Chicago Close
07/12/10 -- Soybeans
Jan soybeans ended 3c lower at USD12.85 1/2c; Dec soymeal finished USD2.50 lower at USD343.00; Dec soyoil was 26 points higher at 53.39. A firmer dollar on ideas that more QE would be needed in 2011 to keep the US recovery afloat depressed prices heading into the year end. Crude oil hit it's best levels for more than two years, but also turned lower later in the day. Funds were estimated to have been net sellers of 3,000 soybean contracts on the day. South American crop production estimates are starting to filter through lower for soybeans on the back of adverse weather conditions.
Corn
Jan corn fell 6 1/2c, to USD5.47 1/4c; March corn declined 6 1/4c, to USD5.61 3/4c. Crude oil fell back below USD90/barrel and the dollar strengthened as the day wore on. In addition uncertainty over the renewal of the ethanol blenders tax credit is keeping the market cautious. Funds were estimated to have sold around 8,000 contracts today. Thoughts now are that at least half of eastern Australia's wheat crop will only make feed grade. That could be 10-12 MMT extra feed wheat on the market for SE Asia in 2011, which is detrimental to demand for US corn.
Wheat
CBOT Dec wheat ended down 9c to USD7.43 a bushel; KCBT Dec wheat fell 4 1/4c to USD8.21 1/4; MGEX Dec wheat rose one cent to USD8.35. The gap between quality high protein wheat on KCBT and CBOT continues to widen. News emanating from Australia suggests that the world supply of quality wheat is continuing to tighten. ABARE today raised their overall all wheat production estimate to a record 26.8 MMT, but cut their export forecast by almost 2.5 MMT to 16 MMT. There is also talk of 2-3 MMT of wheat simply being abandoned as not even fit for harvesting.
EU Wheat Close
07/12/10 -- Jan London wheat closed down GBP0.90 at GBP186.10/tonne, and Nov GBP1.50 easier at GBP154.50/tonne. Jan Paris wheat fell EUR3.00 to EUR232.25/tonne and Nov was EUR0.25 higher to EUR209.50/tonne.
This was the second session in a row that EU wheat opened sharply higher only to close mostly easier by the end of the day.
Traded volumes have been lower this week, with one or two European nations having public holidays. Profit-taking has also been a feature as we near the year end.
Australia raised the size of their wheat crop today to a record 26.8 MMT, although export prospects were cut to 16 MMT by ABARE. They are clearly going to have much more feed wheat than normal in 2011, and will be eying potential exports to SE Asia.
The underlying fundamentals for EU wheat remain positive, although prices here are expensive enough to start to ration demand with US wheat considerably cheaper. This was especially true today as the dollar weakened on the back of comments from US Fed chairman Ben Bernanke that a third round of QE may be needed to maintain the recovery in the world’s largest economy.
US wheat therefore looks very well placed to pick up the vast majority of foreign import tenders in the first half of 2011.
There are enough concerns about wheat production around the world to keep the market on its toes for the time being. US, Chinese and Russian wheat all face an uncertain winter.
EU Rapemeal Prices
07/12/10 -- Latest guide prices for EU rapemeal.
Basis FOB Lower Rhine in euros/metric tonne, with change from previous trading day:
| Dec10 | 215.00 | -3.00 |
| Jan11 | 215.00 | -3.00 |
| Feb/Apr11 | 215.00 | -1.00 |
| May/FH Jul11 | 215.00 | -1.00 |
| Aug/Oct11 | 186.00 | -2.00 |
| Nov11/Jan12 | 190.00 | -4.00 |
| Nov11/Apr12 | 191.00 | -4.00 |
Crude Oil Breaks Through USD90/Barrel
07/12/10 -- Crude oil has broken through USD90/barrel to post a more than two year high this morning.
A weak dollar, on the back of comments from US Fed chairman Ben Bernanke that a third round of QE may be needed to maintain the recovery in the world’s largest economy pushed crude to an intra-day high of USD90.37/barrel by mid morning. Brent crude also hit a 26 month high of USD92.36/barrel.
As well as a weak dollar, cold weather in Europe and parts of the US is seen supporting prices in the near term.
Crude levels are now closer to the 2008 highs of USD147/barrel than the early 2009 lows of USD33/barrel.
A Few Early Thoughts
07/12/10 -- ABARE seem to have surprised more than a few this morning by raising their Australian wheat production estimate to a record 26.8 MMT. The old adage "rain makes grain" would once again appear to be true if they are correct. With the harvest in the east now delayed by 4-6 weeks I guess we won't really have an accurate handle on yields until it really gets going in full swing.
That seems unlikely to happen just yet, with the local Bureau of Meteorology predicting heavy falls of up to 150mm later in the week.
ABARE cut their 2010/11 wheat export estimate by 2.4 MMT to 16 MMT, reflecting the anticipated lack of quality high protein wheat. Even so that is still 0.5 MMT higher than the USDA's latest estimate and up to 2 MMT above some of the others kicking around.
The trade is starting to wake up to ideas that it's America that is going to have to make up the global shortfall in quality wheat next year. With Russia, Ukraine and probably Kazakhstan too pretty much effectively out of the market, and EU stocks likely to be virtually exhausted by spring the US is unlikely to find too much opposition in high protein wheat tenders in the first half of 2011.
The USDA's current US export projection for 2010/11 of 34 MMT could therefore be on the low side. Exactly halfway through the marketing year, they've already exported 14.5 MMT, with further outstanding sales of 8.7 MMT, according to the USDA. That's 23.2 MMT already shipped, or committed for shipment, against the 24.1 MMT exported during the whole of last season.
Projected US ending stocks for 2010/11 are probably also too high, but at 23 MMT - fortunately for the rest of the world - the well is far from running dry.
