Morning News
12/09/12 -- The overnight electronic market sees soybeans 10-14 cents higher, with corn up 2-3 cents and wheat 2-4 cents firmer. Evrybody is waiting on the USDA report due out at 13.30 London time. Soybeans are up seemingly on a correction from recent losses. September closed below USD17 last night for the first time in almost a month. That was also the fifth straight session of declines during which time the front month contract has shed almost 75 cents.
Yet fundamentally nothing much has changed for soybeans. Global demand remains strong, the USDA is expected to unveil the smallest domestic soybean stockpile since 1976 this afternoon and dryness in Brazil is a concern with planting there due to start within days. The world badly needs a big crop out of South America in 2012/13.
There's a possibility that the USDA might surprise the market and raise potential US soybean yields slightly today. They need to do something if they want to avoid pegging 2012/13 ending stocks below the 100 million bushel mark (and they surely do).
For corn, it seems that another yield reduction is highly likely, with something around the 120 bpa mark the average trade guess. How are they going to balance the 2012/13 books? An increase in carry in from 2011/12 is a possibility, by virtue of increased imports and reduced exports. Feed demand could also be cut, although a further reduction in ethanol usage is probably unlikely at this stage.
For wheat, US ending stocks are expected to see a small increase to 709 million bushels from the August estimate of 698 million. It's changes to the global balance sheet that will be of more interest, particularly the Black Sea countries and Australia.
The Ukraine Ministry have outlined their intention to cap wheat exports at 4 MMT this season, of which around 1.7 MMT has already been shipped. At that rate they will be out of the wheat export market by the end of the year.
Egypt's recent buying spree can be attributed to them wanting to mop up as much cheap Black Sea wheat as possible before the barn doors are closed until next season. Russian offers do seem to be drying up with France getting it's first share of Egypt's 2012/13 business yesterday. US wheat is still priced out.
It's unlikely that Egypt will continue buying in such large and frequent quantities once the cheap sellers are out of the market though.
The German constitutional court has this morning rejected a petition to block the European Stability Mechanism (ESM), propelling the euro to a four-month high against the dollar. The pound is also up above 1.61 against the greenback for the first time since May.