel on unrest in Nigeria and Iran threatens supplies.
European and Asian stocks are higher, with Wall Street expected to follow suit later today.
The US dollar continues to lose ground following the rebound in risk appetite.
Iraq purchased 100,000 MT of US and 150,000 MT of Australian wheat overnight, whilst South Korea bought 22,400 MT of US wheat. Malaysia bought 50,000 MT of US corn.
Brazil says it is keeping it's 10% wheat import tariff for purchases from outside the Mercosur bloc.
Harvesting of winter wheat has spread from Texas and Oklahoma into southern Kansas, where early reports are that yields are generally not as bad as had been feared.
Early calls for this afternoon's CBOT session: Corn 1 to 3 higher, Soybeans steady, Wheat 2 to 4 higher.
The EU will have to use more than half of its vegetable oil supplies to manufacture biodiesel by 2018, according to the OECD's latest agricultural projections.
Average vegetable oil prices are expected to be more than 30pc higher in real terms over the next decade compared with the average for 1997-2006 as a result, the OECD said.
Global ethanol demand will contribute to rising demand for coarse grains as feedstock, necessitating a 10-20pc hike in average crop prices in real terms over the next 10 years compared with 1997-2006, they added.
The report warns that episodes of extreme price volatility similar to the hike in 2008 cannot be ruled out in coming years, particularly as commodity prices have become increasingly linked to oil and energy costs and environmental experts warn of more erratic weather conditions, they concluded.
Franns Rilles, a 33-year old illegal Bolivian worker in a Spanish bakery, who lost lost an arm in a freak kneading machine accident, was dumped 50 metres from a hospital whilst his severed arm was casually tossed into a nearby skip by his boss!
Rilles, who allegedly worked 12-hour days at the bakery in the eastern Valencia region under no contract and was earning just €23 a day, was subsequently sacked for failing to clock out on his way to hospital.
Reports say that the bakery has since been shut down and its bosses have been detained.
They had a finger in every pie those lads.
Think I'm joking? Try Googling Franns Rilles.
Prices of agri-commodities are more likely to rise than fall in the months ahead, according to a new report from Credit Suisse.
"Compared with consensus, we think the short-term outlook looks more problematic for agricultural supply than it does for demand," says the report.
They see lower plantings and reduced fertiliser applications, both at least partly influenced by the credit crisis, as two of the key factors affecting supply, coupled with adverse weather in some areas – notably Argentina, eastern Europe and parts of the US.
So it's not just me then?
The Australian Bureau of Agricultural and Resource Economics, or ABARE, are forecasting this season's Australian wheat crop around half a million tonnes higher than 2008's at 22 MMT.
Top-producing state of Western Australia will see output fall from by 1.4 MMT from 8.9 MMT to 7.5 MMT, with NSW weighing in with 6.8 MMT (unch), South Australia 3.2 MMT (up 0.9 MMT), Victoria 2.6 MMT (up 1.1 MMT) and Queensland 1.8 MMT (down 0.1 MMT).
Barley output this coming season will reach 7.7 MMT they say, up 0.9 MMT from a year ago, whilst canola production will be 200,000 MT lower at 1.7 MMT.
National Australia Bank Ltd say that this season's wheat crop will total 22.6 MMT after reasonable rains in early June improved crop prospects.
A strong cold front has brought heavy precipitation to the west with Gingin, north of Perth taking a huge 70mm of rain in 24 hours, their heaviest rain for eight years. South Australia has had two significant rain events this month with a third forecast this weekend, whilst NSW has also seen heavy rains in some areas.
The UK had exported 3.04 MMT of wheat, and 737,000 MT of barley in the current marketing year up to the end of April, according to latest customs figures.
That leaves 660,000 MT of wheat still to be exported in May & June to reach Defra's projected target for the year of 3.7 MMT. That might be a tall order given that the volume shipped out in April was only a little over 200,000 MT.
We are in line however to hit the projected annual barley export estimate of 860,000 MT.
The majority of the wheat exported in April went to Spain, Portugal and Holland.
I am indebted to my Slovakian corespondent, Marta, who has emailed me to point out a mistake from earlier in the week.
I inadvertently mixed up Russia's wheat production for 2008/09 and 2009/10, putting them in the wrong columns. As Marta points out, that makes the difference in wheat supply from the world's top exporting nations in the coming season even tighter.
I've also subsequently tweaked a couple of other production numbers in light of revised forecasts from Strategie Grains etc.
Here's what the table should look like now for the top six for 2009/10:
2008/09 (MMT) 2009/10 (MMT)
US 68.0 57.0
EU-27 151.7 132.5
Russia 63.7 58.0
Canada 28.6 23.4
Australia 21.5 22.0
Ukraine 25.9 18.0
Argentina 8.3 7.7
Total 367.7 318.6
So the world's top six exporting nations are set to produce almost 50 MMT less wheat in the year ahead. Remember that these six countries account for over half of world production and 87.5% of global trade in wheat. Eighty seven and a half percent of world trade, that's a bloody big percentage.
