EU Wheat Closes Mixed
EU wheat futures closed higher Wednesday with November Paris milling wheat ending up EUR0.50 at EUR125.75/tonne, and London November feed wheat ending down GBP0.50 at GBP100.15/tonne.
London wheat was again sharply higher earlier in the session, but failed to hold onto those gains as farmer selling kicked in.
Increased production from Russia was forecast by SovEcon, and a sharply reduced intervention buying programme for 2009/10 by the Russians might also have a negative impact on the competitiveness of EU wheat on the export front.
The German Ag Ministry say that wheat output there will come in at just under 25.2 MMT (including a small amount of durum wheat) this season. That is more than a million tonnes under some other private estimates from the likes of the IGC.
Wheat production in Argentina is seen at just 7.1 MMT according to the Buenos Aires Cereals Exchange. That's 15% down on last season, and less than half what they've been used to producing.
CBOT Closing Comments
Soybeans
Nov soybeans closed at $9.12, up 2 cents, and Oct soymeal closed at $290.70, up $5.20. Weather remains a concern with wet cold and freezing conditions forecast for the end of the week. CONAB say that Brazilian soybean production will rise to 62.3-63.3 MMT in 2010, up from 57 MMT last season. Estimates for tomorrow's USDA weekly export sales report range from 675,000 to 925,000 MT.
Corn
Dec corn settled at $3.59 ¾, up 1 ½ cents. Rain, snow and frost are all in the forecast for later this week in the Midwest. That will maybe knock a few bushels off yields, but will certainly cause quality issues with this late developing crop. A higher US dollar and lower crude oil futures pressured futures, limiting some upside movement. Trade estimates ahead of Thursday's USDA weekly export sales report for corn range from 650,000 to 1 million MT.
Wheat
CBOT wheat finished at $4.63 ¼, up 3 cents. Japan is looking for 147,000 MT of wheat in it's usual weekly tender tomorrow, 86,000 MT of that will be US origin. SovEcon say that the Russian wheat crop will now amount to 60-61 MMT, back in the summer they were forecasting only 55 MMT. Estimates ahead of Thursday's USDA weekly export sales report for wheat range from 400,000 to 600,000 MT.
US Weather: Jingle Bells
I guess if you've had beneficial weather for this long you have to be expecting a kick in the teeth sometime.
Wet weather begins in earnest Thursday from Wisconsin to Texas. Heaviest rains will fall in Missouri and Illinois with 3-4 inch totals, says Allan Motew of QT Weather.
Snow and cold also arrives in two waves, the first from South Dakota to Kansas Thursday then a larger area in the Dakotas, Nebraska, Kansas, Minnesota and NW Iowa, Saturday. Snow and a cold rain are also possible in Illinois Sunday, and Michigan, Indiana and Ohio Monday, says Allen.
One to two inch snows start tonight in South Dakota, with falls of up to five inches in the Black Hills, before snow pushes on to reach Nebraska, NW Kansas and even E Colorado too, with anything from a trace to three inches possible, he adds.
Additionally, elsewhere there will be halted harvest progress for many farmers as rains leave flooded fields from Oklahoma to Ohio, Thursday and Friday. After that a second round of snow falls Friday and Saturday this time reaching eastward into Minnesota, E Nebraska, W Iowa and NE Kansas. NE North Dakota can expect greater than 6 inches he says.
Following on from that lot, the next system arrives late next week (Friday/Saturday) across all ready soggy Missouri, Illinois and Indiana, he concludes.
SovEcon Increases Russian Crop Estimates
This season's Russian grain crop will now total 96-97.5 MMT in clean weight, say SovEcon, significantly higher than the official Russian Ag Ministry of Lies forecast of 90 MMT. That's around 10-11% down on last season's 108.1 MMT.
The wheat crop will now amount to 60-61 MMT, they say, a reduction of around 5% on 2008's 63.8 MMT.
eCBOT Close, Early Call, US Selling Ethanol To Brazil?
The overnight session closed mostly a little higher with wheat and corn up around 2 cents or so and beans down 3/4 to up 1 1/4 cents.
Rain and freezing conditions are on the way for the US Midwest with snow in the northern and central Plains.
Whilst this might not knock too much off final yields it is enough to keep the market a little nervous. Quality might be more of an issue though. The cool and wet summer has caused some problems with mold in early harvested corn, according to some reports.
Stories are also circulating that the US has sold corn ethanol to Brazil, normally the world's largest ethanol exporter. The story goes that with world sugar prices so high Brazil is using it's sugar cane to make sugar not ethanol, and might soon start to import US product as all gasoline sold in the country contains 25% ethanol.
There are obvious bullish demand implications for US corn if that proves to be the case. Rabobank recently pegged US corn for ethanol use in 2009/10 at 4.3 billion bushels, or around a third of the entire US crop.
Brazil will produce around 51-52 MMT of corn in 2009/10, say CONAB, a similar amount to last season. Soybean production will rise to 62.3-63.3 MMT, they say, up from 57 MMT last season. The soybean estimate is in line with Abiove's prediction of 63.4 MMT late last week.
Japan is looking for 147,000 MT of wheat in it's usual weekly tender. 86,000 MT of that will be US origin.