The flip side of all this is that Australia will be awash in low grade feed wheat in 2011. With plenty of potential homes in Asia willing to take that as an alternative to corn, corn bulls could rightly be a little nervous heading into the year-end with no firm decision on the blender's tax credit yet on the table.
ABARE peg wheat production in Western Australia at 3.8 MMT, leaving 23 MMT to come from South Australia and the eastern states of NWS, Victoria and Queensland. If a third of the latter is only feed grade (and some suggest that it could be more than that) then we've got an extra 7.7 MMT of feed wheat looking for a home on the world marketplace.
Australia Latest
07/12/10 -- ABARE surprised the market this morning by raising it's Australian wheat production estimate for this season to a record 26.8 MMT. They've tended to be on the high side of trade estimates all year, but this latest projection appears to have been met with bemusement by the rest of the trade who have been marking output (as well as obviously quality) down not up.
Whilst acknowledging that wheat quality has taken a hit recently due to heavy rains in the east, they didn't specifically quantify the magnitude of potential downgrades.
Today's estimate os almost 5 MMT higher than last season's output of 21.9 MMT, and comes on the back of record yields in most of the eastern grains belt, they say.
Again this is very reminiscent of the UK's wheat crop of 2008, which was still being harvested in northern regions at 26% moisture well into late October after a very wet summer and autumn. Despite trade production downgrades we subsequently brought in a record crop in excess of 17.2 MMT, although milling grade wheat was in short supply.
Despite today's news the overnight Globex market sees wheat continue to march higher, with the most active March contract currently up 12c.
You can read the full ABARE report here.
Chicago Close
06/12/10 -- Soybeans
Jan soybeans ended 11 3/4c lower at USD12.88 1/2; Jan soymeal finished USD5.10 lower at USD346.50; Jan soyoil was 9 points higher at 53.54. Profit-taking can probably best describe today's action, there wasn't a great deal of fresh news and the dollar was firmer. With month, quarter and year end approaching it was probably time to take some money off the table and bank a few Christmas bonuses. Weekly export inspections came in at only 33.495 million bushels, well below expectations. The USDA announced the sale of 116,000 MT of old crop and 55,000 MT of new crop soybeans to China.
Corn
Jan corn fell 5 1/4c, to USD5.53 3/4; March corn fell 5 1/2c, to USD5.68. The dollar was firmer, prompting fund selling. Ideas that the Australian situation is bearish for corn, on the back of them having much more feed wheat than normal to market sparked further selling. Unconfirmed reports of Australian feed wheat sales to the Philippines added to corn's unease, as too are concerns that the ethanol blenders tax credit may not get renewed at the end of the year. Weekly export inspections were low at 25.2 million bushels, although the USDA did report the sale of 116,000 MT of US corn to unknown.
Wheat
CBOT March wheat ended up 14c at USD7.93 a bushel; KCBT March wheat rose 14 3/4c to USD8.36 3/4; MGEX March wheat climbed 15c to USD8.50 1/4. Wheat led the complex today on more worries over Australian wheat quality, with added doubts on China and Russia adding to the mix. The USDA reported the sale of 160,000MT of HRW to unknown. KCBT and MGEX hit more than two year highs and Kansas wheat extended it's premium over Chicago to the most in 2 1/2 years. Weekly export inspections were in line with expectations at 19.215 million bushels.
EU Wheat Closing Comments - Monday
06/12/10 -- EU wheat closed a seesaw session mostly lower with Jan London wheat GBP0.45 easier at GBP187.00/tonne and new crop Nov down GBP0.35 at GBP156.00/tonne. Jan Paris wheat was unchanged at EUR235.25/tonne and Nov was 0.25 lower at EUR209.25/tonne.
Wheat traded sharply higher early in the session, with London wheat setting another fresh 2 1/2 year high for a front month and Paris wheat also hitting contract highs. Profit-taking kicked in later in the session, dragging most months into slightly negative territory by the close of play.
Even so the underlying trend is undoubtedly upwards, with weather concerns over Australia, China and the US foremost in traders' minds. Quality wheat volume keeps diminishing with excess rains already having taken their toll on Canadian and German wheat earlier in the season, the same now seems to be happening Down Under.
ABARE will report on Australian wheat production tomorrow.
Quality EU wheat supplies are getting tighter by the day too, with some eastern European nations already hanging up the sold out signs.
Only modest planting increases are forecast for EU soft wheat for the 2011 harvest, with the French Ministry today predicting just 2% more went into the ground this autumn. Agreste peg the area for next season at 5 million hectares, winter barley plantings meanwhile are seen falling for the second year in a row to 1.1 million hectares.
EU Rapemeal Prices
06/12/10 -- Latest guide prices for EU rapemeal.
Basis FOB Lower Rhine in euros/metric tonne, with change from previous trading day:
| Dec10 | 218.00 | +2.00 |
| Jan11 | 218.00 | +2.00 |
| Feb/Apr11 | 216.00 | +2.00 |
| May/FH Jul11 | 216.00 | unch |
| Aug/Oct11 | 188.00 | unch |
| Nov11/Jan12 | 194.00 | +1.00 |
Early Call On Chicago
06/12/10 -- The overnight grains were mixed, with wheat mostly 8-10c higher, but with corn down 4-5c and beans mixed either side.
Wheat is up again on continued concerns over quality in Australia following another wet weekend and more to come in the week ahead.
The differential between KCBT - the benchmark for quality wheat in the US - and CBOT wheat is currently at it's widest for 2 1/2 years. If you want quality the US is rapidly becoming the only shop in town with any stock left to sell. To underline that, the USDA have today reported the sale of 160,000 of US HRW wheat to "unknown".