There is the potential that final Russian output might increase a bit according to my sources. However production in Argentina could decrease yet, and in Australia anything could happen with it seeming more likely to be a downward revision rather than an upward one.
Egypt's state-owned wheat buyer GASC cancelled yesterday's high-profile wheat tender without offering a reason why.
Maybe they just wanted to see who was offering what origin? Or maybe they thought that they were being clever by wasting everybody's time?
There is some talk that most of the offers failed to meet Egypt's newly-discovered strict contractual specifications.
That's rich isn't it? It was only a few weeks ago they were slaughtering feral pigs in the slums of Cairo that live knee-deep in stuff that you don't want to be knee-deep in. Now all of a sudden they won't take your wheat unless it's accompanied by a health certificate signed by Elvis in triplicate.
Wouldn't it be lovely if the next time they float a tender up nobody even bothers to put an offer in?
"Erm, sorry Nomani mate, we didn't bother 'cos we thought you were just p*ssing about like last time."
That might concentrate their minds a little bit. You can't make bread out of fresh air you know.
The Brazilian government has said it is maintaining its 10% import duty on wheat imported from outside the South American Mercosur trade bloc, despite pressure from local millers.
With almost all of Brazil's import needs normally met by Argentina, the country's flour milling association (Abitrigo) has been lobbying the government to waive the import duty to allow wheat imports into the country from outside Mercosur.
Drought slashed Argentina's 2008/09 crop almost in half, and it's prospects for 2009/10 don't look any brighter with the government there unlikely to sanction wheat exports of more than a million tonnes in the 2009/10 marketing year.
Brazilian flour millers typically import around 6 MMT of wheat per year, potentially leaving them having to pay the import tariff on around 5 MMT in the coming season.
The Brazilian government is keen to do business with Russia, and has recently been in negotiations with the Russians to trade wheat for meat. It seems possible that their hard-line over the import duty might precede a move to waive the tax on Russian only wheat, which the local milling industry regard as inferior quality-wise to its US or Canadian alternative.
The recent highly-publicised problems with quality between Russia and Egypt will have done little to quell their fears.
July soybeans closed at $12.13 ¾, up 7 ½ cents, November soybeans finished at $10.43 ½, down 6 ½ cents. It remains a bullish old crop/bearish new crop story it seems. China bought old-crop beans again according to the weekly USDA export sales report. Whilst they were also in evidence booking new-crop beans, purchases for the 2008/09 marketing year are much more significant given the tightness of old-crop stocks. The much talked about cancellations once again failed to materialise.
July corn closed at $4.03 ¼, down 4 ½ cents, and December corn ended at $4.23 ¾, down 5 cents. Energy prices were mostly lower today with the exception of the first few contracts of crude oil. Weekly export sales were stronger than expected, and helped to limit the losses. Trade talk continues to suggest a switch from corn to soybean acres of 1-3 million, which is supportive for new-crop corn.
July CBOT wheat closed at $5.60 ¼, down 5 ¾ cents. The US harvest is starting to gather a pace, with cutting in the largest winter wheat state of Kansas now underway, which is adding some pressure to futures prices. Weather conditions are favourable for the progression of the harvest over the next few weeks. Production in Europe and Argentina is seen lower in 2009 which is bullish, but more concrete export business is needed.
EU wheat futures closed with little change Thursday, having dropped very sharply since the beginning of the month maybe a bottom is in sight?
Paris November milling wheat closed up EUR0.25 at EUR145.50/tonne, and London November feed wheat ended flat at GBP117.50/tonne.
Egypt cancelled its wheat tender, offering no rational explanation. Trade gossip suggests that maybe they were testing the market to see who offered what. There was no clear indication as to whether they regard the recent quality problems with Russian as water under the bridge.
Also in the news today were reports that Strategie Grains dropped their EU-27 grain production estimate by 6.4 MMT. Of that soft wheat output was reduced by 2.6 MMT.
Most of the usual newswires are full of stories about burdensome old crop stocks, and that you can't seem to buy a bullish story for wheat at the moment. I think that if you look beyond the rhetoric, the supply and demand picture for 2009/10 is actually quite tight, and has the potential to get worse.
Wheat production in Argentina will surely be significantly lower than current "official" estimates, and output in Australia could also be slashed if an El Nino event takes hold.
With a misjudged global drive towards bio-ethanol production from wheat on the cards, the supply/demand ratio is set to get one whole lot tighter in the next few years.
The overnights closed with little change, wheat was 2-3 cents higher, corn a couple of cents lower and soybeans mixed around 2 down to 1 up.
In the outside markets crude oil is showing little change around $71/barrel, the dollar is a tad firmer and stocks a little lower. Jobs data from the US shows that unemployment fell last week by 148,000 to 6.76 million, that could provide Wall Street with a bit of a boost when it opens.
The USDA export sales report came in largely within the expected parameters, although it was significant that there were no old crop Chinese bean cancellations. Indeed, they actually booked another cargo. They are also said to have bought 100,000 MT of Argy soyoil overnight.
Japan bought 127,000 MT of mostly US wheat in a routine tender. Egypt are shopping for a couple of cargoes of various origin wheat.
