CBOT Closing Comments
Soybeans
CBOT August soybeans finished 27 1/4 cents higher at USD9.67 3/4; December soymeal ended USD9.80 higher at USD272.20; December soyoil settled 100 points higher at 37.60. Last night's USDA crop ratings were a surprise, cutting good/excellent by one percentage point, when most of the trade had been expecting an improvement. The trade anticipates a cut in US ending stocks in Friday's USDA report.
Corn
July corn ended up 10 3/4 cents at USD3.70 3/4 per bushel; Dec corn ended up 10 cents to USD3.89 1/4. The trade is positioning ahead of Friday's USDA report, but seems to be in no mood to press the downside too much. After the close last night the USDA reported corn as 71% good/excellent, down two points on a week ago.
Wheat
CBOT September wheat ended up 23 cents at USD5.30 1/2, KCBT September wheat was up 24 1/2 cents at USD5.45 1/2; MGE September wheat rose 25 3/4 cents to USD5.61. US spring wheat ratings good/excellent fell one point from last week to 83%, but are still amongst the best since 1990, according to the USDA last night.
EU Wheat Closing Comments
November London wheat closed GBP1.15 higher at GBP118.60/tonne and November Paris wheat up EUR3.50 at EUR160.75/tonne.
Both London and Paris futures recovered well from a lower opening earlier in the day. It's been an impressive rally that we've seen this past week or so, probably the most impressive since the unforgettable days of early 2008. But we should all remember the tears that that one ended in.
Egypt bought only one cargo of Russian wheat in today's tender, paying USD18.50 more for it than in their previous tender little more than a week ago. This wheat was also more than USD18/tonne cheaper than the lowest French wheat tender.
That kind of proves one thing to me. Black Sea grain will continue to be offered at levels that knock EU wheat "into a cocked hat" until they run out of stuff to sell. That probably isn't going to happen now until early 2011.
There isn't much fresh news on yields out of France or Germany this past few days.
A very small number of fields have reportedly been cut in the UK, and yields from those are surprisingly good.
Did You Think I Said Cancel That Sukhovei?
You must have misheard. What I actually said was "no thanks pal, I've had three already".
Here's how it goes:
Tuesday afternoon, experts warn that a deadly wind known as a sukhovei could hit Russian crops this week. Market shoots up.
Wednesday morning, other experts say, phew, there's some cold air forming over Siberia, the sukhovei calledoffi. Market eases back.
Wednesday afternoon, Sukhoveibackoni other different experts to that last lot we got in, they were rubbish, now tell us that Russia has already had three sukhovei's last month. Market shoots up again.
What's next?:
Thursday morning, Sukhovei: I'm Having A Baby By Every Member Of The England Squad (except the gay ones).
Thursday afternoon, Sukhovei: Baby False Alarm Sensation (they're all gay).
Friday morning, Sukhovei: My Waters Broke In The Middle Of Harvey Nicks.
Friday afternoon, Sukhovei: Mistake - That Wasn't My Waters.
I'm loving this, I can't wait for the morning, in fact I might stay up all night now....
Russian Harvest Latest
Russian farmers have got off to a flyer this year, harvesting 5.4 MMT of grain already, according to the Ag Ministry. That's a million tonnes more than at the same time last year, as farmers began the harvest early because of the ongoing drought.
There's another 80 million tonnes to go yet, if you believe what the Ministry say. I don't though, I reckon they'll be all done by tonight!
Nah, not really, but if they do manage to cobble 85 MMT together out of that lot then I'm a World Cup finalist (a Dutchman, geddit).
Still, it's not a problem, as there's 24 MMT old crop stocks left in store, if you also believe what the Ministry say. Unfortunately I don't believe that either!
Although I fully expect the Russians to be aggressive exporters early in the season, we could see things slacken off considerably once we get into the new year, much in the same way that Ukraine faded off the radar early in 2010.
CBOT Early Call
The overnight grains closed with beans up around 6-7c, corn 1-2c higher and wheat mostly a cent or so higher.
Crude oil is dragging itself slowly higher too.
It's likely to be all about book squaring ahead of Friday's USDA report, now that European and Russian/CIS crop losses seem to have been factored into (some would say more than factored into) current levels.
Corn and soybean ending stocks are expected to fall and wheat stocks rise in Friday's report.
US weather conditions look conducive towards another record, or near record, corn and soybean crop this year. Wheat, corn and soybean crop ratings all fell slightly in last night's crop conditions report.
Egypt bought only one cargo of Russian wheat in today's tender, paying USD18.50 more for it than their previous tender little more than a week ago.
Early calls for this afternoon's CBOT session: Corn called 1 to 3 higher; Soybeans called 4 to 6 higher; Wheat called flat to 2 higher.
USDA: Ending Stocks Estimates
Like 'em or loathe 'em, and I think you know which camp I fall into by now, not that I make a habit of falling into camp things you understand, the entire global grain trade will be gathered round in a hushed and revered silence for the latest inane musings of the USDA on Friday.
So once again, just for old time's sake, here's what the trade (and I) think that Washington are going to come up with on Friday:
Ending Stocks (bil bu) Nogger Avg Trade Range June USDA
------------------------------------------------------------------
Corn 1.250 1.404 1.214-1.600 1.603
Beans 0.150 0.171 0.138-0.195 0.185
Wheat 0.970 0.968 0.940-0.973 0.930
Cancel That Sukhovei, My Taxi's Here
Just 24 hours after whipping us all up into a frenzy, the same people that told us yesterday that there was a sukhovei coming, today say that it's missed it's bus and might not make it after all.
