CBOT Closing Comments
Soybeans
Beans had a very bad day at the office, with July settling 66 1/2 cents lower at $11.33 a bushel, and Nov finishing 68 cents lower at $8.95. Limitless July was 81 cents down at the low of the day. US weather is largely non-threatening, hot and wet is good. China might keep buying beans, but they don't seem to want US poultry, with stories now circulating that China intends to cut off shipments of US chickens entirely in a tit-for-tat dispute it is taking to the WTO. That won't do anything for soymeal supplies in the US, with July closing $20.20/tonne lower tonight. The Chinese story got the market spooked, as that has been the main driving force recently, and the large fund longs crashed out all at the same time just ahead of Friday's WASDE report.
Corn
July corn closed at $3.35 ½, down 7 ¾ cents, and December corn at $3.35 ¾, down 8 ½ cents. A more genteel day for corn, although there was some inevitable spillover from bean weakness. That said, the December contract had a low of $3.35, within 30 cents of the contract-life low of $3.05 posted September 15th of 2006. US weather looks good for the week ahead and crude was weak, closing below $63/barrel, and a firmer dollar also didn't help corn's case today.
Wheat
Sep wheat fell 6 3/4 cents to close at $5.12 1/2 a bushel. In many ways wheat is completely different to beans and corn at the moment. We are in the middle of harvesting US winter wheat, making it much less of an unknown quantity. In addition, wheat peaked a long time before the other two, making it seem logically likely that it will bottom first. Reports coming out of Russia, Ukraine and now Canada suggest that all is not well with wheat crops there, and that existing production estimates from the likes of the USDA have been overstated. They will get the chance to correct that on Friday with their latest WASDE report, but as we all know the USDA are famously slow at getting their arses into gear.
EU Wheat Ends Around Unchanged Tuesday
EU wheat futures closed around unchanged Tuesday in stark comparison to what was going on in US markets late in the European trading session.
Paris November milling wheat closed unchanged at EUR140.50/tonne, whilst London November feed wheat also closed flat at GBP111.75/tonne.
In Chicago however things were quite different with soybeans crashing close to limit down on fund liquidation.
That will almost certainly spill over into European futures trade in the morning, especially for rapeseed. Wheat and corn in the US only posted relatively modest losses, so that may not affect EU wheat too much.
Whilst the wheat harvest is underway in Russia and Ukraine, reports coming out of these countries are mixed with yields and also quality variable.
Eventual production numbers want closely monitoring, as there is a pretty wide disparity between the bottom and top end of trade estimates for Russian grain production in particular.
Consumers are still predicting harvest pressure, whilst producers are still eyeing the big carry premiums.
eCBOT Close, Early Call
the overnights closed firmer, with beans up modestly on old crop, but around 7-8 cents firmer on new crop, wheat closed around 4-5 cents firmer and corn 2-5 cents higher.
A surprise deterioration in crop condition ratings from the USDA after the close last night, and a correction from a sharply weaker close set the tone for trade.
A weaker dollar and slightly firmer crude oil also helped.
Good to excellent ratings for corn fell one point, beans two and spring wheat four, contrary to expectations of a slight increase. Those cheeky chappies at the USDA like a nice surprise don't they!
US weather is largely non-threatening, and should be conducive for reasonable crop development, although there is little doubt that things are a bit behind normal.
Only 14% of the soybean crop is blooming compared to the five year average of 24%, and only 8% of corn is silking compared to the five year average of 16%.
Wheat is being harvested in Ukraine and parts of Russia, early reports suggest slightly disappointing yields, and lower production. Drought in Canada is also a concern for wheat and rapeseed.
The API is expected to reduce crude oil stocks by around 2 million barrels later today, although gasoline inventories are expected 750,000-1 million higher.
European stocks are slightly firmer, and the Dow Jones IA is expected to open a tad higher.
Early calls for this afternoon's CBOT session: corn called 3 to 5 higher; old-crop soybeans 2-3 higher, new-crop soybeans called 5 to 10 higher; September CBOT wheat called 4 to 5 higher.
Going Into Administration Today We Have
Coffee Republic.
According to the BBC they have 187 UK outlets, yet only 153 staff - and 26 of them work in head office. So that leaves 127 people to man 187 shops, no wonder it's not working, do they have a little honesty box next to the Expresso machine?
The assorted ne'er-do-wells that hang around these places must love that.
"Get me another freebie latté with sixteen sugars will you Swampy me old China? That will compliment this half-eaten bags of chips I've just foraged from the skip over there a treat."
Ukraine Harvest Latest
The harvest in Ukraine is progressing at a rapid rate, with 13.6% of the planted area already cut, producing 4.375 MMT of grain.
Yields are still running behind last season, with the wheat area harvested so far only producing 2.5 MT/hectare.
A final yield like that would see this season's wheat harvest come in at less than 17 MMT.
Dry spring growing conditions and reduced plantings are expected to cut Ukrainian wheat production this season. A lack of available credit has also forced Ukraine farmers to cut back on fertiliser and pesticide applications this season.
The Russians Appear To Be At It Again
Newswire reports suggest that Alexei Gordeyev, the ex-head of the Russian Ministry of Agriculture, and the current governor of Voronezh, is forecasting a Russian grain harvest of just 75-80 MMT this year.
That is substantially lower than last season's 108.1 MMT, 26-30% lower in fact, and also 10 MMT under the official Ministry estimate of 85-90 MMT, and well below the estimate of 96 MMT from the US attaché.
Drought and pests have had a significant effect on Russian crops this year, he says, noting that lack of credit has led to reduced agro-chemical and fertiliser application.
A shortage of combines may also cause problems and crop losses at harvest-time, he adds.
Well, I might be the only one around here who is bullish on wheat, but even I am going to reserve judgement on this one until we have some more evidence. Weren't they forecasting a crop of 85-90 MMT last year around this time, before pulling a 108.1 MMT rabbit out of the hat?