Strategie Grains lopped 6.4 MMT off last month's EU-27 grain production estimate, including reducing their soft wheat forecast by 2.6 MMT.
The Argy wheat crop for 2009/10 keeps getting smaller too, with the Buenos Aires Grain Exchange pegging plantings there at a record low 2.96 million hectares.
Also some way off in the distance is the Australian wheat crop, at the moment most analysts estimates are for a crop of around 22 MMT, but with various weather bodies warning that a drought-inducing El Nino year is more than likely that could potentially fall by as much as half.
Early calls for this afternoon's CBOT session: corn called 1 to 3 lower; soybeans called mixed 2 lower to 2 higher; wheat called steady to 3 higher.
Probably the most significant factor in today's weekly export sales report from the USDA for the period June 5-11 was further old-crop soybean sales to China. Additionally there were no cancellations by China, although 28,000 MT to "unknown" was cancelled.
The USDA reported net old crop soybean sales of 145,700 MT, principally to Mexico (51,000 MT), China (49,400 MT). New crop sales came in at 105,000 MT split between China (60,000 MT) and unknown destinations (45,000 MT). Pre-report expectations had been for combined sales of 50,000-250,000 MT.
Corn sales were strong yet again coming in at 767,300 MT old crop and 376,200 MT for new crop. Pre-report expectations had been for combined sales of 650,000 to 1 million MT.
Wheat sales were 268,800 MT, primarily for Japan (61,700 MT), Indonesia (58,000 MT, switched from unknown destinations), Egypt (55,000 MT), Taiwan (49,800 MT) and Nigeria (46,000 MT). Pre-report expectations had been for sales of 200,000 to 400,000 MT.
Actual exports for beans were 349,400 MT, with surprise, surprise China taking the lion's share at 164,400 MT. Wheat exports came in at 392,800 MT and corn exports at 817,900 MT.
The pound fell sharply against the dollar and euro mid-morning Thursday after the release of figures showing that UK May retail sales unexpectedly fell by 0.6%. Analysts were looking for a 0.3% gain which would have been a third straight month of improvement.
Meanwhile, calls for spending to be curbed by Chancellor of the Exchequer Alistair Darling will put added pressure on Prime Minister Gordon Brown as the government continues to increase its debt in an attempt to spur an economic recovery.
Guarded comments from BoE Governor Mervyn King about the timing of an economic recovery also saw investors shy away from UK assets.
The pound briefly fell below $1.62 shortly after the retail sales figures were released before stabilising later in the day around $1.6250. Against the euro sterling stumbled to around 1.1650, having traded above 1.18 yesterday.
Following on from yesterday's piece about UK wheat supply & demand, and the likelihood that ending stocks will fall steeply in 2009/10, I note today that farm consultants Andersons are forecasting this year's UK wheat crop at 14.3 million tonnes. If we run with that figure, then that drops us below a million tonnes for next season's ending stocks (the table has been duly ammended).
Taking things a step further and factoring in this sharply lower carryout, plus the Vivergo plant starting up in the second half of 2010, makes the same table for 2010/11 look even more interesting:
Opening stocks 0.86
H&I Consumption 9.00
Animal Feed 6.65
Total Consumption 16.04
The upshot being that by 2010/11 we would only have an exportable surplus of 0.86 MMT, around a third of what we normally export.
As Laurie White pointed out to me this morning, it won't only be here in the UK where this kind of scenario is being played out, it will be happening all over Europe too.
The EU 2009 wheat crop is getting smaller say French analysts Strategie Grains, who have cut their soft wheat estimate for the current season by 2.6 MMT from last month to 126.3 MMT.
That's a 10% decrease on last season's output of 140 MMT, due to reduced plantings and drought.
Sharply reduced production is expected from the UK, Spain, Romania and Hungary they say.
Note, this is soft wheat production we are talking here, the table on the right of the blog includes durum wheat as well.
Strategie Grains also lopped 2 MMT off last month's barley production estimate too to 59.2 MMT, and 1.4 MMT off their corn forecast to 57.4 MMT.
Egypt are tendering for wheat for the first time since April, and also the first tender since Russian, Ukrainian and Australian wheat where all impounded by customs officials over quality issues.
At least if they don't buy UK wheat they can't have a problem with our quality can they!
The state-owned wheat buyer GASC is shopping for two cargoes of wheat, the first is 55-60,000 MT of U.S. North Pacific soft white wheat, US hard red wheat, US soft red winter wheat, French milling wheat, Australian standard white wheat, Australian hard wheat, German milling wheat, Canadian soft wheat, Argentine bread wheat and/or Kazakhstan milling wheat.
They are also in the market for 30,000 to 60,000 MT of Russian soft milling wheat, Ukrainian soft milling wheat, French milling wheat, UK milling wheat, or Syrian milling wheat.
Both lots are for shipment July 11-20 with quotes on a free-on-board basis, with a separate freight offer.
It will be very interesting to see who offers what, and which way the tender goes in light of the recent spats.
The Buenos Aires Cereals Exchange has dropped it's estimate for 2009/10 Argentine wheat plantings to 2.96 million hectares, from 3.2 million last week.