They're also today reporting the sale of 171,000 MT of old crop and 55,000 MT of new crop soybeans to China, plus 20,000 MT of soyoil to "unknown", along with 116,000 MT of old crop corn also to "unknown".
It remains too dry in eastern Argentina, with only scattered light showers in the forecast for the week ahead. Around 20% of China's wheat crop is also now said to be under drought stress, and the US crop on the Plains is far from perfect either.
Corn is under a bit of pressure from ideas that the US blenders tax credit will not be renewed at the end of the month, as the Republicans flex their new-found muscles. The potential influx of up to 10 MMT of extra feed wheat onto the market from Australia is also a bearish factor.
From here on in we can also expect to see profit-taking through to the end of the year as traders look to bank a few bonuses. Currently I'd say that things are still looking fairly favourable for further wheat price appreciation, moderately so for soybeans, but less so for corn (the ginger-haired step-child of the trio).
Early calls for this afternoon's CBOT session: Wheat up 8-10c, beans down 1-3c and corn 3-5c easier.
Early Morning Vibe
06/12/10 -- Wheat leads the way higher again on the overnight Globex market. As most of us probably already know, England are doing very well in the 2nd test against Australia in Adelaide, with rain looking like the main obstacle to victory.
The culprit is a deep trough moving across South Australia which is forecast to move slowly eastwards into NSW and Victoria as the week wears on. Here it's already been one of the wettest Decembers on record, even though we are less than a week into the month.
Various analysts estimates currently say that anywhere between 6-10 MMT of the eastern Australian wheat crop will have to be downgraded.
Quality wheat availability is clearly going to be very tight in the first half of 2011, with the US likely to be the only volume seller.
Although in the UK the feed wheat supply chain also looks equally tight until next summer, there are question marks over demand too at current levels. Demand from the livestock sector is sluggish at best, wheat prices are high relative to other raw materials and imports of cheaper feed wheat from the continent are becoming viable at these levels.
In addition we have the spectre of the will they, won't they issue with regards to the renewal of the blenders tax credit in the US, which is due to expire at the end of this month. That could hit demand from the ethanol sector, which you will recall takes around a third of the entire US corn crop.
Too much rain isn't the problem in Argentina, it's lack of it after another largely dry weekend. The latest forecast shows "no significant rain expected over E Argentina for the week ahead, despite some threat later in the week," according to QT Weather.
"Last week, rainfall anomalies grew across E Argentina, being in deficit by 15-35 mm," they add. Neighbouring Uruguay is also being badly affected by drought.
Talking of drought, it wouldn't be Christmas without one in China too now would it? November temperatures 1-4C higher than normal, combined with a sharp reduction in rainfall in the North China Plain is stressing winter wheat in the region. Still, what Santa can't fix silver iodide can. They won't have to bother putting a silver sixpence into next year's Christmas pudding, it'll be full of the stuff naturally. Yes, I know that they probably don't eat Christmas Pud on the North China Plain, I'm using my artistic blogging licence. They can't read this stuff anyway, I'm banned over there, remember?
Just in case you missed it, Stats Canada unexpectedly raised their rapeseed production estimate for the 2010/11 crop by a hefty 1.4 MMT on Friday. Alberta's canola crop hit a record 4.5 MMT, they said. That took production in the three prairie provinces of Alberta, Manitoba and Saskatchewan to 11.7 MMT.
You'll be unsurprised to discover that there was more trouble at the Nogger household over the weekend when the police called round. No, it was nothing to do with Taff the angry Welshman and his wretched car for once. Nor indeed his blingy Christmas lights that were liberally strewn around his house frontage on Saturday like a Jackson Pollack on drugs. Now they are criminal. Two planes bound for Leeds/Bradford tried to land in our street last night.
No, the local rozzers knocked on the door sporting a photograph of MrsN#1 would you believe? They said "excuse me Sir, is this your ex-wife?" I said "yes officers, it is."
"I'm sorry Sir, I'm afraid it looks like she's been knocked down by a bus," they said. "Yes she does doesn't she," I replied, and off they went. Honest.
CBOT Closing Comments
03/12/10 -- Soybeans
CBOT Jan soybeans ended 20 1/2c higher at USD13.00 1/4c a bushel; Jan soymeal rose USD5.90 to USD351.60; Jan soyoil ended 61 pips higher at 53.45. Beans broke through the psychologically important USD13/bushel mark, with Jan posting the highest weekly settlement in the life of the contract. The dollar fell on the back of a lower than expected nonfarm payroll increase, and crude oil posted it's highest close since October 2008 nearing USD90/barrel. Argentine dryness is already causing concern with little more than half the crop in the ground.
Corn
Dec corn rose 17 3/4 cents to USD5.58 1/2; March corn rose 18 cents to USD5.73 1/2. The weak dollar and rising crude oil price also helped corn, as too did spillover support from resurgent wheat. Corn bulls should be mindful that the problems in Australia could actually be negative for US corn demand into Asia. The dryness problems in Argentina raise concerns over the corn crop as well as soybeans, in what is the world's second largest exporter of the grain. Unlike soybeans corn planting in Argentina is ahead of last year at 81% complete, versus 77% this time a year ago.
Wheat
CBOT March wheat ended up 30 1/2c at USD7.79 a bushel; KCBT March wheat rose 20 1/4c to USD8.22; MGEX March wheat climbed 22c to USD8.35 1/4. Wheat posted strong gains on all three exchanges as the market starts to catch onto the fact that before too long there's maybe only going to be one quality wheat shop left open - the US. Eu exports are flying out, and Australia's wheat crop seems to be deteriorating on a daily basis. Argentina will have a better wheat crop this year, but much of their surplus is likely to go to neighbouring Brazil.
EU Wheat Close
03/12/10 -- EU wheat futures closed higher once again Friday, with Jan London wheat up GBP2.45 to GBP187.45/tonne and Jan Paris wheat EUR1.50 firmer at EUR235.25/tonne.