Speculative funds and traders are still short big-time on CBOT wheat, leaving the market vulnerable to a sharp upwards correction as was witnessed last night.
Early calls for this afternoon's CBOT session: corn called 2 to 3 higher; beans called steady to 2 higher; wheat called 1 to 3 higher.
I See That The Egyptians Are At It Again
We've moved on a level or two from faking your own import documents and quality certificates here.
Egyptian politicians have called for the innovative Artificial Virginity Hymen Kit to be banned.
You think I'm definitely making this one up don't you?
Would I lie to you baby?
How Big Is Germany's Wheat Crop?
The IGC recently said 26.4 MMT, a small increase on last season despite reduced plantings, with yields averaging around 8 MT/ha.
The agriculture ministry have just upped their estimate by 100,000 MT, but still only to just shy of 25.2 MMT (including a small amount of durum wheat).
That's a fairly substantial difference of opinion is it not? Not as substantial as getting confused over which adjacent countries belong to you granted, but significant nevertheless.
Barley output is held steady at 12.3 MMT (12.0 MMT in 2008), whilst rapeseed production is also increased by 100,000 MT to 6.3 MMT, 21% higher than in 2008.
Argy 2010 Soybean Crop Seen Up 62%
Argentina will produce 52 MMT of soybeans in 2010, according to the US agricultural attaché. That's an increase of 62.5% on last season drought-riddled crop of just 32 MMT.
Plantings will come in at a record 18.5 million hectares, up 7.5% from last year's 17.2 million ha, he says.
Yields will come in at 2.81 MT/ha, up from just 2.00 MT/ha in 2009, he estimates.
The increased production will enable domestic crush (in the marketing year Apr10/Mar11) to increase to 37.0 MMT from 32.5 MMT. Bean exports will almost triple to 12.0 MMT from 4.2 MMT, he says.
He also forecasts sunseed output at 3.5 MMT (2.9), with plantings up to 2.0 million hectares (1.8) and a yield of 1.75 MT/ha (1.60).
Note: His record soybean area figure of 18.5 million hectares is actually towards the low end of some trade estimates, 19-20 million have been mentioned elsewhere. They've just dropped their wheat planted area alone by almost 1.5 million hectares remember.
Taxi Driver And 13 Year Old Girl Win Ploughing Competitions
Bill Tonkin, a Cheddon Fitzpaine taxi driver, took the overall championship ploughing cup in this weekend’s Crewkerne Young Farmers Club annual ploughing match. He obviously took his time as the meter was running. Why anybody should be surprised about a taxi driver driving up and down a field fifteen times when he could have simply gone straight across it is beyond me.
Meanwhile, a 13-year-old school girl beat 40 experienced rivals to claim first place in a ploughing competition at Redbourn Berry Farm, Herts. The girl, Elly Deacon, had only driven a tractor for the first time four days before the event and had just four hours worth of practice. It's a good job she didn't have to reverse it into a parking space as well that's all I can say.
UK Winter Planting Progress
The very dry September allowed good progress to be made with drilling crops for 2010, say ADAS.
All winter oilseed rape crops have now been drilled with the earliest sown crops now well established. Later sown OSR, which went into much drier ground, has struggled to emerge they say.
Winter wheat drilling began in early September followed by winter barley, second wheats and winter oats. An estimated 50—60% of winter cereals were drilled by the end of September, they add.
As with OSR, cereals drilled early into moist seedbeds have emerged and are now at around 1-2 leaf stage. For crops drilled later into dry seed beds emergence is more patchy, they conclude.
Lower fertiliser prices, poor malting barley prices and the prospect of no barley intervention next year could see more wheat and oilseed rape getting planted this winter.
ADAS see UK wheat plantings rising to 2 million hectares from 1.8 million hectares in 2008. OSR area should also increase from 571,700 hectares to 600,000 hectares or more, they say.
Barley plantings will lose out, particularly spring barley which saw an increase of a third this season to 424,400 hectares.
A change EU subsidy rules, aimed at encouraging cultivation of a wider range of crops, which comes into effect in 2010 may also promote a bit of diversification into other protein crops such as peas.
Indian Politics, Lying And Time-Wasting
It's a good job we don't play them at football, that's all I can say.
If you thought that our own politicians were a namby pamby bunch of in it for myself ne'er-do-well Johnny come-lately's then take a shuftie at India. What a nest of self-centred smarmy exponents of the art of untruths they are.
Having told reporters only yesterday that the government would release 1.5 MMT of wheat onto the domestic market to stave off spiraling food prices, India's junior food minister K.V. Thomas today has upped the ante now saying that 3 MMT will soon be released. (Note the avoidance of a specific date when this fantastic event will actually occur).
Of course, we've been hearing this for months now, and for months nothing has happened. They've got 30 million tonnes of wheat in store for a rainy day, we all know that. Well Tommo my old chumbawumba it's raining cats & dogs out there so show me your money.
Hang on, calm down, calm down...Indian Finance Minister Pranab Mukherjee, is playing down increased food prices pushing up inflation after the worst monsoon rains since 1972 hit summer crops.
"Even if there is shortfall of grains to the extent of 10 million tons in this year, the surplus we have (makes it)...manageable," Mukherjee is quoted as saying. "I'm not overly concerned with that."