Canadian Drought 'Worst In 50 Years'
The worst drought in years has already caused nine counties in Alberta to to declare agricultural states of emergency, with farmers calling in the loss adjusters to claim on their crop insurance.
The last big drought to hit the Canadian wheat belt was in 2002 when production was slashed to 14.6 MMT, and Environment Canada are calling this one the worst drought in 50 years.
The most recent report available from the Canadian Wheat Board is dated June 11th, in which they cut their estimates of wheat, durum and barley production to 29.7 million tonnes in the 2009 crop year, down almost 20 per cent on last year.
"Production estimates have dropped significantly in the past two weeks from what had been average yield expectations," they warned.
And in many of the worst affected areas it hasn't rained since.
Links:
Crop outlook bleak as drought ravages Prairies
Farmers start to write off year as drought parches Prairie land
USDA Crop Progress Report
Corn
The USDA pegged the crop at 8% poor to very poor, 1% worse than last week and 71% good to excellent, also 1% lower than last week. That's a bit of a surprise although 71% G/E is better than the 65% we would normally have at this time of year. The later than usual crop is only 8% silking compared to the five year average of 16%.
Soybeans
Soybeans also posted a surprising decline in condition, also only 14% of the crop was blooming compared to the five year average of 24%, highlighting the lateness of this year's crop. Soybean conditions deteriorated from last week by 2% in the poor to very poor category and also dropped 2% from last weeks good to excellent rating.
Winter Wheat
Winter wheat is 90% harvested in Texas, 83% harvested in Kansas and 98% harvested in Oklahoma. The national total is at 56% harvested compared to 59% on the five year average.
Spring Wheat
The spring wheat crop condition deteriorated by 4% in the good to excellent category to 72% from 76% last week. And the poor to very poor increased to 8% from 6% last week. That's a pretty big deterioration in crop conditions in what the market thought was a pretty good week.
There's something bullish for corn, beans and wheat in tonight's report which may add a bit of support in the overnight session after some pretty steep losses today.
EU Wheat Closing Comments
EU wheat futures ended modestly lower Monday with Paris November milling wheat down EUR0.25 at EUR140.75/tonne, and London November feed wheat closing down GBP0.25 at GBP111.75/tonne.
Prices are drifting gently lower but seem to have arrested the steep declines witnessed during most of June.
Weaker crude oil and falling equities were bearish influences today, but a sharp rise in the dollar tempered losses.
The barley harvest is well advanced in Eastern Europe, with wheat cutting next on the agenda, that might bring some further pressure although farmers are reluctant sellers ar current levels.
According to Coceral the EU-27 will produce a wheat crop of 137.6 MMT in 2009/10, of which 128.6 MMT will be soft wheat. That's down 8.6% on an all wheat crop of 150.5 MMT in 2008. Yields for soft wheat are forecast at 5.6 MT/ha, 6.7% lower than 6.0 MT/ha in 2008.
CBOT Closing Comments
Soybeans
July soybeans settled 43 cents lower at $12.00 a bushel, and November soybeans also finished 43 cents lower at $9.63. Beans were under pressure from the start following a sharply weaker overnight session following the holiday weekend. Favourable weekend weather, and a promising forecast for the week ahead, combined with a firm dollar and weak crude oil to send beans crashing lower. The USDA announced 14.12 million bushels of soybeans were inspected for export on Friday, slightly above the 13.30 million bushel needed to meet USDA’s estimates for the year.
Corn
July closed down 2 1/2 cents at $3.43 1/4 a bushel, and December corn closed down 13 1/4 cents at $3.44 1/4. Largely ideal weekend weather and a promising outlook for the week ahead kept corn on the defensive throughout the day. Crude oil prices fell to their lowest levels in over a month today, whilst a flight to the safe-haven of the dollar also weighed on prices.
Wheat
September wheat closed down 9 3/4 cents at $5.19 1/4 a bushel. Weakness from soybeans spilled over into wheat, with the strong dollar also a bearish factor. Funds are heavily short wheat, and sold a further estimated 3,000 contracts today, leaving this market vulnerable to a technical correction at some point. The US harvest is progressing reasonably well and export demand remains slack which is also depressing prices.
EU Grain Production/Stocks Estimates
According to Coceral the EU-27 will produce a wheat crop of 137.6 MMT in 2009/10, of which 128.6 MMT will be soft wheat. That's down 8.6% on an all wheat crop of 150.5 MMT in 2008. Yields for soft wheat are forecast at 5.6 MT/ha, 6.7% lower than 6.0 MT/ha in 2008.
Barley production is seen at 59.7 MMT, that's 9% down on last season's 65.6 MMT.
Corn production is pegged at 56.1 MMT, 7% lower than the 60.5 MMT produced in 2008.
Overall the total EU-27 cereal crop will be 285.3 MMT, 8% down from the 310.2 MMT produced last season.
eCBOT Close, Early Call
The overnights closed lower, with soybeans leading the way crashing around 30 cents easier, corn closed around 6-10 cents lower and wheat down around 6 cents. It is worth noting that the day after the 4th July holiday there is often a strong sell-off on beans and corn.
Beneficial weekend weather and a favourable forecast for the week ahead were bearish influences this morning, as too was a firmer dollar and weak crude oil.
US jobs data late Thursday is still weighing on the market today. US job losses surged by more than expected to 467,000 in June, pushing the unemployment rate to a new 26-year high of 9.5 per cent, that indicates that demand for crude oil from the world's largest consumer is unlikely to pick up anytime soon.
Crude has been as low as $63.40/barrel this morning, almost $10 below it's recent high set only last Tuesday, and currently resides at $64.19/barrel.
The jobs data also prompted a flee to safety on ideas that the recession is far from over and that those green shoots are really banana skins. That gave the dollar a boost, further hurting the grains sector.
Tonight we get the latest crop progress and condition reports from the USDA, with things generally expected to be in pretty good shape, expect increases in good/excellent for both corn & beans. We will also get to know just how far the winter wheat harvest has progressed.
After that attention will shift to Friday's WASDE report.