The figure is not quite as low as Oil World's estimate of 2.8 million earlier in the week, but it's getting there.
Although planting is still ongoing, we are already past the ideal date for optimum production, the exchange say.
This latest figure is 35% down on last year's planted area, due to drought, lack of finance, export taxes and the distinct probability that the government won't issue any export licences at all for 2009/10.
That would be interesting, as President Cristina Fernández de Kirchner recently struck a deal with wheat exporters to get them to buy a million tonnes of old crop wheat, in exchange for guarantees that the government would issue export licenses for a million tonnes of wheat in the next marketing year.
Crikey, a female politician LYING, who'd have thought that? She might me a hot babe, but she'll do, or say, anything for some new shoes. Allegedly.
July soybeans closed at $12.06 ¼, up 5 cents, November beans ended at $10.50, up 21 ½ cents. The old crop/new crop spread narrowed a bit today with 1 to 2 inches of rain in this week's forecast for Indiana and Illinois, further hampering planting progress there. Yield for soybeans planted after June 20th in Illinois will drop as much as 22%, and drop 30% after June 30th according to Purdue University. Talk continues to circulate of China cancelling or rolling old crop purchases into new crop. Thursday's export sales report from the USDA will be scrutinised for evidence of this.
July corn closed at $4.07 ¾, up 3 ¾ cents. After falling sharply the last three sessions, corn was overdue to take a breather today. Weather for corn growing should be ideal over the next week with warm temperatures and 1 to 2 inches of rain in the major corn growing areas. Trade talk is that anywhere up to 3 million acres of corn might end up getting switched into beans due to persistent rain throughout the last six weeks. That's probably a bit overdone, with most farmers seemingly finding a way to get their corn in one way or another.
July CBOT wheat closed at $5.66, up ¼ cents. Wheat was once again the weakest leg of the "holy trinity" of corn, beans and wheat. Export demand remains slack, and tomorrow's USDA weekly export sales report looks unlikely to throw up any big surprises. The Australian Bureau of Meteorology says signs of an El Nino event have strengthened over the last two weeks to more than double the normal risks of the weather event. That is a potential threat to a wheat crop that is only just in the ground. In Argentina too, the 2009 crop is already shrinking. The Buenos Aires Cereals Exchange cut it's estimate on wheat plantings there to 2.96 million hectares, from 3.2 million a week ago. That's the lowest area on record.
EU wheat futures continued their downwards spiral Wednesday with Paris November milling wheat ending down EUR0.25 at EUR145.25/tonne and November London feed wheat closing down GBP0.50 at GBP117.50/tonne.
At least the magnitude of the fall seems to be diminishing, both London and Paris futures have closed lower in eleven sessions out of thirteen this month, Unlucky for wheat!
As per usual it's lack of buyers that's the main problem, and what export orders are around are being fiercely contested by the usual suspects from the Black Sea, with this season's harvest already underway in Ukraine.
In the US harvesting of winter wheat has now begun as far north as southern Kansas, with reports of significantly better yields than the more southerly state of Texas.
Somebody emailed me a copy of the latest HGCA/Defra UK wheat balance sheet the other day. The tables include estimates for 2008/09 for things like feed usage, imports, exports that sort of thing. As well as their best guesses for the current season, they also include the national average for the previous five years.
Got that? The previous five years, ie 2003/04 to 2007/08, NOT including the current marketing year. The reason that is important is that we can say 2008/09 was an exceptional year not just in terms of production but also exports.
Now this got me thinking, I've been banging on here that I'm actually quite bullish on UK new-crop wheat, as you may have noticed. So I thought why not try and project what the balance sheet for 2009/10 is going to look like, using these historical averages and a bit of half decent guesswork?
So that is what I've done. The table is displayed on the right hand side of the page, just below where the futures prices are.
It makes for quite interesting reading. I've made a few assumptions, but nothing too outrageous methinks, let me talk you through it:
The HGCA/Defra say that 2008/09 UK wheat ending stocks will be 2.44 MMT, that's a little higher than "normal" but I guess that we'd all expect that given the size of last year's crop and the price inverse in the marketplace.
So we begin 2009/10 with a carry-in of 2.44 MMT, for production this coming season I'm using my own personal estimate of 14.5 MMT, which co-incidentally is almost exactly the average over the previous five seasons. That seems to be in the middle of most trade estimates I've seen recently which range 14.25-14.75 MMT.
For imports, exports, feed usage, seed and "other" I've run with figures around the five year average, or thereabouts.
For human & industrial consumption I've increased that from 6.88 MMT in 2008/09 to 7.7 MMT in 2009/10 to take into account extra demand from Ensus.
The bottom line is we are left with a domestic surplus of 1.06 MMT at the end of 2009/10, significantly lower (44% lower in fact) than "normal" over the preceding five years.
Note that projected exports for 2009/10 are cut back to average levels, a full 1.5 MMT less than we are expected to export in the current marketing year. The way things are looking we couldn't export 3.7 MMT again next year because we haven't got it.
Suppose this season's crop only comes in at 14 MMT? That leaves us only a half million tonne comfort zone.