Well I'm glad that YOU aren't overly concerned, the hungry masses might see the situation differently. So get your finger out Mukherjee my old mucker, and release the wheat rather than talking about it.
Hang on a minute, there's a slight problem, didn't see this one coming did we boys & girls...
Mukherjee says that the government need to wait and see to what extent winter crops can compensate for summer crop losses, and that they can't do that until "end of November, the middle of December."
Now, does anyone smell a rodent?
Ukraine Harvest/Exports
The harvest in Ukraine is drawing to a close with 90% of the planted area cut as at Oct 6, producing 40.35 MMT of grain.
Unlike their Russian counterparts, the Ukrainian ag Ministry's forecast of a crop of 42-43 MMT looks pretty accurate, a reduction of about 20% on last year.
Undaunted by lower output cash-starved Ukraine are matching last year's record export pace, having shipped 6.6 MMT already in the first three months of the marketing year to Sept 30. That's well over a third of their 2009/10 MY target of 18 MMT gone already.
Of that total 3.7 MMT was wheat, which is 15% up on the first three months of MY 2008/09.
On a positive note for the rest of us, at these rates the Ukrainian cupboards should be bear by the spring.
I've got a funny feeling about Ukraine. I feel somehow that they might have turned up at a party fashionably late, thinking they were cool clutching a bottle of Lambrini, only to find just a couple of die hard stragglers left.
Europe's over there throwing up down the back of the sofa. Russia's gone off to his private club in town with all the nice birds. And there's only the ugly twins of Bulgaria & Romania wearing skirts that are far too tight, with faces like a bulldog licking p*ss off a nettle, left.
Still, there's always next year's Eurovision entry to work on. "Happy ding dong p*ss p*ss boom boom" I think it's called, it's ever so catchy 12/1 with Ladbrokes, get in.
Buy, Buy, Buy
Gold ‘Off The Charts’ is a headline that catches my eye this morning. Gold reached a record $1,043.78 an ounce yesterday on ideas that owning the commodity is better than putting money in the bank with interest rates at fourth fifths of bugger all.
Let's all pile in on this sure thing, bullion has “significant upside potential” to reach as high as $1,500 an ounce, Barclays Capital gleefully tell us, not that they have a vested interest you understand.
Bloody hell if only I'd held onto those rings that Mrs Nogger #1 and #2 threw back at me I'd be quids in. Even the infamous cubic zircona one must have had some gold in it surely? I used to wear #2's ring as well as it happens.
It seems that these investment houses are DESPERATE for something to hang their hats on at the moment. They seem to have done quite well out of cocoa and sugar recently too, how long before their attention turns back to that well-known biofuel feedstock wheat?
Here's Something You Probably Didn't Know
The Reserve Bank of Australia put interest rates up by 25 basis points to 3.25 percent yesterday.
What the chuffing Nora has that got to do with anything Nogger, I hear you ask.
Well, it's quite shocking when you think about it. Such a relatively low interest rate, wouldn't we all have loved to have had a 3.25% mortgage for the last twenty years, just happens to be six and a half times better than what your money gets you here in the UK.
Suddenly anywhere that's safe and offers the dizzy heights of 3.25% looks mightily attractive for investors.
So much so in fact that the Ozzie dollar hit its highest level against sterling since early 1985 yesterday.
Still, who's got the ashes eh?
Chicago Closing Comments
Soybeans
Nov soybean closed at $9.10, up 25 cents, and Oct soymeal closed at $285.50, up $10.00. Rain, cold, snow and freezing temperatures are forecast for large parts of the northern Midwest over the next week or so. Given the late nature of this season's crop the market seemed to need to add a bit of 'protection money' into current prices. A sharply lower US dollar index and higher crude oil futures provided additional outside market support.
Corn
Dec corn finished at $3.58 ¼, up 16 ¾ cents. A poor weekend weather forecast, given the slow state of crop maturity announced by the USDA last night is making the market a bit nervous. A sharply lower US dollar index and higher crude oil futures provided additional outside market support.
Wheat
Wheat settled at $4.60 ¼, up 17 ½ cents. Spillover strength from beans and corn helped wheat today, as did a steeply dropping US dollar index. Whilst spec shorts have reduced their exposure recently, they are still heavily short on wheat. That leaves the market vulnerable to a corrective bounce for little or no apparent reason.
EU Wheat Closes Higher
EU wheat futures confounded the "world is awash with wheat" brigade by closing sharply higher Tuesday.
November Paris milling wheat closed up EUR1.75 at EUR125.25/tonne, whilst London November feed wheat traded up GBP2.05 at GBP100.65/tonne.
Certainly a very poor performance by the pound helped support London wheat today.
EU farmers don't much care for the look of current bids and are busy planting rather than selling at the moment.
Still, consumers have seen wheat prices come down a very long way since the beginning of June and are in no mood to capitulate just yet, despite recent price rises.
It still seems like winter wheat plantings in western Europe will be higher for the 2010 harvest, but things could be markedly different elsewhere.
Most parts of the UK appear to have had a much-needed very good soaking of rain over the last 24 hours.
More Russian Lies
This season's Russian grain harvest now amounts to 93 MMT as of October 6, off 39 million hectares, or 85% of the planted area.