I bet the nice people at Google were wondering what was going on yesterday, all of a sudden popular searches like "Michelle Obama's jugs" or "Steven Gerrard, knobjockey" were being replaced by some Russian word that nobody had ever heard of.
It seems that cooler air forming over Siberia is about to spoil all the fun and stop the "naturally occurring weather phenomena" from erm, well, naturally occurring like.
I've never been so disappointed since my first marriage. I should have suspected something was wrong when she wanted the theme tune from Ski Sunday to be played as her wedding march. It was indeed all downhill after that.
Anyroad this sukhovei thingy, I can even spell it correctly without looking it up all ready, is off - at least for now.
From what I am hearing it may have been too late to cause much damage anyway, as it seems that plenty of that has already been done.
The Russian Institute for Agricultural Market Studies, or IKAR, have dropped their wheat production estimate to 55 MMT, from 57 MMT last week and 61.8 MMT in 2009. That's a reduction of 11% on last year. Barley output will fall even more, by 19% to 14.5 MMT, they say.
Both of those may prove to be still optimistic on the back of what is being described as Russia's "worst drought in a decade".
Of course we heard all this last year too, as you may recall. Then it seemed to be a case of trying to con aid money out of central government. When it was made clear that times were hard and there was no money in the kitty, things suddenly and dramatically improved at the eleventh hour. A bit like England's World Cup campaign, but without the improvement bit.
Will that also be the case this time round? Somehow I doubt it, I think that this could be more of a "cry wolf" scenario judging on the reports I am hearing. Maybe that is why the market seems to have taken so long to react to the news? Nobody believed it was that bad the first time round, as "they always say this every year"?
The bus that the sukhovei has missed must also have been picking "Stan" up from the airport as he still remains incommunicado.
News Bites
Egypt's GASC are back in the market today tendering for 120,000 MT of wheat if anyone can be bothered to put a bid in. Why not tell them to bugger off, what harm could it do? Tunisia are also looking for 25,000 MT of barley, do we like them? Yes, OK, so let's give the nice Tunisians a price and just not bother calling Nomani Nomani back then.
Parched wheat in Western Australia is sweating (literally) on rain forecast for Thursday/Friday showing up to provide some much-needed moisture.
The Baltic Dry Index, guess what that did last night, shall I give you a clue? I'm going to communicate it to you via telepathy..........It worked! That's right it was down again, closing at 2127 for a nifty little 89 point or 4% drop. I'm starting to lose count now on the number of consecutive days declines, but I think that might be 29.
The French Ministry yesterday pegged the 2010 soft wheat crop at 35.3 MMT, most pundits think that they are a bit over optimistic at that, just like the French were at Waterloo for example. They also pegged this season's rapeseed crop at 4.5 MMT, down 19% on last season.
Private reports coming out of Russia suggest that the Ministry's recently revised grain production estimate of 85 MMT (down 12%) still doesn't accurately reflect just how bad things really are this year. Some are suggesting output lower than domestic consumption, which is 77 MMT. With 24 MMT left over from last season that shouldn't be a huge problem, but may curtail their export ambitions somewhat for 2010/11.
If things really are that bad in Russia, then it's a pretty good bet that wheat isn't looking "overly chipper" in neighbouring Kazakhstan either. Unfortunately we can't get hold of our man "Stan" at the moment to find out exactly what scenes of devastation awaited him on his return there at the weekend. More as we get it on that front...
Wheat: Second Guessing The USDA
US spring wheat ratings good/excellent fell one point from last week to 83%, but are still amongst the best since 1990, according to the USDA last night. The crop is slightly behind normal development at 52% headed, compared to 57% normally. Winter wheat harvesting is past hallway done at 54%, which is in line with normal. Harvesting in the top producing state of Kansas is now 84% complete. Good/excellent winter wheat fell one point to 63%.
Overall the US wheat crop is clearly looking in great shape. Last Friday, Informa pegged the all wheat yield at a record 45.9 bu/acre, fully two bushels ahead of the USDA. They also had 2010 US wheat production at 2.217 billion bushels, which is 150 million higher than the USDA, and now slightly ahead of last year despite the sharp acreage drop.
That sets the stage for the USDA to raise their US production estimates on Friday. They should also increase their ending stocks based on last week's numbers showing wheat stocks as of June 1 at 973 million bushels, which was 33 million bushel above the average trade estimate.
So, from a US wheat perspective, Friday's USDA report should be bearish. Although balancing the books is a pretty popular pastime in Washington, so don't go getting too surprised if they don't raise their domestic usage estimates also to compensate for last week's surprisingly low corn supplies. That might absorb some, if not most, of this extra US production.
The sixty million dollar question now seems to be what will they say for production elsewhere? In particular Russia, Kazakhstan, Europe, Canada and China. Certainly all but the last of those could see production estimates revised lower. Last month's numbers were 57.5 MMT, 17 MMT, 143 MMT, 24.5 MMT and 112 MMT respectively, you could easily make a case out for cutting at least 10 MMT off that little lot, but the USDA are famously slow at reacting to rapidly changing crop production prospects. It may well be that the Russian crop is only 50 MMT this year, but if it is the chances of the USDA reporting it at that on Friday are remote.
So even before the numbers are out, I'm already doubting their credibility, yet the market will react to the USDA's perception of things just like it always does. We might as well place bets on a couple of raindrops sliding down the window pane. Given the magnitude of the recent rises in European prices over the past week, booking a few profits ahead of Friday might be a good idea.