Old crop beans keep pouring out of America, and Brazil too for that matter who exported over 6 MMT in June alone. Meanwhile late last week the USDA reported 600,000 MT of new crop sales to China plus 152,400 MT sold to 'unknown'.
Clearly current prices aren't rationing demand too much just yet, and a late US harvest could still see a sting in the tail from old-crop.
The potential is there for ending stocks to dip below a very tight 100 million bushels on beans, although I think it unlikely that the USDA will be able to bring themselves to come out with a number that low.
The wheat market is heavily oversold, leaving it vulnerable to a corrective bounce at some point. Harvesting is underway in Russia and Ukraine and parts of Europe which will undoubtedly bring some pressure, although lower production is expected across much of the region.
In a widely expected move, India removed its 20-month ban on exports of wheat, saying it will allow 900,000 MT of exports by state-owned trading companies.
Saudi Arabia bought 440,000 MT of EU, US and Canadian wheat over the weekend.
European equities are lower, and Wall Street is expected to follow suit after closing 223.32 points down on Thursday.
Early calls for this afternoon's CBOT session: corn called 8 to 12 lower; soybeans called 30 to 35 lower; CBOT wheat called 5 to 7 lower.
Russian Grain Harvest Progress
Russia farmers in the Southern Federal District had harvested nearly 2.8 MMT of new crop grain as of Friday July 3rd, according to Elena Skrynnik, the Minister of Agriculture of Russia.
She says that Russia will harvest 85 MMT of grain this year, a 21% reduction on last season's bumper crop of 108.1 MMT. That is also 5 MMT less than the government were predicting a month ago.
Around 2.1 million hectares of spring crops perished due to drought, with over 25% (600,000 ha or 70% of sowings in the region) located in the Samara oblast, Skrynnik said. Also, Orenburg, Saratov, Volgograd and Penza oblasts, and the Republic of Tatarstan and the Republic of Bashkortostan suffered from drought, she added.
With a domestic requirement of almost 76 MMT, that certainly won't leave Russia with anything like so much grain to export in 2009/10, even allowing for a sizable carryover from last season.
Having said that, it's entirely possible that Ms Skrynnik is being economical with the truth, a not entirely unknown Russian trait for those that remember last year's regular announcements from the Agriculture Ministry.
Cargill Opens New Russian Feed Mill
Cargill have opened a new US$12.5m 250,000 MT/per annum feed mill at it's Efremov site in the Tula region of Russia.
The mill will manufacture animal feed using the by-products from a group of Cargill-owned facilities in the area including a corn sweeteners plant, a malt plant, an additional sweeteners plant using wheat and a vegetable oil refinery.
The plant will produce feed for the Russian beef, poultry, dairy and pork industries.
Ukraine Harvest Latest
Ukrainian farmers had harvested 2.8 MMT of grain as of Friday July 3rd from 8.8% of the planted area, according to the agriculture ministry.
Yields to date are running at 2.51 MT/hectare they say, that's 18.5% lower than 3.08 MT/hectare at the same time last year.
Yields will have to improve on that considerably if Ukraine is to produce the ministry's forecast of a grain crop of 42-43 MMT. Private analysts say that's a bit optimistic and that grain production will be 38-39 MMT this year compared to 53.5 MMT in 2008.
Wheat accounts for around half of the country's grain crop with estimates for this season in the 18-20 MMT range, compared to 25.9 MMT in 2008. Barley production this season is seen around 10 MMT from 11.8 MMT in 2008.
Crude Oil Breaks Below USD64
Crude oil broke below $64/barrel Monday as the dollar firmed on its safe-haven status.
It's a jittery start to the week, with Asian and European stocks lower as appetite for risk evaporates.
News last week that US job losses had surged by more than expected to 467,000 in June, pushing the unemployment rate to a new 26-year high of 9.5 per cent, indicates that demand for crude oil from the world's largest consumer is unlikely to pick up anytime soon.
Crude oil has now slumped by more than $9 from last Tuesday's high above $73/barrel despite fresh militant activity in Nigeria over the weekend.
News that rebels had hijacked a chemical tanker with six foreign crew members aboard, destroyed a strategic facility owned by US oil group Chevron and claimed responsibility for an attack on a Royal Dutch Shell facility in the Niger Delta, would have sent the markets soaring twelve months ago.
Instead, in the wake of this recession, we have crude $1.78 lower at $63.85/barrel.
Something That Made Me Chuckle
Flicking through the Telegraph at the weekend...My Top Ten Michael Jackson Hits.
Christ, I thought, I think I'd be struggling to come up with half a dozen I thought were OK, let alone have to whittle them down to 'just' ten of my most favourite and then put them in order.
"Will you come and tuck me in Daddy?"
"Piss off, you're a blanket, tuck yourself in."
Australia Crops Latest
Grain production in Western Australia, the nation's most productive state and the one responsible for most of the country's wheat exports. will fall from 13.6 MMT in 2008 to 10-12 MMT this year, according to the state’s Department of Agriculture and Food.
“A late start and below-average rainfall through the April-June period has contributed to lower-than-normal crop potential through much of the central and north-eastern wheat belt,” they say.
Western Australia (which normally accounts for around 40% of national output) could see wheat output of 5.6-7.7 MMT from the 8.9 MMT produced last year, according to the region's monopoly grain storage facility Cooperative Bulk Handling.
The country is bracing itself for further possible cuts in production if the expected El Nino weather event materialises. The Climate Prediction Centre recently warned that the development of El Nino was 'likely' this year.
The last two El Nino years were 2002/03 and 2006/07 when national wheat production was slashed to 10.1 MMT and 10.8 MMT respectively.
The Bureau of Meteorology is set to release it's latest review of El Nino potential on Wednesday.
US Weekend Weather
Much of the US saw beneficial rains over the long holiday weekend with 48-hour precipitation totaling one to three-inches hitting Iowa, Missouri, Illinois, Indiana, Kentucky, Tennessee, the Delta and parts of the southern Plains, according to Allen Motew of QT Weather.