When's Vivergo firing up? Not until new crop 2010 I'd guess otherwise there could be some real fireworks. Interesting.
Rapeseed production in the Ukraine is seen down 48% this year to 1.5 MMT, from 2.9 MMT in 2008/09 according to Oil World.
Exports will decline to 1.27 MMT in the coming season, 52% lower than the 2.66 MMT exported in 2008/09 they add.
More rapeseed will be crushed domestically, they say with an estimated 220,000 MT being used in 2009/10 copmared to 180,000 MT in 2008/09.
Five former Dairy Farmers of Britain depots have managed to find new buyers, say PricewaterhouseCoopers.
Four depots in the liquids division of DFoB have been acquired by The Capital Dairy Company Limited and the Cheshunt depot has been sold to Braeforge Limited.
The depots sold to the Capital Dairy Company Limited are in Newark, Skegness, Spalding, Hillsborough.
Unfortunately it seems that there are unlikely to be any further buyers emerging for the remaining DFoB depots, putting around 250 more people out of work.
It is not expected that ex DFoB Chairman Lord Grantchester, 32nd in the Sunday Times Rich List, will be joining them in the dole queue.
Sainsbury's have reported like-for-like sales, excluding fuel and VAT, rose 7.8 percent in the 12 weeks to June 13.
The figure is higher than analysts expectations for 7.3% growth, and comes in well ahead of rivals and market leaders Tesco who reported growth of only 4.3% yesterday for the 13 weeks to May 30.
The company also announced expansion plans, including buying a further nine Co-op stores, on top of the 24 already acquired, and raising £445 million by offering new shares and bonds.
July soybeans closed at $12.01 ¼, up 4 ¼ cents, and November soybeans at $10.28 ½, up 3 ¾ cents. Beans closed higher on the day, but still 18-20 cents below the days highs, aided by a weak dollar. There is still a bullish old-crop, bearish new-crop story, with almost $2/bushel differential it seems crazy to suggest that this could get wider, but that is exactly what I am going to propose will happen. We are looking at two completely different stories here, old-crop (which takes us up to say September) US supplies are unbelievably tight. New-crop is a totally different kettle of fish.
July corn closed at $4.04, down 2 cents. There maybe isn't too much downside on corn, as planting delays and late seedings will maybe lead to lower yields in 2009/10. Corn planting is essentially complete but the trade still seems to think we may see a reduction in acreage on the June 30th acreage report due to unfavourable planting conditions this past spring.
July CBOT wheat ended at $5.65 ¾, down 9 ½ cents. of the selling pressure can be related to wheat harvest in the Southern Plains, although early yield reports are far from encouraging. Production prospects out of Argentina for 2009 are poor, and output from Canada, the EU-27, Russia and Ukraine are also seen lower in the coming season.
London wheat futures closed higher for the first session in the last eight Tuesday in a correction from the sharp drop witnessed over the last couple of weeks.
Ideas that things had been overdone to the upside were substantially corrected by a 12-14% decline in EU futures since the start of the month.
Paris November milling wheat closed down EUR0.50 at EUR145.50/tonne, and London November feed wheat ended up GBP0.50 at EUR118.00/tonne.
The trade is now starting to focus on northern hemisphere harvest prospects developing over the next few weeks.
The signs are mostly encouraging, or so the trade would have you believe, European prospects are great, so too are those in the US, Russia and the FSU.
Meanwhile, global demand is shrinking by the minute, and there is absolutely nothing to get bullish about. They say.
There's plenty to go round, stocks are enormous, nobody wants the stuff, the only way is down. Don't worry about Argentina, that's already factored in. There is no threat to Australian production this year, that El Nino stuff is all a load of rubbish.
Yes, the largest exporting nations are almost all potentially looking at sharply lower production in 2009/10, but Egyptian consumption is seen down a million tonnes, so what is there to worry about?
Dairy farmers caught up in the aftermath of the collapse of Dairy Farmers of Britain, who have been unable to secure a new milk contract, are being told to consider the option of renting their cows out, rather than being forced to sell in a depressed market.
The going rate is around £250/year apparently, if only they'd have thought of this idea when Mrs Nogger#1 was around, I'd be quids in by now. Still, my loss is the local rugby team's gain.
Full story here: Do you do them in any other colours?
The overnights closed higher, reversing some of Monday night's steep declines. Beans closed around 16-18 cents higher, with corn up around 3-4 cents and wheat 5-6 cents higher.
Crude oil is up the best part of $2/barrel to $72.34. Weekly stocks data from the API is due later today, with traders expecting a decline in inventories of 1.8-2.0 million barrels.
The dollar is weaker after Russian President Medvedev made comments suggesting that Russia and China invest some of their reserves in each other's debt instead of buying US Treasuries. It's taken him a while to come up with that one, but he's got there in the end, bless.
That's also a slight switch away from yesterday's comments that the dollar’s status as the main reserve currency was unlikely to change for some time yet.
There seems to be an air of disappointment that US soybean plantings only managed to advance to 87% done, from 78% a week ago, as revealed by the USDA last night, although this week's forecast seems to be conducive to press ahead with seedings.