That's 3 MMT more than the official government estimate for the entire crop, with 15% still left to be harvested.
Only last week did Russia's farm minister Yelena Skrynnik finally grudgingly raise her official estimate from 85 MMT to 90 MMT, and already she's been caught out trotting out another load of complete pants.
Still, here's a much more interesting fact.....
The word Skrynnik in Scrabble (obviously it has eight letters so you are using a letter already on the board) is worth what? That's right Yelena Skrynnik is worth a 69.
The Big Freeze
A widespread freeze is on the cards for the US Midwest this weekend with temperatures forecast to fall as low as 19 degrees in the Dakotas on Sunday night, according to QT Weather.
Freezing temperatures will push as far south as Nebraska, and will also reach into northern Missouri and Central Illinois, they say.
Temperatures will be 12-24 degrees below normal over the Western Corn Belt and Northern through Central Plains Sunday. Before that snow will work its way across the Dakotas Friday and Nebraska into W Iowa Saturday evening. Snow is also seen for N Minnesota and NW Wisconsin, they add.
Whether this scenario has come too late to knock anything off yields remains to be seen. Certainly last night's progress figures from the USDA would appear to suggest that it might.
India Finds The Key To The Magic Cupboard
Hurrah, India's junior food minister K.V. Thomas has told reporters that he's found the key to the magic wheat cupboard. All will soon be well and the country's population of over a billion will be able to get some bread very shortly.
If I read one more time that "the government's wheat stockpiles as of Sept 1st were 30 million tonnes" then I will surely burst a blood vessel.
The government will release a whopping 1.5 MMT of wheat onto the domestic market "in phases over the next two to three months" says Thomas.
Well that's going to sort the job out isn't it Tommo? Does anyone here remember that episode of the Young Ones where they're having a party back at the house? Assorted student types turn up for a p*ss up and Rik casually tosses a group of them four of those very small cans of lager that you get in hotel mini-bars saying "there you go get stuck into that lot."
That's about as much use as 1.5 MMT is spread over 2-3 months in a country that consumes almost 6.5 MMT/month of the stuff.
Pound Takes Another Hammering
I've written here before recently that the pound appears to be competing head-to-head with the dollar as to which of the majors is the weakest currency.
At the moment sterling appears to be winning that particular race in the style of a thoroughbred.
UK industrial production data out today came in devastatingly weak, and much lower than forecast, forcing some heavy selling of the pound across the board.
UK industrial outputs unexpectedly plunged 2.5% in August after rising 0.5% in the previous month, with the annual rate of production tumbling 11.3% from the previous year, while manufacturing slipped 1.9% from July to mark the lowest level of outputs since 1992.
The data appears to underline the fact that the Bank of England’s unprecedented steps to shore up the ailing economy will need to continue for some time. Indeed, the chances of having to extend QE measures as soon as November suddenly look a lot more likely.
Meanwhile, investors continue to speculate that the European Central Bank will tighten it’s fiscal policy next year. ECB council member Erkki Liikanen said that central bank will withdraw its emergency programs “when the economic situation allows.”
Parity here we come.
EU Wheat Ends Marginally Higher
EU wheat futures started the week closing marginally higher with November Paris milling wheat closing up EUR0.25 at EUR123.25/tonne, and London November feed wheat ending up GBP0.10 at GBP98.60/tonne.
Rolling forward of November longs into January was a feature. Traders still report that farmer retention remains strong, despite recent price rises.
Growers are busying themselves with winter drilling, and increased wheat and rapeseed plantings look to be on the cards at the expense of barley.
Most pundits are projecting the UK wheat area rising from 1.8 million hectares to around 2 million for the 2010 harvest. Similarly the UK OSR area is seen growing from 571,700 ha to "at least 600,000 ha," according to ADAS.
A very dry September is a concern for UK and many EU producers, as newly planted OSR (and in some cases wheat) has not got off to a very good start. In the UK most of the country is expected to get a fairly good soaking Tuesday. The first for more than a month in many parts, after large parts of the UK got only a fifth of normal rainfall during September.
CBOT Closing Comments
Soybeans
Nov soybeans closed unchanged at $8.85/bushel, with Oct soymeal closing at $275.50, up $3.50, and Oct soyoil closing at 33.53 cents, down 20 points. Support came from a weaker dollar and US weather forecasts calling for periods of rain this week combined with below normal temperatures. After the close of pit trading, the USDA reported soybean harvest at 15% completed which fell well below trade estimates. Soybean maturity came in at 79%, which is 9 percentage points behind the 5-year average.
Corn
Dec corn settled at $3.41 ½, up 8 cents, hitting an eight-week high earlier in the session on ideas that cold and wet weather will further delay an already late US corn crop. Better than expected weekly export inspections at 38.405 million bushels provided support as well. After the close of trading, the USDA reported corn harvest at 10% completed which fell on low end of trade estimates. Corn maturity came in at 57%, which is 27 percentage points behind the 5-year average.