This was London wheat's twelfth higher close out of the last thirteen trading sessions, during which time it has posted impressive gains of GBP31.70/tonne having risen more than GBP10.00/tonne this week alone. Paris wheat is up EUR17.00/tonne since last Friday.
London wheat is gaining on ideas that the domestic crop has been more aggressively sold for export in the last six months than anybody realised. UK exports are subsequently running well ahead of schedule, as too are those in the EU as a whole - 40% up on last season at the last count earlier this week.
That puts Europe on course to export almost 2 MMT more than the USDA currently predict, which would come straight off the bottom line ending stocks for 2010/11. At 10.7 MMT those are already forecast to be the smallest since 1983/84.
What are by now becoming well-documented problems in Australia sees the harvest in the east running 4-6 weeks behind schedule, with serious implications on quality, if not also now quantity starting to emerge.
Potential problems now also lie ahead for US and Russian winter wheat when it emerges from dormancy in the spring. US wheat currently has one of the highest poor/very poor ratings in the last twenty years at 17%. In the top producing US state of Kansas poor/very poor is now rated at a weighty 25%, further west in Colorado it's 40%.
Russian winter wheat plantings are forecast down 14% to 28 million acres, according to the IGC. That puts a lot of pressure on spring plantings, especially as spring wheat normally yields around 20% less than winter sown wheat in Russia. In addition, sunflowers are said to be a more profitable crop than spring wheat for Russian growers.
Early Call On Chicago
03/12/10 -- The overnight grains were firmer, led by wheat which posted gains of 17/22c. Corn finished 6/7c on spillover support from wheat, with beans up 7/8c.
Considering that the world can ill-afford a weather problem in 2011, suddenly the market is like a punch-drunk boxer on the ropes, getting hit from all angles.
Eastern Australia's wheat crop is in a mess, with talk of up to half of it only making feed grade. With Western Australia's crop slashed to around 3.5 MMT by drought, South Australia and east are expected to chip in with a wheat crop of around 20 MMT to make up the deficit. So we could be looking at taking up to 10 MMT out of the quality wheat supply chain for 2010/11.
The US winter wheat crop is entering dormancy in the worst state for years. The USDA reported on crop conditions this side of spring for the last time on Monday, pegging only 47% of the crop in the good/excellent category, one of the lowest percentages in years.
Now reports are circulating that around 9 million acres of China's principal wheat growing areas have been hit by drought. That's around 20% of the total planted area, and below average rainfall is expected to continue through to February.
Taiwan bought US wheat today, reputedly paying just under USD550/tonne for 14% Dark Northern Spring wheat, that would have to be amongst the highest prices paid in a good while as Asian buyers scramble for quality wheat.
Stats Canada peg all wheat production there this season at 23.2 MMT, 12.5% down on last year. Heavy spring flooding is also said to have taken it's toll on quality here too.
La Nina seems to be throwing up more difficulties than El Nino ever did with Argentina also under threat from only scant rainfall, with soybean plantings only managing to reach 57% done this week, according to the Buenos Aires Grain Exchange.
Meanwhile Russia's sharply lower and late planted winter wheat acreage faces a testing few months, and there are serious concerns as to their ability to be able to pull-off their targeted big spring planting increases.
For the week so far (excluding today's Globex markets) we see March CBOT wheat up 61 1/4 cents, Jan soybeans up 41 1/4 cents and March corn up 2 1/2 cents. Corn is clearly lagging on ideas that there may be 10 MMT more feed wheat on the market to tempt Asian buyers early in 2011.
Early calls for this afternoon's CBOT session: Corn and beans up 8-10c, wheat up 20-25c.
London Wheat Surges To Fresh Highs
03/12/10 -- London wheat has me flipping back through the record books this morning after front month January opens GBP3.45 higher at GBP188.45/tonne. Not only is that a contract high, a close at that would be the highest since March 26th 2008. Which just happens to be my birthday!
The overnight Globex market now sees wheat up around 23-24c, posting gains of 75-85c since last Friday's close.
"There is clearly going to be a dearth of quality wheat available in the first half of 2011, with America looking like being the only volume long-holder," say Dow Jones Newswires today. I wonder where they read that? Oh, there it is just a bit lower down, says an observer.
There you go, you wait all this time then two free lunches come along in quick succession. They could at least call me Nogger rather than an observer, you'd have thought. Internationally renowned blogger, market analyst, divorce specialist and raconteur would be better, but I'd settle for Nogger.
No Such Thing As A Free Lunch?
03/12/10 -- Who says that there's no such thing as a free lunch? Get your knife and fork out and pull up a chair, say the people at Farmers Weekly. Due to potential circulation issues with the wintry weather gripping the country they've put this week's edition of the magazine out in digital format completely free!
Have a quick (or leisurely) shuftie here: Shameless freeloader and proud of it
Early Vibe
03/12/10 -- Chicago wheat, which was 25c up in early trade yesterday, gave up much of those gains by the close finishing 8-9c higher on spillover weakness from corn and beans. That lost ground has been recovered this morning though, with the overnight session showing gains of 15-20c.
Australian milling wheat futures are soaring, posting 7% gains overnight for a rise of almost 30% in a week. The current La Nina episode, which is causing dryness concerns in Argentina, continues to dump rain across the entire grain belt on the eastern side of Australia which starts in Queensland runs down through NSW, Victoria and finishing in South Australia. "The same front has been hanging around now for about 7 days and looks like staying here for another week or so," says my newest Australian buddy Shaneo.
His wheat is now only likely to be suitable for feeding after earlier looking like being "the best they have been for as long as my father can remember," he says.