CBOT Closing Comments
Soybeans
August CBOT soybeans finished 4 cents lower at USD9.40 1/2, and November soybeans 5 3/4 cents lower at USD9.00; December soymeal ended USD1.90 lower at USD262.40; December soyoil settled 18 points lower at 36.69. China bought 120,000 MT of US soybeans and another 40,000 MT of US soyoil overnight, according to the USDA. After the close the USDA reported soybeans as 79% good/excellent, down one point on a week ago. They said that 23% of the crop is blooming compared to 20% normally.
Corn
July corn ended down 4 cents at USD4.60 per bushel, and Dec corn closed down 5 1/4 cents at USD3.79 1/4. After the close the USDA reported corns as 71% good/excellent, down two points on a week ago. They said that 19% of the crop was silking compared to 12% normally. Export inspections for the week ending July 1st came in at the low end of expectations. Argentina's Ag Ministry say that the corn harvest hit 91% done, 2% ahead of last week.
Wheat
CBOT Sept wheat ended up 4 1/2 cents at USD5.07 1/2; KCBT Sept wheat closed up 5 cents at USD5.21; MGE Sept wheat increased 4 3/4 cents to USD5.35 3/4. Short-covering was a feature today, although prices finished well of earlier session highs. The USDA reported that winter wheat is rated 11% poor/very poor, 26% fair, and 63% good/excellent. Good/excellent was down one point from last week. Harvesting is running at slightly above average at 54% done. Spring wheat is 52% headed versus 28% a year ago, and 57% on average.
EU Wheat Closing Comments
It was another strong day for EU grains, with November London wheat closing GBP2.45 higher at GBP117.45/tonne and November Paris wheat ending EUR3 higher at EUR157.25/tonne.
November Paris corn closed EUR1.50 higher, with November Paris rapeseed up EUR4.25 and November Paris barley EUR6.00 higher.
As you can see the European markets certainly seem to have the bit between their teeth at the moment, we've suddenly gone from feast to famine.
The French farm ministry today said that the nation would produce 35.3 MMT of soft wheat this year, 2.5% down on last season despite a higher acreage. That might be towards the high end of estimates, with early reports on barley yields now coming in 5-15% lower than anticipated, and wheat likely to follow suit.
Early French barley yields continue to disappoint, and indications are that wheat and rapeseed yields will also be hit, coming in below last season's levels.
Russia is where the real emphasis is however. All of a sudden output here is dropping by 3-5 MMT a week, with Dow Jones today reporting on the possibility of a potentially heavily damaging weather phenomenon know as a "sukhovei" possibly on the cards for the south and west of the Ural Mountains this week.
This extremely hot and dry wind can apparently cause widespread crop devastation almost overnight.
Meanwhile it remains dry and warm in the SE of England, which may also be potentially lopping something off final yields, although perversely it may also help quality and protein levels.
Here's Something You Don't See Every Day
The expression "widespread annihilation" when associated with a Russian crop report. It can't be that bad. Can it? It certainly seems to be putting the wind up one or two people today that's for sure.
Sukhovei
Canadian Crop Conditions
Flooding continues to cause major crop damage across the province of Saskatchewan, according to Saskatchewan Agriculture's weekly Crop Report.
The problem is particularly bad in the northeast where rain on already saturated fields resulted in a range of precipitation of up to 82 mm.
Cropland topsoil moisture here continues to increase and is rated as 92 per cent surplus, according to the report.
More than half of the winter cereals in the region are showing as being behind in normal development, with more than three quarters of spring cereals and oilseeds likewise.
Crops rated as poor/very poor: 26% of winter wheat; 28% of spring wheat; 32% of barley: 35% of canola.
CBOT Early Call
The overnight grains closed with wheat leading the way 1-13c higher, beans up 3-4c and corn 5-6c firmer.
It's not very often that Chicago follows Europe, it's usually the other way round, but it would seem that is what is happening today as the US returns to work after an extended holiday weekend.
US weekend weather and the forecast for the week ahead look non-threatening, crops seem to be generally in pretty good shape, the USDA will report tonight on crop conditions, and should indicate that soybean planting is now just about done.
China bought 120,000 MT of US soybeans and another 40,000 MT of US soyoil overnight, according to the USDA.
The Argy soybean harvest is just about over at 99% complete, and Celeres raised their estimate of Brazilian soybean production to 68.5 MMT, an 18% increase on last season.
The US winter wheat harvest is progressing well, again the USDA will report on that tonight.
China got some rain in the dry northeast, and the Chinese government's weekly corn auctions are attracting less interest than they were, with less than half of the 1.5 MMT offered being taken up this week.
Europe and Russian weather and potential crop losses are what the market has suddenly woken up to, even though nothing especially new has really come out this past few days.
Early harvesting results from southern France and Germany merely seem to confirm what we all expected already, yields would be down this year after the harsh winter, dry spring and recent heatwave.
Russia's Ag Ministry dropped their grain production estimate to 85 MMT yesterday, but again all that did really was get them into line with earlier forecasts from SovEcon.
Early harvest results coming out of Ukraine, if anything, seem better than they might have been.
It seems to me that this recent EU price spike has been fed by short-covering, and farmer reluctance to sell on the basis that "they were right all along" and the perception that this is only the start of a concerted move higher, to more realistic levels, that show them the margin they rightly deserve.