More rain is on the way this week and stressing heat will be slow to develop. When the heat does arrive, it will not last long, he adds.
Thursday/Friday will see some heat developing, with highs in the mid to upper nineties, but rain quickly returns Saturday, and the temperature drops, he says.
Sounds like they've had a favourable weekend and a decent week is in store for developing crops, no surprise then that eCBOT is sharply lower this morning.
Pound Sharply Lower
The pound is sharply lower this morning, trading at $1.6110 against the dollar and 1.1585 against the euro.
Risk appetite appears to have gone out of the window this morning, with crude oil also sharply lower around $64/barrel.
Gordon McBroon warned over the weekend that the recession may get worse and the Times said that the BoE was set to increase it's QE spending by another £25 billion.
It doesn't take a lot to set off a run on sterling at the best of times, let alone in this jittery day and age.
Still, that may provide an element of underlying support for London wheat later today.
Bulgarian Barley Harvest 70 Pct Done
The barley harvest in Bulgaria is 70% done, according to UkrAgroConsult.
Despite frequent showers, the warm weather and winds have helped farmers to make good progress in harvesting this past week, they say.
So far there are no worries about the quality of the barley from the new crop. Test weight is an average of 64 kg/hl, moisture is normal, below 14,5%, and admixtures are within 1-2%.
Some concerns have been expressed about the quality of the malting barley – but so far the new is mostly positive, they conclude.
Backhanders
In tonight's episode of Backhanders mysterious Egyptian wheat buyer Nomoney Nomoney gets into a fight with Phil and Grant down the Queen Spick when he asks for his $10 million back, Ashraf Ihadnothingtodowithit Atall Atall realises that he can't be the father of Ian Beale's love child and Nick Cotton gets a job as a cargo superintendent. 
EU Wheat Ends Flat To Slightly Lower
EU wheat futures ended a quiet day Friday flat to slightly lower in very subdued trade.
Paris November milling wheat ended down EUR0.50 at EUR141.25/tonne, and London November feed wheat closed unchanged at GBP112/tonne.
With the markets in the US closed for the Independence Day holiday, it was always likely to be a quiet affair, and so it proved.
In London only 88 lots traded all day, with business wittily described by one trader as a steaming pile of faeces.
We're into July and the combines are rolling across much of Europe, and we'll soon begin harvesting here in the UK, so I guess we shouldn't be too surprised that it's quiet and the market is depressed.
EU wheat has got a bit of a boost with Egypt buying french wheat a couple of times in the past fortnight as their dispute with Russia over quality issues drags on.
Despite both sides publicly stating that the problem is internal to Egypt one Russian cargo still sits at the docks in Egypt impounded by the authorities until the state get their money back for a previously disputed shipment.
Brazilian Soybean Exports At Record Pace
Brazil has exported a record 19 MMT of soybeans in the first half of 2009, according to the Brazilian Trade Ministry. That's more than three-quarters of their anticipated exports for the entire year of 24.8 MMT.
Exporters have been keen to cash in on high Chicago prices, strong Chinese buying, the crop failure in Argentina and the large inverse between front-end and deferred month contracts.
Brazil is expected to utilise around 30 MMT domestically of it's 57 MMT soybean produced this year, leaving around 25 MMT to export, with a little bit left for carryover into 2010.
The phenomenal pace of Brazilian exports is pushing up domestic premiums, with August delivery Paranagua currently running at a premium of $1.40 per bushel over August in Chicago.
They will of course be conscious of a large US crop hitting the market in a couple of months time. With the problems in Argentina, this potentially leaves the US as the only shop in town during Q4 of 2009 and Q1 2010.
EU Grain Exports Up 60 Pct
With just one week of the marketing year left to report on, the EU had granted 30.4 MMT of grain export licences, up 60% from the level of 18.9 MMT a year ago.
Of that total, soft wheat export licences amounted to 22 MMT.
Unsurprisingly, grain import licences have been issued on substantially less volume this season, 57% lower at 11.3 MMT from 27.4 MMT a year ago.
Argentina Drought Ongoing
The drought in Argentina which has lasted around eighteen months now is ongoing, with only southern and eastern parts of Buenos Aires province receiving beneficial rains in June:
As it happens the south and east of Buenos Aires province is the country's most productive wheat growing area, accounting for around half of national production.
The other main growing areas are the eastern half of Cordoba, western Santa Fe and eastern La Pampa, which have all had less than half of normal rainfall during June.
Egypt's GASC Under Investigation, BBC Buy TV Rights
Egypt's state-owned wheat buyer GASC is under investigation for it's part in the recent problems with quality on imports from Russia, according to media reports.
The country's state prosecution office is said to be in the middle of an ongoing investigation, which might be criminal, into GASC and Egyptian Traders Co, the company at the centre of the recent row.
GASC have interestingly steered well clear of Russian purchases in it's last two recent tenders, despite Russian wheat being offered cheaper than other origins, instead buying French and US wheat.
The BBC have bought the TV rights to the saga and are said to be "at an advanced stage" of launching a new TV soap surrounding the Egyptian wheat trade called Backhanders. The soap will be centered around a fictional area of Cairo called Dilbert Square.
In it Ross Kemp will be blacked-up to play GASC chairman Nomoney Nomoney, with the part of the Egyptian Traders Co CEO and chairman of the Egyptian feed trade body GUPTA, Ashraf Ihadnothingtodowithit Atall Atall, going surprisingly to Peter Andre 'because he looks foriegn'.
I Never Thought I'd Feel Sorry For An Argie
But today I almost do, the poor buggers, quite literally. Not only does your average man on the streets now have a lower per capita income than his counterpart in neighbouring Chile.
Crippled by drought, inflation, punitive taxes and crippling red tape the agricultural sector has gone to the dogs.
The Agricultural Secretariat haven't put out a crop estimate since March, the one that was famously withdrawn after a couple of hours because it 'contained errors'.
In 2008, for the first time ever, Argentina exported less beef than Uruguay, despite being almost fifteen times bigger.
They're set to produce less wheat than they consume in 2009.