Thanks to Shaneo, Bill Crabtree and Andrew Jurgs who all emailed me to confirm that grain driers are indeed relatively few and far between Down Under, leaving most Australian farmers with little choice other than to sit back and watch the cricket whilst Mother Nature does their drying for them.
They're going to have to wait a while longer yet, QT Weather say that "A progression of storms will keep east Australia soggy for the next 10 days."
"In major cropping areas, rainfall anomalies for November were 50-150mm (2-6 inches) above normal, setting the stage for this month’s flooding, crop damage and harvest stoppages as rains have been relentless," they add.
Yet again, the quality wheat supply and demand picture continues to tighten.
Meanwhile the Chinese government got no bids whatsoever in this week's 300,000 MT soybean auction. It would seem that the minimum price was set too high to attract local interest. They also announced plans to auction off a further 100,000 MT of rapeseed oil next week. They sold 70% of what was on offer at their last auction.
The lucky old Chinese say that they had a record grain harvest of 546.4 MT in 2010, the seventh year of increases in a row, according to the National Bureau of Statistics. They say that production rebounded this year from last season's drought-affected crop. They don't explain how last season's drought-affected crop officially managed to top 2008's non drought-affected crop. Neither do they enlighten us on why last season they insisted that the crop hadn't been affected by drought. Better get me Charlie Chan on line two....
Brussels have now issued export licences for 10.1 MMT of soft wheat less than halfway through the marketing year, 40% up on this time a year ago. If we were to maintain that pace then we'd export 23.9 MMT in 2010/11, almost 2 MMT more than the USDA currently predict. The vast majority of this week's licences went once again to France - 396,000 MT.
Going back to QT Weather, they say that a second wave of ocean cooling means that we won't see La Nina peak until March. That's later than the Dec/Feb time frame that other forecasters are giving. If they're right that could continue to cause problems for South America, particularly Argentine soybeans and corn.
Chicago Close
02/12/10 -- Soybeans
Jan 11 soybeans closed at USD12.79 3/4, down 3 1/4 cents; Dec 10 soybean meal closed at USD344.10, down USD2.50; Dec 10 soybean oil closed at 52.47, up 22 points. Today's weekly export sales came in at 1.4 MMT, above trade expectations for sales of 1-1.3 MMT, and the highest in a month. China booked it's biggest total in four months. US sales currently stand at more than three quarters of the USDA's projected total for the entire marketing year, normally that total is on 55%.
Corn
Dec 10 corn closed at USD5.40 3/4, down 11 cents; Mar 11 corn closed at USD5.55 1/2, down 10 3/4 cents. Export sales were in line with trade expectations at 758,050 MT. In addition to those sales the USDA today announced 135,000 MT of corn sold to Japan and 238,000 MT to "unknown". Trade talk for corn is starting to focus on the likelihood, or otherwise, of the existing tax break on corn ethanol being extended when it expires at the end of the year.
Wheat
Dec 10 CBOT wheat closed at USD7.06 1/2, up 9 cents; Dec 10 KCBT wheat closed at USD7.87 1/4, up 6 1/2 cents; Dec 10 MGEX wheat closed at USD7.93 1/4, up 9 cents. Wheat futures closed up but well off session highs. The USDA today reported wheat export sales of 663,300 MT for the 2010/11 marketing year, plus 40,900 MT for delivery in 2011/12. That is in line with expectations for sales of 500-700,000 MT. Australian problems are adding to ideas that quality wheat will be in short supply come the spring.
EU Wheat Close
02/12/10 -- EU wheat futures closed higher with Jan11 London wheat up GBP1.75 to GBP185.00/tonne and Nov11 London wheat up GBP1.95 to GBP156.00/tonne. Jan11 Paris wheat rose EUR4.75 to EUR233.75/tonne and Nov11 Paris wheat was up EUR3.00 to EUR209.50/tonne.
Futures closed a little off the days highs, which were set early on, on profit-taking. Even so London wheat posted new contract highs and the highest close for a front month since March 26th 2008.
The strong pace of EU exports continues unabated. Brussels issued export licences for 558,000 MT of wheat during the past week, that brings the cumulative total for the marketing year to date to 10.1 MMT, 40% up on this time last year.
Missing out on yesterday's Egyptian tender looks like a blessing in disguise at this rate.
Australia's wheat crop is going downhill rapidly in the east, with some reports suggesting that things are so drowned out that some of the crop there won't even be suitable for feeding. It is an enormous kick in the nether regions for farmers in the area who have struggled against drought over the past few years.
The harvest there is now running at least a month behind. Unlike in the UK, many growers are huge distances away from the few grain driers that they have Down Under. So sitting tight and waiting for nature to do it's job is the only really viable option for the majority of Australian farmers, according to Andrew Jurgs, grain analyst at Czarnikow.
There is clearly going to be a dearth of quality wheat available in the first half of 2011, with America looking like being the only volume long-holder.
Early Call On Chicago
02/12/10 -- The overnight grains were mixed, with wheat ending 8-9c higher, beans 7-8c lower and corn down 3-4c.
Wheat was up on the back of Australian weather woes, and large-scale crop downgrades. Heavy rain, flash flooding and hail hit Victoria this morning, with some places recording 12mm of rain in just ten minutes. More is forecast for tomorrow, with only a brief respite over the weekend before heavy rain and storms will again cross the state mid-next week.
In South America, Argentine soybean plantings are well behind normal. November soybean rainfall was only 39% of normal in the key soy provinces, allowing little more than 50% of the crop to get planted and hampering germination.
What rain has fallen has tended to be only in the form of light showers, certainly not the widespread soaking that growers there are hoping for. There are no such drenching rains in the forecast either, and temperatures are into the 90's next week.