I don't dispute that they deserve a margin, the market usually does that. The USDA are out on Friday with a supply and demand report that should be bearish on wheat. If global wheat production numbers are falling, how likely is it that the USDA will be up to speed and report the reality of the situation anyway? Exactly. This my friends is a golden selling opportunity.
Certainly from an EU wheat perspective. US wheat, whilst expensive relative to EU grain, is also vulnerable to correction given then size of spec shorts in that too. If we do see US wheat move higher then all that is likely to happen is that the basis will widen further anyway.
Early calls on this afternoon's CBOT session: corn called 2 to 5 higher; Soybeans called 2 to 5 higher; Wheat called 5 to 10 higher.
Look Out, There's A Sukhovei Coming
We all know what a "sukhovei" is don't we ladies and gentlemen? No, she wasn't knocked out by Serena in the first round at Wimbledon:
(sü·kō·vā)
An extremely hot, dessicating, dusty, and predominantly easterly wind that affects the steppes of southern Russia, particularly in the region south and west of the Ural Mountains. It occurs most frequently in spring and summer and may cause extensive crop damage.
There's a breaking news story that one might be on the cards this week. That could be interesting.
Not that it will make that much difference looking at this very sorry looking crop of wheat from a few days ago posted by my chum out in Ukraine Mike Lee on his blog: here. I think there might be an a in crop.
French/German Harvest Latest
Joachim Ruhmann of DLR reports that early harvesting results from southern France remain disappointing. Barley yields are coming in 5-15% below last year with specific weights "not outstanding" - in the region of 62-64kg/hl, he says.
Early data from the harvesting south of Chartres and the Loire have been hit by the cold winter and the heat of the past few weeks, says Joachim. After interruptions to the harvest caused by weekend rains and thunderstorms, farmers' activity has resumed with harvesting already estimated at around a third complete in the southwest of the country, he adds.
Indications are that wheat and rapeseed yields will also be hit, coming in below last season's levels, he concludes.
Meanwhile in Germany early harvesting results are more promising, says Joachim. Winter barley yields and specific weights are quite varied, with averages of around 65kg/hl. The colour of this season's barley is a surprise, says Joachim, describing it as "very bright, almost white".
Yields are also fluctuating quite widely, but overall will probably average lower than last season, he says.
Some of the forward parts of the Rhineland could see the barley harvest be almost completed by the end of the week, whereas in Munsterland to the west the crop is around 10 days behind normal development, despite the recent hot weather, says Joachim.
New crop barley prices ex farm Rhineland yesterday were around EUR105-109/tonne ex farm, he adds.
Snippets
The Baltic Dry Index continues to decline, closing at 2216 last night, down 64 points, or 2.8%. That brings the total number of days of consecutive declines now to 28, marking a near 2000 point decline since a 6th May high of 4209. This is the longest unbroken run of declines since 2005.
According to Elena Skrynnik, the Russian Minister of Agriculture, despite a drought hit harvest likely in 2010 carry-over grain stocks of 24 MMT mean that they can still expect to export 20 MMT of grains in 2010/11.
Ukraine had harvested 1.77 MMT of grains by July 5th, according to the Ag Ministry. Average yields are currently running at 2.46 MT per hectare, versus 2.54 MT per hectare this time last year, they say. Barley accounts for 1.5 MMT of the harvest so far, with the remainder of the grain harvest to date mostly wheat (240,000 MT).
The country has also harvested 271,000 MT of rapeseed from an area of 194,000 hectares at an average yield of 1.4 MT per hectare, they add.
Robert Wiseman Dairies is the latest in a line of buyers to increase their milk price with effect from July 1st. The 0.4 pence per litre increase takes the company's UK farmgate price to 24.72ppl.
South Australia 2010 Winter Crop Production Seen Down 19 Percent
According to South Australia state's Department of Primary Industries and Resources the area given over to winter crop production will fall across the board in the state this season.
Overall winter crop production will fall 19% this year to 6.34 MMT, they say.
Of that, wheat production in the state will fall 13% to 3.5 MMT, whilst barley output will decline even more sharply - down by almost a third to 1.7 MMT. Canola production will also decline, down 10% to 267,300MT, they say.
Drier conditions for the first three weeks of May delayed seeding in many areas, although good falls in late May allowed seeding to resume, with most farmers finished by mid-late June, they add.
Growing season rainfall to date (April-June) is near average throughout most districts, they conclude.
Full report here
EU Wheat Closing Comments
It's been a while since we've seen a close like this, probably not since early 2008. November London wheat closed GBP4 higher at GBP115/tonne, November Paris wheat was up EUR4 at EUR154.25/tonne. November corn was up EUR6.75 at EUR160/tonne, November rapeseed EUR2 higher at EUR328.75/tonne and January malting barley up EUR6.50 at EUR179/tonne.
Sellers largely seem to have run for the hills as talk of significant yield losses brought on by the recent hot and dry spell abound.
A combination of a hard winter, a dry spring and now surging temperatures possibly accelerating EU cereals towards a rapid and early maturity suddenly seems to have everyone talking about lower production.
The Russian Ag Ministry today dropped their 2010 grain production estimate to 85 MMT, fully 15 MMT lower than they were expecting not too many months ago, and more than 12% down on last year and over 20% down on 2008.
Add that to the problems being experienced by Canadian growers, the reduced US acreage, and lower wheat output now expected from Ukraine and Kazakhstan and suddenly most of the major exporting nations are now looking at significantly lower output in 2010. Only Australia and Argentina look likely to see production growth this year, and their crops have only just been or are still being planted.