Wheat
December wheat finished at $4.42 ¾, up 1 ½ cents. Spillover from corn lent supportive tone to wheat futures, as did a weaker US dollar. After the close of pit trading, the USDA reported spring wheat harvest at 97% completed and winter wheat plantings at 53% completed. Spec money liquidated some of its heavy shorts in wheat last week, according to CFTC data. Although most of the major media reports still trend on the side of bearishness towards wheat, the sheer weight of spec shorts leaves the market vulnerable to a corrective upswing for little or no reason.
eCBOT Close, Early Call
The overnight market closed mixed with beans around 4 cents lower, corn a cent or two easier and wheat around a cent higher.
A weak dollar is supportive to grains, but record soybean and corn production is imminent. I think that prices may work lower throughout the session, as traders start to think about the USDA report on Friday at least partially concurring with Informa and FCStone from last week.
Brazil will produce a record 63.4 MMT of soybeans in 2009/10, according to Abiove. That's 1.4 MMT more than the USDA's September estimate and an 11% increase on last season.
And Lord knows how many beans Argentine farmers will plant, suffice to say acreage there will comfortably exceed anything that they have seeded before.
Iraq, Morocco, Jordan and Bangladesh are all tendering for wheat.
Spec funds and non-commercial traders are still heavily short in CBOT wheat but have reduced the size of their liabilities this last week.
Crude oil is lower at around $68.50/barrel.
Early calls for this afternoon's CBOT session: corn called steady to 2 lower; beans called 2 to 4 lower; wheat called flat to 2 higher.
Market Bites
Morocco is tendering for up to 600,000 MT of wheat according to some reports. There are apparently some financial inducements available on US wheat that aren't applicable to other origins. This may help at least some of the tender to be won by US sellers.
Iraq are also in the market for 100,000 MT of wheat and Bangladesh is to tender for 60,000 MT of wheat for Nov/Dec delivery.
Kazakhstan say that this years grain harvest will total almost 21 MMT in bunker weight, and that the country will export 9-10 MMT of grains in the 2009/10 marketing year.
Late rains in India might help winter wheat plantings this month, as every cloud has a silver lining. However summer rice production in key state of Andhra Pradesh might be down as much as 30%. Summer soybean output in the states of Madhya Pradesh and Maharashtra is also being hit by late season floods just as the crop is ready to be harvested.
It's a new month so that means another BoE meeting of the MPC Thursday. No changes are expected to interest rates or the level of QE just yet.
The dollar is down after poor jobs data Friday, and as G7 finance ministers stayed silent on the recent weakness in the greenback at their summit in Istanbul over the weekend. The pound has just popped back above $1.60.
The overnight eCBOT market is narrowly mixed, with a weak dollar supportive but recent crop estimates from Informa and FCStone likely pointing to an upward revision in US production numbers from the USDA on Friday.
Egypt Seize French Wheat
In the latest twist to the ongoing saga of Egyptian wheat quality-control standards suddenly becoming the most exacting in the world, a 63,000 MT cargo of French wheat has been seized by the authorities.
The wheat, which arrived in the port of Sagafa on Sept 19, is said to contain 'poisonous' seeds at more than double the permitted limit of 20 seeds/kg.
It may be possible to removed the seeds by sieving to make it conform to GASC's exacting standards after which it may be released to enter the food chain or be re-exported, the local quarantine authorities say. The picky buggers.
Brazilian Coop Goes Pop
One of Brazil's largest grain cooperatives has gone into liquidation, according to media reports.
Cooperativa Agropecuaria e Industrial, or Cooagri, which was founded in 1957 was declared insolvent by a court in the Brazilian city of Dourados, according to the local newspaper Valor Economico.
The cooperative had an annual sales revenue of around US$590 million, and almost 1,000 employees.
In February this year the cooperatives members unwisely vetoed a proposal from the board to lease their 18 units in Mato Grosso do Sul to ADM for a period of five years.
No doubt ADM will now attempt to resurrect that deal at a knock-down price. Smart move by the members there!
CBOT Closing Comments
Soybeans
Soybeans finished sharply lower, closing below $9/bushel for the first time since March. November beans finished the day at $8.85, down 33 cents whilst October soymeal closed at $272.00, down $12.70. Informa Economics said that US soybean production this season would total a record 3.383 billion bushels, with an average yield of 44 bushels per acre. The numbers are slightly higher than FCStone's estimates earlier in the week. They are also well above the USDA's September prediction of 3.245 billion bushels with an average yield of 42.3 bushels to the acre. Brazil will produce a record 63.4 MMT of soybeans in 2009/10, according to Abiove. That's 1.4 MMT more than the USDA's September estimate and an 11% increase on last season.
Corn
December corn closed at $3.33 ½, down 7 cents. Spillover weakness from soybeans put corn under pressure. Informa said that US corn production, as with soybeans, will be set an all-time record of 13.127 billion bushels with an average yield of 164.7. Again, as with soybeans, both numbers are slightly higher than FCStone's estimates earlier in the week and well above the USDA's September figures of 12.954 billion bushels with an average yield of 161.9 bushels to the acre.
Wheat
December wheat closed at $4.41 ¼, down 11 ½ cents. Weakness in soybeans weighed on wheat, driving prices to close at or near contract lows. Stats Canada increased their Canadian wheat production estimate by almost 1 MMT from last month to 24.581 MMT. The US spring wheat harvest is just about finished and winter wheat plantings are in line with average with a little over a third of the crop planted.