The USDA today reported wheat export sales of 663,300 MT for the 2010/11 marketing year, plus 40,900 MT for delivery in 2011/12. That is in line with expectations for sales of 500-700,000 MT.
Soybean sales came in at 1.4 MMT, above trade expectations for sales of 1-1.3 MMT. Corn sales were in line with trade estimates at 758,100 MT.
In addition to those sales the USDA today announced 135,000 MT of corn sold to Japan and 238,000 MT to "unknown".
Early calls for this afternoon's CBOT session: wheat up 7-9c; corn down 3-4c; beans down 6-8c.
Rocket Man
02/12/10 -- May London wheat opens GBP3.00/tonne higher this morning, with new crop Nov up GBP2.95/tonne in early trade. May is now up GBP12.80/tonne and Nov up GBP8.00/tonne in a week.
The difference between this rally and the one of 2007/08 is that this one has more to do with the fundamentals of supply and demand.
Supply is getting tighter by the day, and it is seriously starting to look like we will run out of wheat. Having said that from a feed perspective wheat is bloody expensive stuff at GBP180/190 ex farm, which is where it is now, you could buy rapemeal or DDGS at not much more than that.
Unfortunately however, you can't put rapemeal of DDGS through a bioethanol or starch refinery, or load them onto a boat labelled "wheat" and ship them abroad against a sale you made at GBP100/tonne six months ago. More's the pity.
Morning Muse
02/12/10 -- It's 8.30am, and as I haven't left the house yet I haven't been accused of any wrongdoing so far today. Taff's car isn't there, so he's either gone to work or I've stolen it. The people at No84 are probably too busy to go to work, there's logs to keep, surveillance cameras to de-ice and so much filing to keep on top of you wouldn't believe. I'm sure that the local police are very grateful though.
The overnights are mostly down a little I see, but hardly what you would call a major reversal. Japan have bought 209,000 MT of US wheat overnight. This was expected, but it's interesting to note the size of the tender is somewhat larger than their normal weekly requirement.
Egypt bought all US wheat yesterday, booking 220,000 MT at cheaper levels than EU origin options.
Australian wheat futures closed sharply higher this morning. The situation in the east is starting to remind me of our own wheat harvest from 2008. There's plenty of it but it's all soaking wet and will only be fit for feed, but first it needs to be harvested.
As I know that the blog gets some Australian readers maybe one of them will kindly email me the answer to this question. What are the farmers' options when it comes to harvesting wet grain? I mean I don't imagine that there's a grain drier just down the road waiting for the one harvest every blue moon that throws up a mountain of wet grain.
SovEcon predict that Russia will harvest 75-85 MMT of grain in 2011, some 15-25 MMT more than this year, but also around 20-30 MMT down on 2009 and 30-40 MMT below the bumper crop of 2008.
A crop towards the lower end of that scale would do little more than cover domestic demand. Even one at the upper end would only serve to supply local demand and replenish carryover stocks which will surely be depleted this season.
That is why I find it difficult to envisage Russia back as a volume seller until 2012. It's going to be late 2011 before they've wrapped up next years corn harvest and know for sure what kind of volume they have to play with, and it isn't likely to be enough. That potentially puts them out of the game until the second half of 2012.
In Argentina there's still almost half the soybean crop left to sow. Leading South American analyst Michael Cordonnier says that although the planting window is still open until the end of the month, the optimum time for planting is already behind us. Yield prospects generally decline on beans sown later than the third week in November, he says.
Shocking News
02/12/10 -- The kids rang me last night totally distraught (they live down south with MrsN#1), to say that they'd come home from school yesterday to find the entire house ransacked. Windows and doors wide open, and everything gone. What sort of a person does that, eh? Apparently Mrs N#1 had had a bit of a choc-craving and ate the entire contents of their advent calendars in one sitting ;-)
CBOT Close
01/12/10 -- Soybeans
Jan 11 soybeans closed at USD12.83, up 40 cents; Dec 10 soybean meal closed at USD346.60, up USD8.00; Dec 10 soybean oil closed at 52.25, up 160 points. Helping today's rally was the drop in the dollar and stronger crude oil. Chinese PMI data shows that its economy is still accelerating, supporting ideas that demand for commodities will continue. Trade estimates for tomorrow’s weekly report range from 1 to 1.2 MMT.
Corn
Dec 10 corn closed at USD5.51 3/4, up 21 3/4 cents; Mar 11 corn closed at USD5.66 1/4, up 22 1/4 cents. A new month and new money seems to have got the entire grain complex off to a flying start. Outside macro markets also provided some support today. Crude oil closed more than USD2.50/barrel higher. Estimates for tomorrows weekly export sales report range from 650,000 to 850,000 MT.
Wheat
Dec 10 CBOT wheat closed at USD6.97 1/2, up 47 1/4 cents; Dec 10 KCBT wheat closed at USD7.80 3/4, up 50 3/4 cents; Dec 10 MGEX wheat closed at USD7.84 1/4, up 44 1/4 cents. Production concerns remain for US, Australia, Argentina and Russia. Meanwhile Egypt bought 220,000 MT of all US wheat in today's tender. Estimates for tomorrows weekly export sales report range form 550,000 to 650,000 MT.
EU Wheat Close
01/12/10 -- EU wheat futures closed with Jan11 London wheat up GBP4.05 at GBP183.25/tonne, and Nov11 London wheat up GBP4.15 to GBP154.05/tonne. Jan11 Paris wheat gained EUR5.00 to EUR229.00/tonne and Nov11 Paris wheat rose EUR6.50 to EUR206.50/tonne.
In London, the July future is now less than GBP10/tonne away from breaking through the psychologically important GBP200/tonne level.
London wheat posted another highest close for a front month since late March 2008 record. EU wheat gained on the continued weakness of the euro, London wheat continues to benefit from ideas that the 2010 crop has been oversold on the export front.