Before you start ordering the new farm equipment and flicking through holiday brochures to the Maldives it is worth remembering that we do still have significant carryover stocks from 2009/10, not to mention some pretty hefty barley intervention stocks in the EU.
We also have new crop stocks now starting to filter through from Russia, the FSU and southern/eastern Europe as well as new crop US winter wheat coming onto the market. It would be a shame to get too carried away and miss an opportunity here, it could be prudent to get some sales on at these levels, especially to cover cashflow requirements this side of Christmas. If an opportunity is likely to present itself to make further sales at significantly better money than this then they may not present themselves again until the new year.
They Must Be Mad
Just days after announcing the launch of their innovative new free mobile app www.grainapp.com, Dalmark Grain have gone even further by bringing out a big brother for it in the shape of a new "portal" website www.grainportal.com.
The idea behind the new site is that it will provide futures prices, charts, news, currency rates, market reports etc via a series of "windows" all one one webpage. These separate windows can be opened and closed as required giving the viewer the ability to customise what information he wishes to view at any one time, avoiding too much clutter, they say.
As with the mobile site, it's also FREE to all, and doesn't even require any registration. On top of that, to promote the launch of the two they're giving away an iPhone 3GS to one lucky visitor. Proof I think, if it were needed, that they really must be mad.
If you're looking to buy any grain at the moment then it might be worth giving them a call, as they're clearly so bonkers that they might not have noticed that the market's shot up this past few days and they might be giving that away too!
Interesting Stuff On China
A report on Reuters today says that Chinese urban dwellers will outnumber those living in rural communities for the first time ever by as soon as 2015.
The growth in the urban population means that more Chinese are turning from being net producers to net consumers of grains. By 2020 Chinese grain demand will be close to 575 MMT, more than 40 MMT above the current level of production, according to the report.
That also assumes of course that we believe the government's production numbers. The pursuit of the government's so-called "safe meat" policy could accelerate this growth in grain consumption further, as the feeding of proper manufactured feed becomes more widespread.
Snippets
There's no overnight market this morning and there won't be any trade in Chicago tonight due to the US Independence Day holiday. So it looks like a quiet day is in store.
Whether we have a quiet week is entirely another matter with the USDA out on Friday with their July crop production and ending stocks estimates. Taking last week's surprises into account they should cut old and new crop corn ending stocks sharply, but wheat stocks should rise.
This is the USDA we are talking about here of course, it's entirely possible that they might raise projected 2010 corn yields sufficiently high to completely erase last week's projected acreage reduction.
The Indian weather office say that monsoon rains there are 14% down on normal for the June 1st-July 4th period. According to a story on Dow Jones Newswires this morning "light rains lashed India's grainbowl northern region over the weekend". Come again, light rains don't lash anything do they?
The Kazakh weather office, Kazhydromet, say that July will start off hot and dry for the first ten days of the month. After that temperatures will dip to 1-2C below normal for the time of year with "normal" rainfall.
Algeria will harvest 5-5.5 MMT of grain this year, according to the Ag Ministry, that would be around 10-18% lower that last season. Harvesting there is 21% complete, they added.
Farmers in South Australia are optimistic for the coming season after 15-30mm of rain fell in the last few days of June. Mice infestations of "plague proportions" and dormant locust eggs waiting to hatch are keeping them on their toes however.
There should be more widespread early harvest reports filtering through from France and southern Germany this week, which will likely decide the fate of EU grain prices for the week ahead.
There are concerns that the recent hot and dry spell will have accelerated maturity at the expense of yield.
Rain in the north and west of the UK over the last few days will have helped crops there, but not much seems to have fallen in the major growing areas to the south and east, and there isn't much in the forecast for those areas for the week ahead either.
Carat winter barley was apparently harvested on Saturday near Marksbury, near Bath at 14% moisture and yielding 8.6 MT/ha, according to Farming Online today.
Review Of The Week
I don't always get time to do this, but this week in particular I thought it would be especially interesting to put up a league table of the week's performances by the different grains:
Commodity Month Fri Close Weekly Change %
------------------------------------------------------------------
Paris malting barley Nov 169.50 +14.00 +9.0%
Paris wheat Nov 150.25 +10.75 +7.7%
London wheat Nov 111.00 +7.75 +7.5%
CBOT corn Jul 364.00 +23.75 +7.0%
Paris corn Nov 153.25 +8.25 +5.7%
CBOT wheat Jul 478.75 +22.50 +4.9%
CBOT soymeal Jul 294.90 +5.30 +1.8%
CBOT soybeans Jul 962.75 +5.75 +0.1%
Paris rapeseed Nov 326.75 -5.50 -1.7%
CBOT soyoil Jul 36.01 -1.15 -3.1%
Crude oil if you are wondering was 8.5% down on the week, closing at just over USD72/barrel, hence the weakness in soyoil and rapeseed.
After a volatile week, overall the pound closed 1.7 cents higher against the dollar, and fell half a cent against the euro on the week, although it fell 2 1/2 cents against the euro from midweek highs.
Another interesting performer was the Baltic Dry Index, which fell 8.8% during the course of the week, it's now declined for 27 sessions in a row and is 46% down in less than six weeks.