Now the poor sods have raging swine flu.
Trading on the Buenos Aires Grain Exchange floor was suspended yesterday, with traders having to phone in with offers and bids.
Seventeen provinces have closed schools and colleges in an attempt to combat the outbreak of H1N1 influenza.
And they've leapt to third in the list of the largest number of deaths from the virus.
But will they apologise for that hand ball, will they buggery. That's all they'd need to do and I'd let it go, the cheating Argie b@stards.
German Grain Production Latest
Grain production estimates in Germany have been revised slightly higher by the association of German farm cooperatives (DRV), saying that a cool and wet May/June period has aided yields.
This means that the German grain harvest this season will total 47.8 MMT, they say, that's 400,000 MT more than their previous estimate although still 4.6% lower than last season's 50.1 MMT.
Wheat production has been revised upwards to 24.9 MMT, up 100,000 MT from previously, but still 4.25 lower than last season's 26.0 MMT.
Barley output will be 11.8 MMT they say, up 200,000 MT from their earlier estimate and now just 1.7% down on last season's 12.0 MMT.
Corn production will be 4.4 MMT (13.7% down on 5.1 MMT in 2008) and oilseed rape output 5.2 MMT (2% higher than last year's 5.1 MMT), they say.
German trading house Toepfer are a little more conservative, pegging the nation's grain crop at 46.5-47.5 MMT, of which wheat is estimated to be in the region of 24-25 MMT.
French analysts Strategie Grains pegged the German wheat crop at 24.5 MMT a fortnight ago, with barley coming in at 11.9 MMT.
Oil World recently said that German rapeseed production this year could reach a record 5.5 MMT.
EU Wheat Ends Mixed Thursday
EU wheat futures closed mixed Thursday with Paris November milling wheat closing EUR1.75 higher at EUR141.25/tonne, and London November feed wheat ending down GBP1.25 at GBP112/tonne.
Harvest pressure is coming from the US and eastern Europe, but farmers are reluctant sellers at this sort of money.
Across Europe weather conditions are mostly ideal for good crop development, although in areas like Bulgaria and Hungary it is too dry.
A weaker crude oil market also did little to help wheat's cause today.
CBOT Closing Comments
Soybeans
July soybeans settled 15 1/2 cents lower at $12.43 a bushel, and November soybeans finished 9 1/2 cents lower at $10.06. The weekly export sales from the USDA were pretty strong at 443,600 MT. In addition private exporters reported sales of 660,000 MT of soybeans for delivery to China during the 2009/10 marketing year, and and 152,400 MT sold to unknown. That is a seriously lot of kit, and seems to indicate that sales to China are far from finished.
Corn
July closed down 6 cents at $3.45 3/4 a bushel. sales today were a combined total of 1.27 MMT above the trade estimates of 550,000 to 850,000 MT. Today’s sales bring the total export sales to 1.3678 billion bushels approaching the USDA forecast of 1.9 billion bushels. Private exporters reported sales of 152,400 MT of corn for delivery to unknown destination for the 2009/10 marketing year.
Wheat
September wheat closed down 6 1/2 cents at $5.29 a bushel. Export sales were 241,860 MT below the low end of trade guesses. Variable rain amounts could postpone harvest in some areas over the next five days in the Southern Plains but will continue to be a challenge through July 7th to the 11th from Kansas north into the Dakotas with above normal rainfall predicted in those areas.
eCBOT Close, Early Call
The overnight session closed lower with beans down 24 1/2 cents nearby and 13-16 cents further forward. Wheat closed 2-3 cents lower and corn around 4-6 cents easier.
Beans and wheat both traded higher earlier in the session but lost ground late on as crude fell and the dollar rose.
Crude is down $1.66 at $67.65/barrel, European equities are also weaker and Wall Street is expected to follow suit.
Chicago is closed tomorrow for Independence Day so there will undoubtedly be an element of book-squaring going on this afternoon.
In the US a dry and warm forecast through until Saturday will be largely beneficial to corn and bean development.
The weekly export sales were bullish for corn and soybeans and neutral for wheat. In the beans, China took almost half the total, including more old crop. It looks like they are going to stick around a while yet.
South Korea bought one cargo - 55,000 MT - of US corn overnight. Japan booked 108,000 MT of mostly US wheat, Taiwan booked 82,350 MT of US wheat and Egypt last night booked 90,000 MT of US/French wheat.
Early calls for this afternoon's CBOT session: corn called 2 to 5 lower; soybeans called 10 to 15 lower; wheat called 3 to 5 lower.
USDA Weekly Export Sales/Shipments
Export Sales
For the period June 19-25, 2009 the USDA report weekly export sales as follows:
For soybeans old crop net sales were 193,500 MT were up noticeably from the previous week and from the prior 4-week average. You guessed it, China was the largest home taking 68,600 MT. For new crop we got net sales of 250,100 MT, of that the top two homes were? Can you guess? That's right, unknown destinations (125,000 MT) and China (120,000 MT). That gives us combined weekly sales of 443,600 MT against pre-report estimates of 125-400,000 MT.
For corn the USDA reported old crop net sales of 1,155,100 MT - up 68 percent from the previous week and 67 percent from the prior 4-week average. New crop net sales came in at 117,000 MT for a combined total of 1,272,100 MT, well above pre-report estimates of 550-850,000 MT.
For wheat of course we are already in the new crop marketing year, getting net sales of of 241,900 MT, against expectations of 250-350,000 MT.
Whilst the soybean sales were only just outside the range of estimates, I don't think that anyone expected old crop to make up almost half the total. And of course, yet again China are still here booking old crop as well as new crop. What are they doing? Turning their dollar reserves into commodities that's what. With $1.95 trillion of their foreign exchange reserves in US dollars, there's a fair bit still left to go at!
Corn sales were very strong yet again, with Japan, South Korea, Egypt and Taiwan all booking six figure quantities. I wouldn't mind the brokerage on that.
Wheat was, as wheat is, ho hum steady away.
