Chicago Rises Buoyed By Strongest US Wheat Export Sales In Almost 2-Years

28/12/12 -- Soycomplex: Jan 13 Soybeans closed at USD14.24, up 5 1/4 cents; Mar 13 Soybeans closed at USD14.18, up 4 cents; Jan 13 Soybean Meal closed at USD427.70, down USD2.10; Jan 13 Soybean Oil closed at 48.94, up 65 points. For the week that puts front month beans 6 3/4 cents lower, with meal down USD6.10 and oil up 23 points. Funds were estimated to have been net buyers of around 2,000 soybean contracts on the day. Weekly export sales were below expectations at only a net 87,000 MT, by virtue of cancellations of 272,300 MT to China and 111,000 MT to unknown destinations. Even so sales are massively ahead of the level required to meet USDA targets. Weekly shipments were strong again at 1,153,800 MT - a record thirteenth week in a row that they've topped the 1 MMT mark. In addition, the USDA announced 165 TMT of US beans sold to China for 2012/13 delivery under the daily reporting system. They also announced 30 TMT of US soybean oil sold to unknown for 2012/13 delivery, extending a run of very strong oil sales lately. South Korea also bought 25 TMT of US beans for May shipment. The Buenos Aires Cereals Exchange placed the 2012/13 Argentine soybean area at 19.7 million hectares, unchanged from their previous estimate. They said that 80.1% of the crop has been planted versus 73.6% a week ago and 80.6% a year ago. The Argentina Ag Ministry estimated the bean area a tad lower at 19.355 million hectares. They said 84% of the Argentine bean crop has been planted versus 77% a week ago and 87% a year ago. Both area estimates are below the USDA's 19.8 million hectare forecast.

Corn: Mar 13 Corn closed at USD6.94, up 2 1/2 cents; May 13 Corn closed at USD6.96 3/4, up 2 1/4 cents. For the week Mar 13 corn was 8 cents lower. Weekly export sales were disappointing yet again at only 104,300 MT, less even than last week's paltry 114,400 MT. Total export commitments now stand at 44 percent of the USDA target compared to the 5-year average of 57 percent. Weekly shipments were so so at best coming in at 286,600 MT. The Buenos Aires Cereals Exchange estimated the 2012/13 Argentine corn area at 3.4 million hectares, unchanged from their previous estimate and down 12% from a year ago. They say that 74.7% of the crop has been planted versus 67.0% a week ago and 79.7% a year ago. The Argentine Ag Ministry estimate the 2012/13 Argentine corn area much higher at 4.575 million hectares. They say that 81% of the crop has been planted versus 74% a week ago and 85% a year ago. The Ministry are thought to be deliberately over-estimating the crop in a transparent attempt to keep a lid on inflation. The USDA estimate the Argentine planted area at 3.7 million hectares. The Argentine Corn Association, Maizar, estimate Argentina’s 2012/13 corn crop at 26–27 MMT, although that is down 1-2 MMT from their previous estimate it would still beat the previous record of 25.2 MMT set two years ago. The weekly US ethanol grind of 834,000 barrels per day beat the level required to hit USDA targets by around 11,000 bpd.

Wheat: Mar 13 CBOT Wheat closed at USD7.78 3/4, up 6 1/2 cents; Mar 13 KCBT Wheat closed at USD8.26, up 2 3/4 cents; Mar 13 MGEX Wheat closed at USD8.67 3/4, up 3 cents. For the week that puts front month Chicago wheat down 13 3/4 cents, with Kansas down 16 cents and Minneapolis falling 13 3/4 cents. Weekly export sales topped 1 MMT and were the highest genuine weekly total in almost 2 years (ignoring carryover volume when switching between crop years). This was the second week in a row that wheat export sales have beaten those for soybeans and corn. Even so, the total percent of wheat sold or shipped is still running well behind the 5 year average pace, but there do finally appear to be signs that things will catch up with USDA targets now we are into the second half of the season. SRW sales were well above the average needed to hit the USDA export target – with 80% of that already sold. HRW sales have picked up with this week’s sales also exceeding the average needed to hit the USDA target. The Buenos Aires Cereals Exchange estimated the 2012/13 wheat crop there at 9.8 MMT, unchanged from their previous estimate, but well down on last year. They say that 67.4% of the crop has been harvested versus 78.5% a year ago. The weekly commitment of traders' report shows that large spec positions (futures and options combined) now hold a net wheat short of 66,517 contracts, which may limit the downside.

EU Wheat Higher On The Day, Lower On The Week

28/12/12 -- EU grains closed mostly higher with Jan 13 London wheat up GBP1.10/tonne to GBP206.75/tonne, May 13 also firming GBP1.10/tonne to GBP211.75/tonne and new crop Nov 13 GBP1.50/tonne higher at GBP186.75/tonne. Jan 13 Paris milling wheat rose EUR1.50/tonne to close at EUR251.25/tonne.

For the holiday-shortened week as a whole Jan 13 London wheat lost GBP3.75/tonne, May 13 fell GBP3.25/tonne and Nov 13 lost GBP2.55/tonne. Jan 13 Paris wheat declined EUR3.25/tonne.

Fresh news has been pretty thin on the ground this week, as you might expect. Ukraine said that they had exported 14 MMT of grains to date so far this marketing year, that includes 5.8 MMT of wheat, 6.2 MMT of corn and 1.8 MMT of barley. Some suggest that they may attempt to squeeze out another few cargoes of wheat before the export door is shut. Even so, they are more or less out of the market.