CBOT Closing Comments
Soybeans
July soybeans closed 9 1/4 cents higher at USD9.62 3/4; December soymeal ended USD3.10 higher at USD264.30; December soyoil settled 15 points higher at 36.87. The trade is concerned that Wednesday's USDA acreage figures were overstated for beans. 2009/10 ending stocks are also likely to be reduced on the back of this week's numbers. Informa today pegged the 2010 US soybean crop at 3.385 billion bushels, up on the USDA's estimate last month of 3.31 billion.
Corn
July corn ended down 1 1/2 cents at USD3.64; Dec corn closed down 3/4 cent at USD3.72 1/2. Weak crude oil and an uncertain US dollar capped any gains today, ahead of the long 3 day weekend. There was also some consolidation after a couple of days of steep rises. Informa Economics pegged 2010 US corn production at 13.241 billion bushels, slightly lower than last month's USDA estimate of 13.37 billion.
Wheat
CBOT Sep wheat ended up 3 1/4 cents at USD5.03; KCBT Sep wheat rose 6 cents to USD5.16; MGE Sep wheat ended up 4 1/2 cents at USD5.31. Short covering seems to be the main driver in the market, when you have as many fund shorts as we have seem in this market recently, then they are always going to be vulnerable to an upside rally for little or no apparent reason.
EU Wheat Closing Comments
November London wheat closed GBP1.25 higher at GBP111.00/tonne, with November Paris wheat ended EUR1.75 higher at EUR150.25/tonne.
It was another impressive day for EU grains. On the week as a whole Nov London wheat closed GBP7.75/tonne higher and Nov Paris wheat gained EUR10.75/tonne.
The USDA provided the catalyst Wednesday, with a sharply lower June 1st stocks estimate for corn. Since then we have had reports of significantly lower early yields from French, German and eastern European barley harvests.
Anecdotal reports also suggest that the Ukraine OSR harvest isn't going too well either. It seems that a combination of a hard winter and a dry spring is impacting on yields quite badly.
I would guess that much of the recent rally is to do with speculative shorts covering in their positions, as opposed to consumer buying.
The Black Sea harvest is almost upon us, and they will be aggressive sellers no matter what.
The Rain In Ukraine Is Really Quite A Pain
Mike Lee, our Ukrainian correspondent, says that his first combines of OSR are ready to roll this weekend. That is if the kind of heavy downpours that are afflicting the region leave anything left to combine.
"I would expect the OSR (yields) to be down and it may go even lower as localised heavy showers knock seed out of brittle pods. Some people apply pod stickers but I reckon you would need super glue to keep pods intact after the sort of summer downpours we get," says Mike.
Check out Mike's blog for a video of the latest on Uk-Rain-e.
CBOT Early Call
The overnight trade closed mixed with beans mostly 2-3 cents higher, corn 2-3 cents easier and wheat 1-2 cents lower.
Crude oil and the dollar are both slightly weaker.
It looks like we will see the market take a bit of a breather from the heavy action witnessed Weds/Thurs heading into a long weekend. That most likely will mean a lower trend tonight.
Soybeans closed higher overnight, and there is a feeling around that the USDA's acreage numbers are over optimistic, whilst the old crop stocks situation is tighter than anticipated.
The USDA are out again next week with their WASDE and ending stocks estimates, they should drop old crop ending stocks for corn and soybeans, but raise them for wheat after this week's numbers, but who can tell? This is the USDA we are talking about here.
The Argy soybean harvest is over at around a record 55 MMT and the corn harvest there is all but finished too. Winter wheat plantings are past halfway.
Hot and dry weather may have cut European and Black Sea grains production it seems. Early barley harvesting results are pretty disappointing in most of this region.
Early calls for this afternoon's CBOT session: beans called 2-4 cents higher, corn and wheat down 1-3 cents. Informa are out midsession with their global production numbers.
It's Kicking Off In Moldova Now
I'm starting to feel a bit like Jeff Sterling here, as the scores start to filter through on a busy Saturday afternoon.
The winter harvesting campaign is expected to kick off in Moldova this weekend, before gradually moving north where harvesting is still a fortnight away.
The OSR harvest has already begun, with yields averaging 1.6 MT/ha (no idea if that's good my Moldovian standards, although obviously you wouldn't be rushing to the Range Rover dealership with that over here).
It shouldn't take too long to get the winter wheat harvest in, they've only planted 270,000 ha of the stuff, a third down on what was sown for 2009.
They'll be dancing on the streets of Chisinau tonight...now over to Forest Green where there's been a sending off...
Kazakh Stan
Our man "Stan" has come back to Blightly for a few days "to cool off" and "hang out with some women that don't have long bushy beards" before heading back to the frying pan that is Kazakhstan tomorrow. I wonder idly if Jet2 do flights from Leeds/Bradford? Stag weekends in Kazakhstan, women in kaftan's with long bushy beards gyrating seductively around a scaffolding pole. It might catch on.
Anyway, "Stan" says that when he left, "they were suffering a serious drought – only having had 7mm of rain since 1st April – so wheat was wilting – literally & OSR was being desiccated in situ – as they also have those very strong drying winds – so not sure what to expect next week..!!!"
More as we get it....
More Early EU Barley Harvest Reports
The Italian winter barley harvest is in full swing, with around 25-30% threshed so far, according to my German correspondent Joachim Ruhmann of DLR.
Yields are understood to vary greatly, as is usual in Italy, but predominately range 58-61 kg/hl, Joachim tells me.
At home in Germany the very first barley to be cut this week is coming in with generally very low moisture levels of around 12%, says Joachim. Early protein levels vary from below 10% to slightly over 11%, he adds.