EU Wheat Closing Comments
EU wheat futures closed mixed with a weak pound helping London close flat to a tad higher, whilst Paris was slightly lower.
November Paris milling wheat closed down EUR0.75 at EUR123.00/tonne. London November feed wheat finished up GBP0.25 at GBP98.50/tonne.
It's the same old stand-off, with end-users expecting lower prices round the corner once farmers have finished sowing winter crops.
Canada became the latest in a long line of countries to confirm that this season's wheat crop might be down on last season, but it is significantly higher than what was expected a month or two back.
All wheat output will total 24.58 MMT this season said Stats Canada, almost 1 MMT higher than their September estimate.
The news comes just a few days after the USDA also raised US production earlier in the week.
Still, it's not all doom and gloom. Rabobank predict that the EU will seize on low grain prices and increased ethanol levels to increase grain usage in biofuel production by 61% to 9 MMT in 2009/10.
Falling corn prices in the US will also see a corresponding increase in corn usage by the ethanol industry this year, they add.
Stats Canada Production Estimates
Stats Canada are out today with revised production estimates, pegging all wheat output this season at 24.58 MMT, 14% down on last season's 28.61 MMT and below trade estimates, although a million tonnes up on last month's projections.
Barley production is also below trade estimates at 9.16 MMT, down 22% on last year's 11.78 MMT. Canola output was towards the low end of trade predictions at 10.27 MMT, 19% down on last year's 12.64 MMT.
Ukraine: Continuing To Milk The Cash Cow, For Now
Dollar-hungry Ukraine continues to export grain like there's no tomorrow, and for them there possibly is no tomorrow. So far this marketing year (July 1-Sept 24) more than 6 MMT has left it's shores, matching last season's record pace. Of that total 3.27 MMT was wheat, 12% more than at the same time a year ago.
The good news is that with a grain harvest 15% lower than last season, and a wheat crop 19% down they surely can't keep on shipping at this rate.
It should come as no surprise that the majority of their exports will come at the front end of the marketing year, these boys are desperate for cash and price is almost secondary.
The Ukraine economy fell 18% in the second quarter of 2009, following a 20% drop in Q1 as industrial production and construction plummeted in the face of the global economic crisis. The only industry that expanded in Q2 was agriculture, up 2% thanks to last season's bumper harvest and subsequent aggressive exports.
The country was granted $11 billion in aid from the IMF last autumn, but there were some tough conditions to meet in order to keep the cash flowing. The next tranche is due this month, and it seems that the authorities will struggle to push through measures required by the IMF to release the money.
A stable hryvnia was one of the IMF's prerequisites, but that has fallen 15 percent against the dollar since the end of June.
The IMF also called upon Ukraine to stabilize the finances of Naftogaz, which is deep in debt due to subsidized gas prices. But with presidential elections fast approaching in January, the government see raising domestic gas prices as political suicide.
So the country remains stuck in political limbo, hemorrhaging money, with the IMF potentially about to pull the plug. You can see why farming enterprises are currently so eager to get some dollars, but all this comes at a cost.
Agrimoney.com recently reported that Ukrainian farming giant Landkom International are actively seeking a "substantial merger". They also reported that "Landkom's cash balance narrowed to $542,000 at the end of June from $34.5m a year before" after a "disappointing" first half of 2009.
If Landkom are struggling, what are the implications for smaller farming enterprises? Drought, the lack of financial resources and the current low prices for grains look set to see grain production next year lower again.
As recently as 2006/07 Ukraine imposed export restrictions after adverse weather conditions hit crop production hard. The 2009/10 season might be Ukraine's swansong before it "does an Argentina" and departs the international wheat export stage as rapidly as it stormed it.
CBOT Closing Comments
Soybeans
November beans closed at 9.18, down 9 cents. Export sales were strong at 1,384,800 MT, but record production is also round the corner. FCStone said today that US soybean output will be a record 3.329 billion, with a yield of 43.4 bu/acre. Output from Brazil and Argentina will also likely be record in 2010.
Corn
December corn closed at $3.40 ½, down 3 ½ cents. Weekly export sales were good at 1,223,400 MT, but a huge US crop is waiting in the wings with seemingly little threat from frost for the time being.
Wheat
December wheat finished at $4.52 ¾, down 4 ¾ cents. Export sales today were 538,152 MT or 19,773,696 bushels and shipments were 23,196,298 bushels, a marketing year high. Morocco are said to be tendering for 400,000 MT of wheat. Russia looks the favourite seller to me.
EU Wheat Ends Higher
EU wheat futures closed higher Thursday with November Paris milling wheat closing up EUR2.00 at EUR124.50/tonne, and London November feed wheat trading up GBP0.75 at GBP98.25/tonne.
London wheat was aided by a weaker sterling, following news that the manufacturing purchasing managers' index (PMI) fell to 49.5 last month from 49.7 in August.
The trade remains in a general state of flux as both buyers and sellers seem content to stand aside. EU growers are now faced with the conundrum of what to plant for next season. It seems that whilst western Europe may be content to give unprofitable wheat one more chance, in eastern Europe farmers may not have that luxury.