Exports
On the actual shipped front, 387,100 MT of soybeans departed US shores last week, where were they headed? It begins with a C. They eat a lot of rice. No, not Colchester. I'm starting to feel a bit like Caroline Ahern on the Fast Show doing the Scorchio! sketch here. Yes our Far Eastern chums took 188,600 MT of soybeans last week, they probably didn't need them but they're better than dollars right now, especially with temperatures hitting 113 degrees F in the north of the country's soybean belt this week.
For corn, exports came in at 742,500 MT, mostly to Japan, Taiwan, South Korea, Mexico and Egypt.
Wheat exports were 366,700 MT. The primary destinations being Yemen (55,000 MT), South Korea (48,400 MT), Nigeria (39,000 MT), Indonesia (33,000 MT), Ecuador (32,000 MT), and Colombia (29,100 MT).
Germany To Open Second Generation Biofuel Plant In 2010
Germany could have a second generation biofuels plant up and running by 2010, according to a report on Reuters.
The plant, in Freiberg in southern Germany, will produce biomass-to-liquid (BTL) fuels largely using wood products and wood-based waste, with not a grain of wheat in sight.
Full story here: I've got wood
Argentine Situation Could Be Bullish Wheat But Bearish Soybeans
Defeat for the Kirchners in Sunday's mid term Argentine elections is being seen as a massive protest vote by your average Argentine. José Public now has a lower per capita income than his counterpart in neighbouring Chile.
“With all respect to our President, I hope you have heard the message of the Argentines in the polls and beginning tomorrow you will convene us to dialogue”, said the Mayor of the City of Buenos Aires, Mauricio Macri emerging from Sunday’s mid term election as one of the strongest 2011 presidential hopefuls.
The adverse results were not just limited to the province of Buenos Aires, or the poor showing in the city of Buenos Aires either, it also included defeat of the Kirchner candidates in three leading provinces, Córdoba, Santa Fé and Mendoza, and even in Patagonia’s Santa Cruz, the stronghold of the ruling couple.
The Kirchners might have dipped out in the mid term elections. but they're still in power, for now. The newly elected members of Congress will not take office until December, so uncertainty looms over how they will govern during the next five months.
Argentine farmers are continuing a silent protest by planting the smallest wheat crop in history. Production this year will do well to exceed 6 MMT, that's the level of national consumption, leaving nothing to line the Kirchner's export coffers.
Drought and taxes have also decimated the beef industry. Famously carnivorous Argentina, which was once the world's largest exporter of beef will also now have to import beef next year, perhaps several million tonnes, much of it coming from its tiny neighbour Uruguay.
The upshot of all this mayhem seems to be that Argentine farmers will sit on their hands for the next few months, before planting the largest soybean crop in their history.
Once wheat planting is out of the way, they don't begin planting corn and sunflowers until September, followed by soybeans in November/December. Already there is talk of a 20% increase in soybean plantings from 2008/09, and remember that they were talking a crop of 50 MMT before the drought set in. That could give us production next year of 60 MMT, almost double what they've just harvested.
All this of course is very weather dependent, but note that the 'likely' El Nino event being talked about might bring drought and misery for Australia later this year, but could potentially bring plentiful rainfall to Argentina.
Oklahoma Wheat Crop 'Worst In Decades'
Oklahoma’s wheat crop for 2009, coming after a barrage of droughts, freezes and heavy rains, is turning out to be what one farmer called the worst in the state since 1955.
Farmers in northern Oklahoma wrapped up harvests this week and some farmers in the Panhandle are still cutting grain, but few are happy with the yields.
A heavy freeze in early April finished off most of the crop in southwestern Oklahoma and badly damaged acreage in the state’s midsection. In addition to that, many parts of Oklahoma received heavy rains in April and May.
“We’re probably going to get less than half the wheat this year as last,” said Mike Schulte, the executive director of the Oklahoma Wheat Commission. “It was a tough year to be growing.”
Bulgarian Crops Hurting
Grain crops in Bulgaria are hurting from drought and heat stress, according to the Dobrudzha Agriculture Institute.
Yields this year will be 20-25% lower than in 2008 they say.
Yields in the northeast, which has the most fertile soil in Bulgaria, will struggle to reach the usual 500 kg of wheat per decare, they say.
The Institute expects about 400-500 kg of barley per decare in the northeast, and about 200-300 kg in Southern Bulgaria.
The amount of rain in Northeast Bulgaria in the spring thus far had been only 15 litres per square metre which was very insufficient, they noted.
Crude Oil Drops Despite Stocks Data
Crude oil fell late yesterday, and has followed through lower this morning despite figures from the US Energy Information Administration saying that US inventories fell 3.7 million barrels last week. That's more than the 1.5-2.0 million that the market had been expecting, and the fourth weekly drop in a row.
The market instead chose to focus on rising gasoline and distillates stocks instead, which rose by 2.3 and 2.9 million barrels respectively.
A firmer dollar is also hurting crude this morning, which currently stands $1.06 lower at $68.25/barrel.
The USDA: Lying Or Just Plain Incompetent?
Another thing that struck me on Tuesday, as I continue to pick through the small print of the USDA report, was the surprise increase in wheat acres.
An extra 1.137 million of them suddenly appeared from nowhere.
Of that total almost half a million were spring wheat acres, now that's a surprise isn't it because spring wheat plantings, particularly in the top producing state of North Dakota were famously running well behind weren't they?
In the March report, 13.304 million acres of spring wheat would be planted the USDA told us, now they say it's 13.772 million.
Now remember here that spring wheat is normally planted April/May, it is generally accepted that planting after May 31st is not a sensible thing to do. Also, May 31st is the cut-off date for claiming full crop insurance on any wheat that subsequently fails. In addition new crop beans and corn at the time offered some pretty fruity returns, so planting them instead was a distinctly viable alternative.
If we check back to 31st May we find that the USDA were reporting spring wheat plantings at just 89% complete. A week later they said 96% done. There are no more planting progress reports for spring wheat after the 7th June as it's pretty much assumed that if it's not in then it won't get planted.