The NOPA crush figure of 142.17 million bushels was sharply higher than anticipated, and points to further erosion of the USDA's already tight ending stocks figure of 110 million bushels.
Spring wheat conditions jumped from 72% to 75% good to excellent this week, whilst winter wheat conditions deteriorated to 29% poor to very poor from 28% last week.
South Korea bought 275,000 MT of US corn yesterday, and Japan is tendering for 127,000 MT of US/Canadian wheat.
Early calls for this afternoon's CBOT session: July corn called 3 to 5 higher; July soybeans called 15 to 20 higher; July CBOT wheat called 4 to 7 higher.
The wheat market has certainly taken quite a tumble in the past few weeks. Since recent June 1st highs we've seen London wheat fall 14%, with Paris down 13% and Chicago wheat 12.7% lower. That's some pretty hefty losses in just a fortnight.
For those that would blame the influences of the "outside markets" crude oil has actually risen 9% during the same period.
So what is it with wheat? Good old-fashioned supply & demand?
Lets have a look at supply, or to be a bit more specific world trade. According to the USDA the world's largest wheat exporters in 2008/09 will be:
The US, the EU-27, Russia, Canada, Australia, Ukraine & Argentina. These are the top six nations that keep much of the world supplied with wheat.
Let's have a look at their production prospects for 2009/10:
2008/09 (MMT) 2009/10 (MMT)
US 68.0 57.0
EU-27 151.7 132.5
Russia 63.7 58.0
Canada 28.6 23.4
Australia 21.5 22.0
Ukraine 25.9 18.0
Argentina 8.3 7.7
Total 367.7 318.6
So the top six exporting nations that account for over half of world production and 87.5% of global trade in wheat are set to see their output fall by almost 50 MMT in the year ahead.
Indeed, it looks a nailed-on certainty that Argentina won't even have any wheat to export at all in 2009/10, and will probably be a net importer (despite the fact that the USDA currently has them down to export 4 MMT next season).
So it must be world demand that's falling then? The world's top six importers, and their likely requirements for 2009/10, according to the USDA:
2008/09 (MMT) 2009/10 (MMT)
Egypt 9.5 8.5
Iran 8.5 6.0
EU-27 6.5 6.5
Brazil 6.0 5.7
Algeria 5.6 5.4
Japan 5.5 5.5
Total 41.6 37.6
So the top importing nations are seen using 4 MMT less in 2009/10, well that's handy, if they were planning on buying it from Argentina, they'll probably find that it isn't available anyway!
So where's the rest of the production shortfall coming from, how are we going to feed the world? Global stocks of course. So with global wheat stocks having been in steady decline since 1998/99, we've had one decent harvest to help replenish them before we start digging into them again.
And what happens if Australia have another El Nino drought year? That could wipe another 10 MMT off world supply quite easily.
We do like to live on the edge don't we?
The pound jumped to it's highest level against the euro since early December 2008 after news that the annual inflation rate in May rose to 2.2%, against analysts expectations of a 2% rise.
Meanwhile retail prices in May fell by 1.1% annually, less than the 1.5% that had been expected.
The pound rose to 1.1829 against the euro and $1.6445 against the dollar, close to its recent high of $1.6660 set on June 3rd.
Bullish comments from The Bank of Japan that the worst of the recession was likely to be over also led to a flight away from the dollar.
Leading British supermarket chain Tesco is reporting first quarter like-for-like sales in the UK up 4.3%.
That's up on the 3.7% growth it reported in the previous quarter, but still lags almost all its other rivals, including the rest of the "big four" Asda, Morrisons and Sainsburys.
Morrisons recently reported 8.2% growth in its most recent quarter, whilst Asda saw growth of 8.4% and Sainsbugs is expected to chip in with growth of 7.3% when it reports its latest figures tomorrow.
Tesco boss Sir Terry Leahy predictably put his own positive spin on the figures saying that Tesco had "made a solid start to the financial year, maintaining good momentum in a challenging economic climate."
Spoken like a man who recently, they say, picked up a £3.7 million cash and shares bonus after his company reported an immoral pre-tax profit up 10% on the previous year to £3.13bn, with sales topping £1bn/week for the first time at £59.4bn for the FY.
Tesco seems now to be relying for much of its growth to come from it's budget "value" range, which is growing at something like 30% year-on-year. In addition it appears that it's non-food side got a lift from the demise of Woolworths with strong demand for electricals, homewares, stationery and toys.
"I'm on income support me, I can only afford to buy the value chicken nuggets and budget fries shaped like David Tennant 'cos I'm saving up for a Nintendo Wii and a 52 inch LCD TV for our Chantelle's fifth next month."
Unfortunately we don't have any specific data on the sale of shell-suits, but you can bet your life that they turned in a strong performance too.
It's probably only a matter of time before everything is collected straight off a pallet on the shop floor. In fact why even bother opening the shop? Chuck it straight into the crowd from the back of the lorry, and maximise your profits even more.