Temperatures have warmed up considerably, with 27C in the early morning in the Upper Rhine Valley, currently rising to 33C by lunchtime. This has led to rapid ripening of barley on better soils very quickly, with a fresh wave of harvesting expected to start in the southwest of the country over the weekend if the weather holds, he concludes.
Dalmark Grain Launch New Mobile 'App'
Those nice people at Dalmark Grain have launched a new easy to navigate mobile 'app' to help you keep in touch with the grain markets wherever you are. And it's not just an app that works exclusively on an iPhone either, it should work on any modern smartphone with mobile web-browsing capabilities, they say.
It features all the London/Paris grains/oilseeds, including the new malting barley contract, along with Chicago day & night markets, crude oil, fertiliser prices, charts, currency cross rates, and even daily market reports.
Best of all, it's FREE for everyone, you don't even have to register, simply point your mobile browser to www.grainapp.com and enjoy. They must be mad I reckon:
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Early Morning Snippets
There's a story on Dow Jones Newswires this morning saying that China bought three cargoes (180,000 MT) of French feed barley for July/Sep shipment sometime last month.
The Baltic Dry Index closed 55 points down at 2351 yesterday, it has now closed lower for 26 sessions in a row.
Much of last night's strength in CBOT wheat can probably be attributed to fund short-covering. Estimates for that range from 15-25,000 contracts.
The 2010/11 grain harvest in Ukraine so far mounts to 911,000 MT of mostly winter barley as of 1st July, according to the local Ag Ministry.
With fully two months of the 2009/10 marketing year left US soybean exports currently stand at 1.36 billion bushels, against a USDA target of 1.455 billion for the entire period. Existing sales, including those as yet unshipped, for the period have already reached over 1.44 billion. That would suggest that a cut in old crop ending stocks should be on the cards in next week's USDA S&D report due July 9th.
That crop report is likely to be bearish for wheat on the basis of the increased June 1st stocks and acreage figures that the USDA released on Wednesday.
Informa are due to release their global production estimates during CBOT trading hours this afternoon. There will be plenty of interest in what they have to say for problem areas like Russia and Canada.
After two days of steep rises, and with an extended holiday weekend due in the US, logic suggests that tonight we could see futures consolidate somewhat and close a little lower. Corn, and to a lesser degree soybeans, have done rather well to ignore the sharp declines in crude oil this past few days.
What Does USDA Stand For? Unreliable Stocks, Dodgy Acreage?
That is what it seems to me. Yesterday's surprises are probably really only a correction to mistakes made as long as twelve months ago if you ask me. In the June 2009 Acreage report you may recall that our chums shocked the trade by coming in uniformly higher across the board for wheat, corn and soybeans acres than the trade had been expecting.
Despite the widely publicised late plantings and extremely wet conditions that prevailed throughout the growing season last year, they then proceeded to "up the ante" by raising yield estimates to record levels as well. Cue much back slapping and high fives all round, see "2009 Crop Year is One for the Record Books, USDA Reports" for example, on the USDA's own website.
Suddenly, fast forward twelve months, and US corn stocks are much lower than anyone thought. Lower than the lowest trade estimate. How can this be, where has it all gone? We know, or should know, what the level of exports and usage have been, so why aren't the stocks there at the end of the day?
Could it be that they were never there in the first place? Is it possible that yesterday's corn stocks numbers were simply a realignment, getting us a bit more in touch with the reality of the situation? Last year's corn crop was overstated but it's taken them until now to redress the balance?
It's not difficult to imagine, we are after all talking about the same guys who to this day STILL have Argy wheat production for 2009/10 at 9.6 MMT, when just about everybody else (including the whole of Argentina) has it at around 7.5 MMT. Now 2.1 MMT difference might not sound like a lot, so let's call it almost 22% instead. Just imagine if 22% of the world's grain stocks didn't really exist, they'd just been overstated and the USDA are just a bit too embarrassed to correct it.
So if last year's US record corn crop was overestimated, it seem a pretty fair assumption that the record soybean crop was too. Wednesday's ending stocks there also came in at lower than the lowest trade estimate. What's going on here, stealth accounting? And have they decided to hit us with all the bad news on one go here, or are there more overstates to be clawed back in the future too?
All of this kind of poses the next question of exactly how reliable are these acreage estimates then too? If you like records, and it seems that the USDA do, then this season's soybean area will be record large at just shy of 79 million acres.
Yet widespread wet weather (again) may well have curtailed farmer's best efforts to get all those soybean acres in. Remember here that it seem like we are only finding out now that what they were predicting last year, in reality, probably didn't actually happen.
Iowa has received 10 inches of rain in June, a whopping 60-75% above normal, according to Martell Crop Projections. The worst summer flooding in 100 years occurred in 1993 causing widespread damage in corn and soybeans. That year a US corn finished with a very poor yield, down 18% below trend, they say. Yet Midwest Corn Belt rainfall from April to June this year was even wetter than this "once in a century" flood of 1993.
Are all those soybean acres really going to get planted? And what are the real implications for final yields in 2010?
The truth of the matter is that we probably won't really know for sure for another twelve months (or more), and that the market will continue to trade whatever numbers the USDA decides to throw our way, as we all hang on their every word because that's the way it's always been.
You only know that the pot is empty, when the pot is empty, and then it's too late.