Yet now we have the USDA telling us that not only did the last remaining 4% get planted well outside the normal planting period, but US farmers threw in another 468,000 acres on top of that just for good measure!
Additionally, these spring acres are only part of the picture, there's another 669,000 on top of that which was newly found this week. Where did they come from? The answer is 559,000 winter wheat and 110,000 durum wheat.
This stuff gets planted around September/October, why didn't they know it was there in March?
Discuss.
EU Raises Import Duties On Maize And Sorghum
The European Commission have raised the import duties on maize and sorghum for the year ahead.
The duty on maize will increase from EUR12.22/mt to EUR17.34/mt, and the duty on sorghum from EUR45.92/mt to EUR47.89/mt.
The import duties for wheat and barley remain unchanged.
Hopefully that might mean a bit more wheat getting used domestically by the feed trade.
Russia Exports Record 23 MMT Grain In 2008/09
Russia has been an aggressive exporter on the world market this past year after bringing in it’s largest wheat crop in post-Soviet history. A crop of 63.7 MMT in 2008 propelled the country to export a record amount of grain in the 2008/09 (July/June) agricultural year.
Russia exported a record 23 MMT of grain during the 2008/09 marketing year just ended, according to the Agriculture Ministry. Of that total 18 MMT was wheat, making Russia into the world’s third largest wheat exporter after the US and EU-27.
That amount comfortably exceeded Russia's previous grain exports record, which was reached in the 2002-2003 agricultural year when the country exported 15.8 MMT of grain.
For 2009 Russian wheat production is seen at 58 MMT according to the IGC, that’s almost 9% down on last season. Private Russian analysts SovEcon peg the crop closer to 60 MMT.
Despite a drop in production, Russia is likely to remain an aggressive exporter in 2009/10, with the USDA currently predicting exports of wheat steady at 18 MMT.
CBOT Closing Comments
Soybeans
July soybeans closed at $12.58 ½, up 32 ¼ cents, November beans finished at $10.15 ½, up 34 ½ cents. This still looks like a game of two halves to me. Old crop is tight and could do anything, especially if China continues to confound the market and spot buy. There is definitely potential for (lack of) supplies across the next couple of months to spike spot prices sharply higher. Beyond that though I wouldn't touch beans with a bargepole. New crop supply potential is enormous, and also South America will weigh in with a huge crop in the spring, unless Mother Nature sticks her oar in again. Soybean export sales estimates for Thursday’s report range from 125-400,000 MT.
Corn
July corn closed at $3.51 ¾, up 4 cents, December corn at $3.69 ¼, up 2 cents. After last night's sharp falls the market took stock today. US weather remains conducive for a very nice crop this year, but spillover strength from beans added a bit of support. As with soybeans, the longer term fundamentals look bearish for corn. Corn export sales estimates for tomorrow’s report range from 550-850,000 MT.
Wheat
July CBOT wheat closed at $5.06 ¼, down 5 cents. Seasonal harvest pressure and the USDA surprisingly finding another 1 million acres of wheat in yesterday's report weigh on the market. Wheat export sales guesses range from 250-350,000 MT for tomorrow’s USDA report.
EU Wheat Recovers Slightly Wednesday
EU wheat futures recovered somewhat from a complete mauling Wednesday, with Paris November milling wheat closing unchanged at EUR139.50/tonne, and London November feed wheat ending up GBP0.75 at GBP113.25/tonne.
Prices look like they well overdone on the downside Tuesday after a massively bearish USDA report, and corrected a little today.
The validity of the USDA figures is certainly being questioned in some quarters, exactly how they could find one million more wheat acres from their March prediction is certainly open to debate.
Still, harvest pressure seems set to keep a lid on any potential rallies at the moment
Egypt's GASC bought 90,000 MT of wheat in a tender today, again passing on Russian wheat to book French and US material.
That news may provide a little support tomorrow.
Argentine Wheat Area Lowered Again - Exchange
The Buenos Aires Cereals Exchange lowered it's estimate of the total wheat planted area for the 2009/10 crop once again Wednesday, this time cutting it to 2.8 million hectares.
So far only 1.37 million hectares have been planted it said, leaving farmers needing to double their plantings to meet that target with only four weeks left to go of the normal planting season which began at the beginning of May.
That looks like a pretty tall order.
When you consider that they only got 2 MT/ha last year, even if they do manage to get it all in the ground then a crop of only 6 MMT, maybe less, looks likely unless rains arrive.
The soybean harvest is now complete and will total just 32 MMT the Exchange said, that's a far cry from early season expectations of a crop of 50 MMT.
eCBOT Close, Early Call
The overnight eCBOT trading session is now extended to trade until 13.15 BST, not a 12 noon close.
Beans closed sharply higher, around 20 cents up, with wheat around 8 cents higher and even corn manging to post modest 4 cent gains.
Late strength in beans from last night's main CBOT session spilled over into the overnights with traders seeming to view yesterday's early wobble as a buying opportunity.
Soybeans were the only thing that didn't throw up a bearish surprise as far as plantings were concerned, rising around half a million less than analyst's estimations. Still, quarterly ending stocks were a little higher than trade ideas.
Even so, if we can piece together a bullish argument for beans it has to be based around old-crop tightness, maybe spilling over into the early new-crop months on the probability of a late harvest.
The large increase in corn acres was a shocker and futures closed at or around limit down last night. Crop reports generally seem to indicate that US corn is looking in great shape. It's hard to whip up too much enthusiasm for going long right now.
Wheat is a more interesting proposition, despite surprisingly raising the acres the USDA also said that only 80% of the winter wheat crop planted would actually get harvested.
Sharply lower production from Argentina may not yet be fully factored into this market. The USDA still have a figure of 11 MMT for 2009/10 and 4 MMT being exported. Both those numbers look massively overestimated.
Harvest pressure from the US, and shortly from Europe isn't going to see wheat stage some sudden huge bull anytime soon run mind you.