Monday night's USDA planting progress & crop condition report said that US soybean plantings are now seen 87% planted versus last year at 83%, 78% a week ago and the five year average of 92%. Soybeans are 72% emerged compared to 69% last year and 83% for the five year average. Soybean conditions (first report of the year) are 6% poor to very poor and 66% good to excellent.
Corn is seen at 95% emerged versus 87% last year and 98% for the five year average. Corn conditions are 5% very poor to poor and 70% good to excellent, that's up one point from last week.
Spring wheat emergence is at 93% even after the difficulties in planting the crop this year. The five year average is 99%. Spring wheat conditions jumped from 72% to 75% good to excellent this week.
Winter wheat conditions deteriorated this past week to 29% poor to very poor from 28% last week. The good to excellent ratings stayed the same at 44% but slipped 1% from excellent to good. Winter wheat harvesting is 9% complete versus the 19% five year average
CBOT grains crashed lower Monday under the heavy influence of weaker crude oil, metals and equities and a firmer US dollar.
July soybeans closed at $11.97, down 48 ½ cents, whilst November soybeans finished at $10.24 ¾, down 51 ¾ cents. Warmer weather will finally return to the US this week, aiding soybean plantings and crop development. The story for soybeans remains one of bullish very tight old-crop supplies, against bearish increased new-crop production. The inverse between July and Nov could widen significantly further. NOPA soybean crushings in May came in at 142.169 million bushels, sharply higher than trade estimates of 136.4-137.2 million bushels, further tightening old-crop supplies.
July corn closed at $4.06, down 19½ cents; December corn finished at $4.27 ¾, down 20 cents. Warm temperatures and normal precipitation are forecast for the Corn Belt in the 6 to 10 day and the 8 to 14 day weather forecasts, that is mildly bearish for corn. Of more influence today were the outside markets, with weakness in crude oil and a stronger dollar particularly adding to the bearish tone. On a bullish note, South Korea bought 275,000 MT of US corn and the USDA will likely drop it's acreage forecast by 1-3 million acres at the end of the month. Unlike soybeans, that could make the new-crop picture quite bullish for corn.
July CBOT wheat ended at $5.75 ¼, down 9 ½ cents, making wheat, for once, the strongest leg of the complex. If you can call 9 ½ cents lower strong that is. The weather forecast this week and next is a little bearish, winter wheat harvesting should advance, and spring wheat crop development should get a boost. There are still some serious question marks over global wheat production however, with Oil World throwing another spanner in the works over the weekend with an Argentine planting forecast of just 2.8 million hectares for 2009. That implies that even with normal yields they will become a net importer of wheat next year, whereas as recently as 2007 they were the world's fifth largest exporter.
EU wheat futures continued their sharp corrective slide unabated Monday with Paris November milling wheat ending down EUR1.75 at EUR146.00/tonne, and London November feed wheat closing down GBP1.25 at GBP117.50/tonne.
In London, the November future has lost GBP17.50/tonne since the start of June, whilst in Paris November milling wheat has fallen EUR19.20/tonne.
With such steep price falls in evidence in such a short period farmers are shell-shocked, but largely remain reluctant sellers, at least until there is more certainty over the size of EU and world crops over the next couple of months.
In London prices have now given up all the gains made in April and May and are back at early April lows. In Paris prices are within EUR5-7 of the early April lows.
Maybe that isn't such a bad thing, if the spec money has got it's fingers burnt again so soon after it finally regained confidence in ag commodities, perhaps we can soon get back to trading the fundamentals.
The fundamentals, such as they are, aren't as bearish as some would have you believe. All the major exporting nations are looking at sharply reduced production in 2009, with the possible exception of Australia, and it is way too early to say what sort of crop they are going to have yet.
Here's a highly interesting and thought provoking article on Paraguay, the world’s fourth-largest exporter of soybeans, where the invasion of the three-headed soybean monster is raping the land.
Here almost 100,000 campesinos (peasant farmers) have been evicted from their land as the multi-national conglomerates move into town to grow soybeans.
In a country where 83 percent of campesinos occupy only 6 percent of the land, forty percent of all property is possessed by just 351 owners of large estates.
Those that resist face serious consequences. More than a hundred campesino leaders have been assassinated, and more than two thousand others have faced trumped-up charges for their resistance to the intrusion of agribusiness.
Get off your land
The overnight markets closed sharply lower with beans down around 22-24 cents on old crop and 34-38 cents on new crop. Wheat was around 12-13 cents lower and corn 8-10 lower.
Weaker outside markets and a firmer dollar combined to push the entire complex lower amid cautious comments from Chinese premier Wen Jibao over the durability of economic recovery in the world's third largest economy.
Crude oil is 75 cents lower at £71.29/barrel, with metals and world stock markets also down. Wall Street is expected to follow suit this afternoon.
The dollar is firmer across the board after Russia's finance minister, Alexei Kudrin, whilst speaking at the G8 Summit over the weekend said that he dollar's status as the world's main reserve currency wasn't likely to change soon. Russia and China have recently been pushing for a new "global currency".
Later today we will get the May NOPA crush report, with the trade expecting 137.2 million bushels of soybeans to have been crushed during the month.