Egypt bought 220,000 MT of US wheat today, usurping French origin amongst others, but nobody seems to mind. The EU simply don't need to try and compete. Why hold a pre-Christmas sale when there's nothing left to sell in the store?
Australia is in trouble. Wheat in the west have been decimated by drought, whilst crops in the east are drowning under incessant rains. Quality is going down the pan rapidly.
Heavy snowfall across northern Europe will help protect crops from winterkill. However snow cover is relatively scant in Ukraine and Russia, raising further concern for late-planted wheat.
A Day In The Life
01/12/10 -- Just popped out for half an hour in quite heavy snow to pick MrsN#3 up from her relaxing day at the local health spa, only to get back to a message to go and see Taff the angry Welshman over the road.
What could he want with me I wonder, maybe he's taken exception to that sheep story from yesterday I ponder? But no, I reversed into his car a short time ago and drove off without stopping, according to Taff. He knows it was me because the people at No84 saw me and came up the street to tell him.
The location of said dent in Taff's front wing and the positioning of his car on the road make it nigh on impossible that it could have been me. You simply wouldn't hit his car in that particular spot reversing off the drive to head off down the road. But the people at No84 are adamant.
"Yes it was definitely him, reversing off that drive in that big silver car, saw it with my own eyes," the Neighbourhood Watch insist.
"Could you please just come up the road then and show me where and how I hit it," I request. They are keen, strangely very keen to oblige.
So up they both come, in a family outing sort of a way. Think poor man's CrimeWatch. They're muttering. "It was definitely you, in your big car."
"14.49 it was," Miss Marple pipes up, as if she's made a specific note of the time, just as you would if you witnessed a multiple shooting for example. She seems a tad disappointed that there aren't any BBC film crews about. (And by the way 14.45 was my allotted time for collecting MrsN#3, and as it was snowing I'd left well before that).
So we arrive at the scene of the crime. "Here you are, your car there reversed off your drive there, and hit this car right here. Look you can see the tyre prints in the snow."
"Erm, but those tyre prints are pointing up the road and I reversed off to head down the road."
"Oh, now that I come to think about it I think the car that did it was a bit more silver than that. But it was definitely a Ford like yours."
"That is a Nissan."
"Oh yes, so it is. You know, I don't think it was you now."
I hope they aren't witnesses against me in a murder trial, that's all I can say.
Early Call On Chicago
01/12/10 -- The overnight grains raced higher to start the month with wheat leading the way around 23-25c firmer, with corn up 8c or so and beans 16-18c higher.
Crude is up almost a dollar and a half, and the US dollar is a bit weaker. News that China's manufacturing index posted a 7-month high last month was also seen as evidence that their economy is continuing to grow, boosting the longevity of demand for grains from that sector.
Wheat is up on ideas that Australia's crop in the east is quickly becoming a wash-out, further tightening the global supply/demand picture for quality wheat.
The flip side is that much of this downgraded wheat will likely soon be making it's way to Asia to replace corn in feed rations.
Weather concerns also remain for US and Russian winter wheat.
There are assorted wheat tenders kicking around, but the Egyptian one will as ever be the most closely watched. News on that is expected later this afternoon.
Argentine dryness concerns are growing, with problems also in some areas of Brazil. At least one leading analysts has downgraded his soybean production forecasts for those two this week, with more downward revisions likely on the way - especially for the former.
Any delays in plantings in South America will postpone China's inevitable switch away from buying US beans, tightening US ending stocks for 2010/11 even further.
Malaysian palm oil values reached their highest levels in more than two years overnight. The February future in Kuala Lumpur broke through 3,500 ringgit for the first time since July 2008 on the strong export pace.
Early calls for this afternoon's CBOT session: wheat up 20-25c; corn up 6-8c; soybeans up 16-18c.
The British Livestock Sector
01/12/10 -- Feed prices are continuing to rise rapidly, in stark contrast to the end returns that the nation's livestock farmers are getting.
This article in the Yorkshire Post highlights the plight of the average British pig farmer right now: Pig industry is facing another price fall crisis
As the article points out, the almost instant rise in feed prices has not and will not be met by a similarly swift increase in pork prices. "The trouble is, there is plenty of pork in the chain," they say.
Much of the pork in the chain is unfortunately imported. I was dismayed to literally have to meticulously search through the bacon and ham joints on offer during a rare trip to the local Sainsbury's on Monday to find British meat on offer.
Not that I'm singling Sainsbugs out for being the only one of the major supermarkets to be guilty of such nefarious practices you understand. The Co-op for all their eco-friendly buy British food ethic rhetoric have recently been serving up BOGOF's on Danish bacon.
Our chums on the continent are of course also feeling the pinch of rising feed prices, leading to increased slaughterings and pork being dumped onto our domestic market, depressing prices over here.
Buy British, whilst you still can.
Going Down: Chicken Tikka Masala
01/12/10 -- The totally un-British (and totally un-Indian also come to that) dish that for years has supposedly been Britain's favourite has apparently been relegated to third spot in the Premiership.
Yes, bland-as-buggery Chicken Tikka Masala fell to third in a recent survey by culinary appliance makers Kenwood I'm pleased to report.
I'm even more delighted to reveal that it was good old fashioned steak and chips that knocked the creamy yellow lumpy mush of it's perch. You can't get more British than that can you? Note I said chips not French Fries.
Second? Spag Bol, with pizza in fourth. Fancy a prawn cocktail to go with your steak for the classic British ultimate dining out experience of the 80's? You got one sunshine in fifth place.
Just to prove what a fantastic and diverge culinary isle we are tomato soup popped up in sixth.
Just in case you're interested, and I know that you are, braised lamb shank came in seventh, garlic bread eighth, chilli con carne ninth and lasagne tenth.