CBOT Closing Comments
Soybeans
July soybeans settled 5 cents higher at USD9.53 1/2 a bushel; July soymeal ended USD2.10 higher at USD291.50; July soyoil settled 41 points lower at 35.87. Spillover support from buoyant corn futures helped beans close in positive territory, although a weak performance by crude oil limited gains. Weekly export sales were ahead of expectations at 264,000 MT for delivery in 2009/10 and 451,000 MT for delivery in 2010/11. Tight old crop stocks is keeping front-end premiums.
Corn
July corn closed 11 1/4 cents higher at USD3.65 1/2; December corn ended up 11 cents at USD3.84 1/2 a bushel. Export sales of 649,700 MT for delivery in 2009/10 and 76,500 MT for delivery in 2010/11 were below expectations. However spillover support from yesterday's surprise stocks and acreage numbers from the USDA provided good underlying support. The five day weather forecast is calling for 1 to 2 inches of rain in the already drenched areas of the Midwest. Dollar weakness also added support.
Wheat
CBOT September wheat finished up 19 1/2 cents at USD4.99 3/4; KCBT September wheat rose 14 cents to USD5.10; MGE September wheat rallied 14 1/4 cents to USD5.26 1/2. Spillover strength from corn flushed some more nervous shorts into the market today. Yesterday's USDA report caught everybody on the hop, the subsequent strength in corn has undermined hefty fund short positions in wheat. Export sales were in line with forecasts at 418,400 MT. Although the HRW wheat harvest is winding down in Kansas, the five day forecast predicts more rain for SRW wheat states like Missouri, which has already been plagued by above normal rainfall this year.
EU Wheat Extends Recent Gains
EU wheat markets added to their recent gains Thursday, with Nov London feed wheat ending GBP2.50 higher at GBP109.75/tonne, and Nov Paris milling wheat up EUR2.75 at EUR148.50/tonne.
Paris corn was also sharply higher for a second day with Nov posting gains of EUR2.75, and Nov malting barley up EUR3.25/tonne.
Nothing can go down forever, and it seems that the speed and severity of this week's price spike has caught a few complacent shorts by surprise.
Reports are slowly filtering through that very early yields in various parts of Europe are disappointing.
With the Russian grain crop getting sharply downgraded in size this week, plus concerns over unplanted acres in Canada and drought hurting wheat in Kazakhstan it appears that final production numbers for 2010 are likely to be lower than current official estimates.
Quality looks like being an issue in some places too, like flooded eastern Europe and many parts of the Midwest where disease, mould and vomitoxin are being reported.
Whilst the recent heatwave in northern France and the UK may have taken the top off yields, hopefully it will have added something to the quality of this year's crop, which would be refreshing.
USDA Export Sales
The USDA weekly export sales for the period June 18-24 were as follows:
Corn: sales of 649,700 MT for delivery in 2009/10 and 76,500 MT for delivery in 2010/11 were below expectations for combined sales of 850,000 – 1,450,000 MT. China was not in evidence. Exports of 952,400 MT were up 16 percent from the previous week.
Wheat: sales of 418,400 MT for the 2010/11 marketing year were in line with expectations of 350,000 – 450,000 MT. Exports were 548,600 MT.
Soybeans: sales of 264,000 MT for delivery in 2009/10 and 451,000 MT for delivery in 2010/11 were ahead of expectations for combined sales of 450,000 – 550,000 MT. China bought 60,000 MT old crop and 341,000 MT new crop. Unknown also took 73,500 MT old and 110,000 MT new crop. Exports of 138,400 MT were down 42 percent from the previous week, with nothing going to China.
Spanish Crop Prospects
Heavy winter and spring rains, whilst causing havoc with widespread flooding at the time, appear to have done this season's Spanish cereal harvest the world of good.
According to the Spanish Cooperative Agro-Food, barley production this season will climb almost 22% to 8.3 MMT, despite farmers planting less of the grain due to depressed domestic prices.
Soft wheat output this year will increase to 4.57 MMT, with oat production of around 1 MMT and rye at just under 270,000 MT also up on last season. The durum wheat crop however will be sharply lower as growers cut back seedings significantly due to large carryover stocks from last season, coming in at just over 850,000 MT, they estimate.
Although they didn't put an estimate on 2010 corn production, they say that spring sowings are down by almost a quarter at 309,000 hectares, from 399,000 in 2009.
Serious Stuff In Western Australia
Farmers in Western Australia have got so fed up with low grain prices and lack of rain that their winter sowings this year will be 10% down "if we're lucky" according to this report: here.
They're predicting a grain crop for Australia's largest producing state well below ABARE's estimate of 12 MMT.
The final paragraph sums it up: "If anyone is doing any more sowing, it is for soil conservation purposes on the sand plains to stop it blowing."
Snippets
The Baltic Dry Index closed 41 points down at 2406 yesterday, day 25 of straight declines.
Reports from France suggest that early barley yields are 5-10% down on last year.
Hearing that early Ukraine rapeseed yields are also disappointing, down 15-20%.
Iraq is tendering for "at least" 100,000 MT of wheat.
Tate & Lyle have announced that it has signed an agreement for the sale of its EU Sugar Refining operations to American Sugar Refining, Inc. for GBP211 million.
The HGCA say that "a return to dry weather in the latter half of the month (June), accompanied by high temperatures, has increased soil moisture deficits, with some over 125mm in the drier eastern counties, and concerns remain over potential yield impact if the dry period continues during grain fill." The say that the earliest UK winter barley and winter oilseed rape crops will be ready for harvesting in 2-3 weeks.