Tight credit and unseasonably warm and dry weather may be forcing a few hands it would seem. Having said that I wouldn't go getting carried away with the idea that wheat prospects will be looking a whole lot brighter in 2010.
If the wheat market is going to move significantly to the upside then I think we need to see a serious production problem somewhere like India over the next few months.
eCBOT Close, Early Call
The overnight session closed a little easier with beans and corn down around a cent or two and wheat off 5-6 cents.
There was a hint of frost in places overnight, but it certainly doesn't seem to be a killer. Another potential drop into the low 30's is seen Sunday, but the main timeframe for a serious sub-freeze looks to be October 9-10.
Export sales were very strong again for beans and corn and respectable for wheat. Actual exports themselves were also strong for corn and wheat. China was once again far and away the biggest buyer of soybeans, booking more than 800,000 MT, with the possibility that they in fact took more than a million if some of the 'unknown destinations' turn out to be Chinese.
It's a national holiday in China now through all of next week, so things should quieten down a little on that front.
FC Stone have increased their production estimates for US corn and soybeans.
Russia have admitted that their official estimate of grain production at 85 MMT was too low and increased it to 90 MMT, which is probably also too low. More serious private estimates from the likes of SovEcon are probably nearer reality at around 95 MMT.
India's summer soybean crop is seen 10% down due to drought. They will shortly begin sowing winter wheat and rapeseed, after summer rains were the lowest in almost forty years. Pakistan will also start sowing winter wheat this month, and conditions there are less than ideal too. With output from the two combined in excess of 100 MMT that situation warrants keeping an eye on.
Morocco are said to be tendering for 400,000 MT of wheat. Russia looks the favourite seller to me.
Chicago wheat got a shot in the arm from month-end short covering last night (who predicted that eh - me!), but is seen giving up much of those gains today.
Not a lot of fundamental change really. For soybeans it's tight old-crop stocks and strong demand from China versus large production round the corner. Throw in potentially record production to come from South America in the new year.
They started planting beans in Brazil's Mato Grosso a fortnight ago, and widespread rains there look like getting the crop off to a good start. Some of these early fast-growing varieties will get harvested in January to take advantage of front-end premiums.
Argy farmers will also plant a record amount of soybeans for harvesting in spring.
So China need to keep their buying boots on, it will however come as a major shock to the US system when they inevitably switch their buying attention to South America in the new year. Where will this record US production go then?
Early calls for this afternoon's CBOT session: corn called 1 to 2 lower; soybeans called steady to 2 lower; wheat called 4 to 6 lower.
USDA Report Monster Export Sales
The USDA today reported another set of monster export sales for the week ended September 24th.
Soybean sales came in at 1,384,800 MT, with China confirmed as taking 808,800 MT of that, plus 'unknown destinations' - which of course frequently means China - taking the lion's share of the remainder with 359,000 MT. Pre-report estimates were for sales of 700,000 MT to 1 MMT.
Corn sales were also above trade expectations of 600-800,000 MT at 1,223,400 MT, up 82 percent from the previous week. Japan (586,900 MT), South Korea (200,500 MT), Mexico (185,100 MT), Guatemala (94,900 MT) and Taiwan (92,900 MT) were the main buyers.
Wheat sales were in line with forecasts of 400-600,000 MT at 538,200 MT. Mexico (69,800 MT), the Philippines (64,300 MT), Nigeria (63,000 MT) and Egypt (63,000 MT) were the main homes.
On the actual physical export front, exports of wheat were a marketing-year high at 631,300 MT. Corn exports were also strong at 965,200 MT, whilst bean exports of 209,000 MT were primarily to China (118,300 MT).
Pound Gets Happy Slapping
Having spent the last couple of days staging a mini rally, the pound is back where it belongs today, the victim of another happy-slapping.
The dollar, euro and yen are believed to have filmed the attack on their mobile phones and are being sought by police in relation to the incident.
Whether the last couple of days struggle back above 1.60 against the dollar was simply due to month-end profit-taking isn't clear. What is known is that the news that the manufacturing purchasing managers' index (PMI) falling to 49.5 last month from 49.7 in August, sparked the incident. A rise to 50.3 had been expected.
Swiss Franc, an innocent bystander said "the pound was just standing over there, looking in the window of Primark. Suddenly these three currencies, I didn't see their faces, came out of Aldi and started calling the him names. Sterling Toss, Pissy Pants Pound, that sort of thing. Next thing he was on the deck crying and taking a right good shoeing.
"Then they ran off in the direction of Ladbrokes singing something about the PMI is falling down, falling down, falling down, you big cry baby. It was horrible," he added.
The Police have appealed for any other currencies that were in Aldi at the time of the incident to come forward, although what it's got to do with Sting and Stewart Copeland I don't know.
FC Stone Crop Estimates
Contrary to my learned chum Eric deCarbonnel telling us that there is no chance of a bumper US harvest this year (see here) FCStone see things slightly differently. I think I know who I'd rather put my faith in.
They say that US corn production will come in at 13.064 billion bushels, with an average yield of 163.3 bu/acre this year. Soybean output will be a record 3.329 billion, with a yield of 43.4 bu/acre, they add.