A little over heavy on the Italian theme there methinks, but at least they kept the McDonalds Happy Meal at bay.
Gutted to see no place for a full English breakfast mind, or even a token bacon butty.
EU Rapemeal Prices
01/12/10 -- Latest guide prices for EU rapemeal.
Basis FOB Lower Rhine in euros/metric tonne, with change from previous trading day:
| Dec10 | 214.00 | unch |
| Jan11 | 214.00 | unch |
| Feb/Apr11 | 212.00 | unch |
| May/FH Jul11 | 212.00 | +2.00 |
| Aug/Oct11 | 184.00 | +2.00 |
| Nov11/Jan12 | 190.00 | +3.00 |
Please Return To Your Seats And Keep Your Seat Belts Fastened
01/12/10 -- New month, new money. So goes the saying. It certainly seems to be holding true this morning with the overnight Globex trade 16-18c higher on wheat, 10c up on beans and 5-6c firmer on corn.
Be careful what you wish for seems to sum things up in Australia as the potential bumper wheat crop in the east turns to mush. With the harvest running around 3-4 weeks behind schedule incessant rains are turning what looked like a crock of gold into a crock of something a whole lot less savoury.
"We have a natural disaster developing at the moment," says this observer. "Queensland already had a lot of downgraded grain. This is a cancer creeping south."
They don't have such problems in Western Australia, where the harvest is already about two-thirds complete. Here the damage was done months ago, with drought slashing wheat production by more than half to around 3.5 MMT from 8.25 MMT last season.
Meanwhile in America we have only 47% of the winter wheat crop rated good/excellent, the lowest in years and well below the 63% level of a year ago.
Fast forward to Argentina and Brazil where Mother Nature is also providing local farmers with what is looking like another difficult growing season. The kind of fast-maturing soybeans that they plant here need soaking rains on a regular basis, but they simply aren't getting them.
Highly-regarded private analyst Michael Cordonnier yesterday became the first to cut his soybean production estimates for the coming season, knocking 1 MMT off output in Argentina and 0.5 MMT off for Brazil. Combined he now sees production there 2.5 MMT less than the USDA's estimate last month.
Is Argentina gearing up for a repeat performance of two years ago when La Nina slashed soybean production to just 32 MMT?
Normally they would have 80-85% of their soybeans planted by now, currently it is little more than 50%, and what has gone into the ground is struggling to germinate with only scant rains and temperatures already pushing into the mid-90's.
Skip to Russia where winter plantings are down 20%. These crops were sown a month or more later than normal due to drought, and are now slipping into winter dormancy in a stunted state of development.
"Wheat having weak roots would be subject to damage from soil erosion. Moreover, when wheat is planted very late it has less time to achieve maximum hardiness to cold making winter kill more likely," warn Martell Crop Projections.
The world isn't well placed for a crop disaster of any significant magnitude in 2011. Australia's difficulties are beyond help. An escalation of the problems in the US, South America and/or Russia might mean significantly higher prices yet.
CBOT Close - Tuesday
30/11/10 -- Soybeans
Jan 11 soybeans closed at USD12.43, up 8 cents; Dec 10 soybean meal closed at USD338.60, up USD2.30; Dec 10 soybean oil closed at 50.65, up 78 points. Weather concerns about the South American crop continue with dryness in large parts of Argentina and Brazil. The USDA reported the sale of 165,000 MT of soybeans to unknown destinations. China is seen importing a record 55-57 MMT of soybeans in 2011, according to COFCO. Support also came from Malaysian palm oil futures rallying to 28-month highs.
Corn
Dec 10 corn closed at USD5.30, down 8 1/4 cents; Mar 11 corn closed at USD5.44, down 9 1/4 cents. Sharply lower crude oil prices were bearish for corn, as too was a Chinese statement dismissing ideas of significant corn imports in 2011. China also announced that it is re-exporting the 54,000 of US corn impounded for containing non-authorised GM strains back in September. That seems to be a signal that they aren't as desperate for any corn they can get as the market has been thinking.
Wheat
Dec 10 CBOT wheat closed at USD6.50 1/4, unchanged; Dec 10 KCBT wheat closed at USD7.30, up 3 1/2 cents; Dec 10 MGEX wheat closed at USD7.40, up 3 1/2 cents. The world is shaping up for a shortage of quality wheat in 2011. Wet weather continues to hamper harvesting in eastern Australia. Canada's well publicised flooding problems earlier in the year also mean that a much higher percentage than normal of it's crop is feed wheat - the highest since 2004 in fact. Egypt's wheat tender results will be closely watched. Japan are also tendering for 209,000 MT of US wheat.
EU Wheat Close - Tuesday
30/11/10 -- EU wheat futures closed mixed Tuesday with Jan11 London wheat down GBP0.05 to GBP179.20/tonne and Nov11 London wheat down GBP1.10 to GBP149.90/tonne. Jan11 Paris wheat closed up EUR1.75 to EUR224.00/tonne and Nov11 Paris wheat was up EUR0.75 to EUR200.00/tonne.
The weak euro helped Paris wheat close mostly in positive territory bit pressured London wheat a little.
Egypt are tendering for wheat again, looking for various origin grain including French, US, Canadian, Australian and Argentinean. It will be interesting to see who scores as the cheapest this time round.
The EU hardly needs to fight to win any more export business than it already has at the moment.
Algeria are also tendering for at least 50,000 MT of wheat today, and Jordan are in the market for 100,000 MT each of wheat and barley.
Russian winter grain plantings are seen 20% down. Whilst spring sowings will increase it seems unlikely that they will compensate for a shortfall of this magnitude. It seems to be becoming increasingly likely that they will turn to importers in 2011, and are probably ruled out as a major force in the export market until 2012.
