The Morning Paper

26/06/12 -- Follow through buying after last night's limit up move on corn currently sees the grain post further gains of 6-7 cents on the electronic market as I type. In fact that should be re-type as corn was 10-15 cents higher when I started writing this. Beans and wheat are taking a bit of a breather, mostly 2-3 cents lower. Strike that, they were 2-3 cents lower, now it's 6-7 cents lower on beans and 10-12 cents easier on wheat.

Cyprus has asked for a bailout, and may require as much as EUR10 billion, according to the morning press. In a reflection of the times we are in the market reaction is "EUR10 billion? Is that all? I'm only interested in amounts larger than EUR100 billion these days."

EUR10 billion is, for Cyprus, a very large amount - more than half it's entire economy in fact, according to Reuters.

The market is focused on the upcoming EU leaders summit at the end of the week, and hoping (rather than banking on) for a rabbit to be extracted from the hat. It seems likely to be another lot of hot air, and noble but vague statements that they have a cunning plan to ensure that good times are round the corner.

They can't however tell us what that plan is, because that would spoil the surprise. But rest assured sweet cheeks, there really IS a plan. Honest.

The new Greek finance minister won't be a part of it though. He's now the old Greek finance minister, having lasted less time than England's Euro hopes, after resigning due to ill health less than a week into the job. If he's that ill he has to resign on the back of it then you'd have thought he'd have known it a week ago wouldn't you?


Egypt's GASC says it's managed has "at least" seven months worth of wheat stocks following it's own domestic harvest and will probably not be back in the market to buy on the international stage until August.

Last night's USDA crop condition ratings saw corn good/excellent cut six percentage points, as opposed to soybeans which only saw a 3 point cut amongst the top two categories. Corn ratings have held up better than soybeans in the previous couple of weeks reports, so you maybe could say that this is the USDA making up for a bit of lost time on corn.

With good/excellent of 56% now well below last year's 68% at this time the pressure is on for a large reduction in prospective yields in the USDA's July 11th report. With more than one eye on that they may well be tempted (or even forced) to come up with a big acreage number for corn on Friday.

Ditto soybeans, where the March acreage estimate of 73.9 million was below even the lowest trade estimate at the time. There is every likelihood that they will up that by at least a million and maybe more.

Creative accounting they call it in Washington, and most other places too.

Nov 12 London wheat is a pound lower in early trade, it too seemingly doing a bit of consolidation following yesterday's steep gains. Last night's close was the highest in just over a year for it, taking ex farm levels to over GBP155/tonne off the combine for feed wheat.

Is that a "the plate only gets passed around once" selling opportunity? Or merely a stepping stone to higher levels? From a purely UK perspective it may be worth remembering that the last time it pissed it down this much all summer - 2008 - we finished up with our highest ever wheat yield of 8.3 MT/ha and the one an only time we managed a crop in excess of 17 MMT.

We've had four 8.0 MT/ha yields (plus that 8.3 MT/ha) in the last 12 years. Looking at the crop in the field now I don't think that there would be many who would bet on this season being any lower than that. So we are probably in line to at least match our second highest wheat yield on record.

A quick flick through the record books tells me that front month November wheat has never been higher than it is today on the 1st of August in any year in history. It's only been higher than it is today on the 1st of November once - the great Russian crop disaster year of 2010.

Our yield in 2010 was a not very special 7.7 MT/ha, and production was less than 15 MMT incidentally.

So is 2012/13 going to offer a repeat performance of the hitherto one-off season of 2010/11? Well, the Russian crop has been downgraded significantly, but things are nowhere near as dire as they were in 2010 my spies over there tell me. Neither would many be willing to stake too many roubles on them introducing an export ban at the beginning of August as they did back then.

We will of course (presumably) have Vivergo to feed, assuming that they can make the economics (and the plant) work. In theory that takes a million tonnes off the market, although the reality of the situation is likely to be less than that.

Ensus? Well, who knows? They've been quieter than Ann Frank's drum kit recently. That could make a difference, although crude oil slumping 25% in the past eight weeks whilst Nov 12 London wheat has gone up a tenner wouldn't seem to suggest that the economics of turning wheat into bioethanol have suddenly become more viable.