Crude oil is higher after the API dropped it's stocks estimate by a large 6.8 million barrels last night. The US Energy Dept are out with their estimate at 15.30 BST, that is expected to show a more modest fall of around 1.5 million barrels.
The dollar is a bit weaker, and equities a little firmer.
Early calls for this afternoon's CBOT session: corn called 2 to 4 higher; soybeans called 15 to 20 higher; wheat called 5 to 10 higher.
World Wheat: Thinking Outside The Box
The world is awash with wheat and stocks are forecast to get even higher next season. That's what everybody is telling us.
Our chums at the USDA say that global wheat stocks will have recovered from a low 120 MMT in 2007/08 to 168 MMT this season and 183 MMT by the end of 2009/10. (The IGC peg next season's ending stocks somewhat lower at 168 MMT, but let's run with the USDA numbers for now).
Who is holding these stocks is an interesting question. Dig a little deeper and the stocks figures aren't as bearish as it might appear at first glance.
A few key exporting countries (like the United States, EU, Canada, and Australia) are surplus producers who consistently supply the world and hold carryover stocks available to the market. History has demonstrated that there is a strong inverse relationship between global prices and the reserves held by these countries, say the USDA themselves.
Meanwhile reserves held by countries like China and India rarely come onto the export market.
Global Wheat Ending Stocks (in MMT):
2007/08 2008/09 2009/10
Australia 4.687 5.462 5.987
Canada 4.561 7.531 6.531
China 38.963 48.413 59.713
EU-27 12.414 20.482 17.443
India 5.800 13.910 16.910
Iran 3.157 4.507 6.057
Russia 1.819 8.969 10.269
US 8.323 18.217 17.610
Others 40.241 40.906 42.130
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Total 119.965 168.397 182.650
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You will note that much of the increased stocks in 2009/10 come from traditionally non-exporting nations such as China, India and Iran. If we reproduce the table without those three we get this:
2007/08 2008/09 2009/10
Australia 4.687 5.462 5.987
Canada 4.561 7.531 6.531
EU-27 12.414 20.482 17.443
Russia 1.819 8.969 10.269
US 8.323 18.217 17.610
Others 40.241 40.906 42.130
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Total 72.045 101.567 99.97
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Add to that the possibility that the IGC are correct and that the USDA estimates for 2009/10 are 14-15 MMT overstated, and that maybe throws a different complexion on things.
Note that the world's top six exporting nations will account for around 82% of all global wheat trade in 2008/09, according to the USDA. Production in these is:
2008/09 2009/10
EU-27 151.7 132.6
US 68.0 57.0
Russia 63.7 59.0
Canada 28.6 23.6
Australia 21.5 22.0
Ukraine 25.9 18.0
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Total 359.4 312.2
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So the world’s top six exporters are set to produce around 47 MMT, or 13%, less wheat in 2009/10. Meanwhile, the world’s seventh top exporter in 2008/09, Argentina, is set to produce so little wheat and with negligible carry-in stocks after back-to-back droughts that it probably won’t have anything to export at all.
These are the countries that count, China can hold all the wheat it likes without it affecting the global market one jot if it's neither a buyer or a seller. If you want to buy wheat this is where you go to shop, and stocks and production amongst the main players isn't rising in 2009/10, it's falling.
Jordan Buys, Japan Seeks Barley
Jordan has bought 100,000 MT of Ukrainian barley at USD168 C&F from the Ukraine trading house Nibulon, according to media reports.
The barley will be delivered 50,000 MT first half August and 50,000 MT first half September.
Japan meanwhile is tendering for 200,000 MT of feed barley for July/October delivery, according to it's Agricultural Ministry.
USDA Report - The Small Print
In amongst the bombardment of activity following the volume of data thrust at us by the USDA yesterday, and the incredulous nature of some of it, it may take a day or two to sift through it all and put it into some sort of order.
One statistic that's sprung to my notice this morning concerns the winter wheat area.
Winter wheat accounts for around three quarters of the total US wheat area, including durum, coming in at 43.448 million acres of a total area of 59.775 million.
Typically, a fairly hefty chunk of this never actually sees a combine, and is often abandoned for grazing or ripped up and replanted with something else, depending on how the crop develops.
Last year only 86% of the planted winter wheat area actually got harvested as grain.
This year the USDA see that figure dropping to 80% after the wide scale failure of crops in states like Texas and Oklahoma.
That means that the actual production numbers may not be quite as bearish as the bare acreage figure suggests when they come out with their revised Supply & Demand estimates later this month.
Egypt's GASC Tendering For Wheat
Egypt's state wheat buyer GASC is back in the market tendering for wheat today, saying that it is seeking 'at least' 55,000 MT.
Last week Egypt bought it's first wheat since the end of April, buying 60,000 MT of French wheat at $191.44/tonne FOB.
The price was said to be around $7/tonne dearer than Russian wheat offers, which would also have benefited from cheaper freight.
Will they continue to snub Russian wheat, despite apparently reaching an accord over recent quality issues?
El Nino Weather Event 'Likely'
The Australian Bureau of Meteorology say that more evidence of a developing El Niño event has emerged during the past fortnight, and computer forecasts show there's very little chance of the development stalling or reversing.
El Niño events are usually (but not always) associated with below normal rainfall in the second half of the year across large parts of southern and inland eastern Australia, they say.
El Niño occurs when sea surface temperatures warm up in the central equatorial Pacific Ocean, Really severe damage occurred in recent El Niño cases in 2002 and 2006 when less than half a normal wheat crop was harvested.
Crude Oil Leaps As Stocks Fall Sharply
Crude oil was higher in early trade Wednesday morning, after the American Petroleum Institute said crude supplies fell a whopping 6.8 million barrels to 349.7 million last week.
That's the largest decline in US inventories in more than nine months.
Yesterday, crude briefly popped above $73/barrel for a eight month high, before falling back after data showing a decline in US consumer confidence, to settle at $69.89/barrel.
At 9am London time crude was $1.17 higher at $71.06/barrel.
The US Energy Department will report their stocks data later this afternoon.