Much warmer weather is in store for the US Midwest this week, according to forecasts, with temperatures pushing into the low 90's. After a string of cooler than normal weeks, this warm-up will be welcomed by most and should enable good progress to be made with soybean plantings and speed up corn development.
Tonight we will get the USDA's latest planting progress and crop condition reports. Last week corn plantings were 97% done, beans 78% planted and spring wheat 96% completed.
Egypt says it has 4 MMT of wheat in it's strategic reserves, including 2.8 MMT of locally procured wheat, which will be enough to last it until the end of the year.
Early calls for this afternoon's CBOT session: July corn called 8 to 10 lower;
July soybeans called 20 to 25 lower; July CBOT wheat called 10 to 12 lower.
Following the resignation of Jane Kennedy, the newly appointed food & farming minister, Jim Fitzpatrick, has been "outed" as a vegetarian.
You couldn't make it up could you? Kennedy's constituency of Wavertree in Liverpool is not exactly renowned for it's agricultural links, being more commonly associated with burnt out Ford Cortina's.
So, in an effort to reassure the nation's farmers that he really is in touch with their needs, Gordon McBroon has appointed a vegetarian MP for Poplar and Canning Town to fight their corner.
On his website, www.jimfitzpatrickmp.co.uk, the new minister for food, farming and environment lists amongst his interests and hobbies "fire" and "West Ham United" I kid you not.
He also states: "I am here to promote the East End of London". I suggest that you do that by buring down Upton Park next time the Hammers are at home Fitz, thereby fulfilling three fantasies all at the same time.
Hilary Benn Secretary of State for the Environment, Food & Rural Affairs, intriguingly, is also a raging carrot-munching "nut-cutlet" who likes nothing better than to curl up in front of a roaring log fire with a cucumber, a jar of organic honey and a copy of the Lentil Lovers Guide. Allegedly.
What next I ask myself? Dale Winton & Graham Norton in charge of defence?
Crop Inspecting in the East End of London
Dairy Farmers of Britain receivers PriceWaterhouseCoopers have announced the closure of the company's plant at Blaydon on Tyneside, which employed around 290 people, after last-ditch attempts to find a buyer over the weekend failed.
The news comes hot on the heels of the announcement of the closure Bridgend dairy with the loss of 279 jobs on Friday, that facility was the last remaining major milk bottling plant in Wales.
Earlier last week the company's Lincoln creamery became the first casualty with 127 jobs lost there.
Dairy cooperative OMSCo has brought forward an existing agreement to take on DFoB's organic farmers from 1st July, and Milk Link has bought the failed company's Llandyrnog plant for an undisclosed sum.
You can say what you like about the French, and I frequently do, but they do know how to organise a good protest.
Around 7,000 French farmers blockaded around two-thirds of France's 60 main retail distribution warehouses that supply French supermarkets on Friday and Saturday, in protest to the margins being made on basics such as milk and meat.
Of course they probably all ran away when the German manager came out to shout at them, but that's not the point.
Now why can't we come up with something like that over here?
Oil World now predict that Argentine farmers will plant just 2.8 million hectares of wheat this season. That is down sharply on their forecast last month of 3.6 million hectares, and a gigantic 39% drop on last year. It is also 400,000 hectares beneath the last figure from the Buenos Aires Grain Exchange, although they did warn that things were likely to get worse not better.
Not only has the country been hit by the worst drought for 70 years, which has now lasted eighteen months, but there are also huge financial disincentives to plant wheat.
The way things look right now the world's fifth largest wheat exporter just a couple of years ago won't even be self-sufficient in wheat in 2010.
It's a Catch 22 situation, the more farmers cut back on wheat plantings, the more likelihood there is that there will be no wheat export licenses granted at all for 2009/10, therefore the lower the incentive to plant.
This leaves President Cristina Fernández de Kirchner in an interesting position, as she recently struck a deal with wheat exporters to get them to buy a million tonnes of old crop wheat, in exchange for guarantees that the government would issue export licenses for a million tonnes of wheat in the next marketing year.
The move was supposed to stimulate new crop plantings, but has clearly failed. Will she stand by her word and allow a million tonnes of wheat out of the country in the next marketing year, knowing that they don't have enough to cover their own domestic requirements?
"Even if it does rain, most farmers are looking at alternate grains such as oats, barley and any other product that does not involve an export tax," said one Argentine farmer.
"The country considered to be one of the breadbaskets of the world is falling towards international oblivion," he added.
What size do we now put on the Ary wheat crop for 2009? The USDA left their production estimate unchanged at 11 MMT on Wednesday. That looks hopelessly optimistic given that planted acreage is seen down almost 40%, yet they are forecasting a crop 33% higher than last year!
Using Oil World's acreage number, if Argentina was to get the same 2 MT/ha yield as last year's drought-ravaged crop then we would only have a final production figure of 5.6 MMT. The USDA are currently using a yield figure of 2.75 MT/ha which would give us final production of 7.7 MMT. Two years ago in 2007/08 yields were 2.92 MT/ha, even a return to those halcyon days would only give us a final output of 8.18 MMT.