All those are tweaked a tad higher than their estimates from last month, and up on the USDA's September figures of 12.955/161.9 for corn and 3.245/42.3 for beans.
Panic - We Are All Going To Starve To Death, Soon
I've noticed for a while now that I keep getting hits from a US-based website called Market Skeptics. The site is a blog for self-styled financial & grains guru Eric deCarbonnel.
It's worth a look if only for amusement value, especially for those of you think I'm over-bullish sometimes! Eric takes things to a completely different level. In fact Eric more copies and pastes things to a different level.
Try No Chance Of A Bumper US Harvest for a slice of Eric's useful insight and an extensive display of his copy & pasting skills.
Or even 2009/10 World Wheat Production or Eric's useful timetable for the 2009/10 food crisis, just so you know when to get the shopping in.
You will notice large tranches of copying & pasting from here too. You might also notice large tranches of Eric completely misinterpreting what is being said, or simply arbitrarily throwing his own crop estimates into the fray.
Market Titbits
India's monsoon season is officially over, and produced 23% less rain than normal. The soybean harvest is underway, with soybean production this summer seen around 10% down on the back of poor rains to 9.7 MMT.
The weather hasn't just been playing silly buggers in India. Mexico, who reportedly lost a significant area of corn and sorghum to drought in the summer, has now been hit by floods after torrential rain lashed the country.
And in the Ukraine, winter plantings are being badly hit by drought. Rainfall in August/September was only 25-50% of normal across much of the country. Warmer than normal temperatures and dry winds have also hit the region. The lack of financial resources and the current low prices for grains are also making agricultural enterprises in the country think twice before planting. One estimate I've seen says that winter rapeseed plantings will be 40% down this year on a combination of all these factors.
The Russian Ag Ministry have capitulated and raised their estimate for this season's grain production to 90 MMT, 17% lower than last season. Russia has a domestic requirement for 77 MMT of grains, according to the Ministry, but with carryover stocks from last season they still expect to export 19 MMT this season they say. They will probably end up with a harvest of around 95 MMT and export 22-23 MMT methinks.
The exchange rate for the single farm payment has been fixed at 90.93 pence, my bezzie mate Nigel Joice emails to inform me. This compares favourably to the rate of 79.03p for 2008, 69.68p for 2007, 67.77p for 2006 and 68.195p in 2005.
Robert Wiseman Dairies say that they will deliver better than expected results for the half year to Oct 3rd. Milk sales volumes are up 10%, largely on the back of sales to the Co-op after DFB went down the pan.
CBOT Closing Comments
Corn
Corn futures finished the day on a higher note, helped by the friendly stocks report of 1.674 billion bushels for 2008/2009 and the much lower US Dollar Index. There were some frost reports overnight in Wisconsin and along the Missouri river bottom. Above normal rains are forecast for central and eastern corn from now until October 14th that could keep farmers in some areas out of the field, delaying harvest. Sharply higher crude oil prices helped to lift ethanol prices, ethanol finished at 1.783, up .018 cents on the October contract. Weekly export sales estimates for tomorrow's report range between 600,000 and 800,000 MT. Last weeks sales were 673,300 MT. December Corn at $3.44, up 3 cents.
Soybeans
Soybean futures finished the day higher despite an increase in stocks of 138 million bushels from 110 million bushels estimate in the September WASDE report. Grain prices were supported today by the sharply lower dollar and much higher crude oil prices. The futures price range of soybeans has narrowed over the past 8 trading days remaining above 9.00 and below 9.40 on the November contract. Cash prices are firm in the gulf due to harvest interruption because of rain in the Delta. Above normal rain will also hamper harvest in the Midwest and eastern Grain Belt through October 14th. Estimates for tomorrow's weekly export sales range from 700,000 to 1,000,000 MT. Last weeks sales were 1,367,000 MT. Soybean meal export sales estimates average 150,000 MT and soybean oil estimates average 162,500 MT. November Soybeans at 9.27, up 10 cents
Wheat
Wheat futures closed higher after posting new contract lows this morning. Wheat stocks increased along with production numbers for 2009. December CBOT wheat futures have dropped $2.86 since June 1st of this year because of adequate global wheat stocks and flat demand. Supplies of wheat continue to increase globally as prices have declined on increased stocks. Today's price support may have come from the significantly lower dollar and some end of quarter evening up by speculators. Analyst estimates for weekly export sales are between 400,000 and 600,000 MT. Last week's sales were 517,900 MT. Rain and below normal temps are forecast over the next two weeks in the Central and Northern Plains. December CBOT Wheat at $4.57 ½, up 10 cents
EU Wheat Futures Continue To Edge Lower
EU wheat futures continued to edge lower Wednesday with November Paris milling wheat futures trading flat at EUR122.50/tonne, and London November feed wheat trading down GBP0.50 at GBP97.50/tonne.
The pound was firmer for once, which pressured UK wheat lower, but overall there is a distinct lack of direction.
Growers don't want to sell at these levels, but consumers are also reluctant to buy. The overall trend is certainly lower, so why should end-users come into the market?
The long-awaited USDA report was mildly bearish for US wheat, pegging the spring wheat crop higher than had been anticipated to 587 million bushels.
Egypt passed on French wheat in it's tender yesterday in favour of Russian wheat.