In South America the quality of this year's harvest is still being assessed, although the signs aren't promising. The Buenos Aires Cereals Exchange estimated this year's Argentine wheat crop at 9.8 MMT, unchanged from previous estimate, but more than a third down on a year ago. They said that 67.4% of the rain-battered wheat crop has been harvested versus 78.5% a year ago.

The are tentative signs that the much-anticipated switch in global wheat demand to the US has begun. The USDA today announced weekly wheat export sales in excess of 1 MMT - the best weekly total in almost two years. Egypt were a featured buyer, taking 405 TMT of the that.

London wheat is almost GBP20/tonne off the contract highs, and it's fortunes for 2013 seem mainly tied to external influences such as the last ditch attempt by President Obama to avert a US "fiscal cliff" disaster.

The other big external influence to look out for in the New Year is fund activity. Will they continue to maintain a "risk-off" mentality and exit the grains for safer, if less potentially lucrative, asset classes? Or will they return to the foray with renewed vigour in 2013? As ever that is a very difficult one to call.

From the fundamental viewpoint we have EU exports running well ahead of last year's pace and signs that demand is switching to the US. Russia/Ukraine are as good as sold out.

In the Southern Hemisphere, Argentina look like having a very small and low quality crop. Australia will keep chipping away, although their output is likely to be down at least 25% from last year.

Meanwhile, demand is expected to remain robust with China importing much more wheat than in previous years and Japan incorporating wheat at the highest levels in animal feed rations in at least 20 years.

Production prospects for 2013 will soon start to be in focus. The US winter crop headed into dormancy in the worst condition it had been in since the USDA started issuing crop condition reports in the 80's. Russia is a mixed bag, so too is Europe with generally good conditions in the east getting worse as you head west. In Ukraine things look very promising at the moment. India's crop is much closer to hand, and they are expecting another bumper harvest in Mar/Apr.

The Morning Vibe

28/12/12 -- Fund liquidation has been the name of the game for the past month as we approach year-end.

In fact exactly a month ago today front month CBOT corn was USD7.60 and wheat was USD8.76, meaning that corn has fallen 9% and wheat nearly 12% since Nov 28. Soybeans are down a more modest 2% during this time.

In the same period London wheat is down almost GBP20/tonne, or nearly 9%, whilst Paris wheat has declined by just over EUR26/tonne, or 9.4%.

The big question now is how will things shape up once we are past year-end? And will Obama pull another 11th hour rabbit out of the hat to avoid the US toppling over the edge of the fiscal cliff?

What we do know is that the Index Funds will be rebalancing their exposure to certain commodities in January. There's an interesting article on this here.

The upshot being that some funds are including soymeal and Kansas wheat for the first time. To "make room" for these commodities funds are expected to be net sellers of CBOT corn, soybeans and wheat, whilst buying CBOT soymeal and KCBT wheat.

Without a deal on the fiscal cliff AND fund selling in CBOT corn, soybeans and wheat prices could be under pressure early in January regardless of market fundamentals. Don't you just love the funds?

In other news today, MDA CropCast have left their Argentine wheat production forecast unchanged at 9.98 MMT, saying that "rains are now easing across the region, and should remain quite limited through next week. This will allow wetness to ease a bit, and also allow wheat harvesting to finally improve a bit. The drier weather will be most beneficial in central and eastern areas."

China's Zhengzhou Commodity Exchange has started trading rapeseed and rapemeal futures today, and they've got off to a bit of a flyer with Sep 13 rapeseed closing 4.3% higher at 5,215 yuan (USD828/tonne) and May 13 rapemeal up 2.1% at 2,409 yuan (USD382/tonne).

China's Ministry of Commerce estimate the country's Dec rapeseed imports at 418,500 MT versus their previous estimate of 121,100 MT.

Chicago Eases On More Fund Selling

27/12/12 -- Soycomplex: Jan 13 Soybeans closed at USD14.18 3/4, down 5 3/4 cents; Mar 13 Soybeans closed at USD14.14, down 4 1/2 cents; Jan 13 Soybean Meal closed at USD429.80, down USD1.50; Jan 13 Soybean Oil closed at 48.29, unchanged. Year end liquidation got the better of an attempt at consolidating Boxing Day losses, with funds net sellers of an estimated 2,000 soybean contracts on the day. Strong demand remains from China, despite last week's cancellations. The USDA reported fresh soybean sales of 115 TMT to China and 108 TMT to unknown destinations, both for 2012/13 shipment on Wednesday. The Ministry of Commerce estimate that they will now import 6.31 MMT of soybeans in December. Oil World pegged China's 2012/13 bean imports at 61.7 MMT versus 59.2 MMT in 2011/12. They also placed Chinese Oct12–Mar13 soybean imports from the US at 19.8 MMT versus 16.6 MMT in 2011/12. Imports from Brazil during the same period are seen falling to 2.2 MMT from 6.7 MMT in 2011/12. Similarly imports from Argentina are forecast to drop to 1.7 MMT from 4.3 MMT in 2011/12. Michael Cordonnier has cut his Argentine soybean crop estimate by 1 MMT to 54.0 MMT on continued wetness. He left his Brazilian soybean production forecast unchanged at 80 MMT. Estimates for tomorrow's weekly export sales report for beans are 400-600,000 MT.

Corn: Mar 13 Corn closed at USD6.91 1/2, down 1 3/4 cents; May 13 Corn closed at USD6.94 1/2, down 2 cents. As with beans an early attempt to rally failed as funds dumped a further 2,000 lots of their length onto the market. Michael Cordonnier forecast the Argentine corn crop at 22.5 MMT, unchanged from his previous estimate. MDA CropCast cut their projections by 2.1 MMT from last week to 23.1 MMT due to "acreage reductions and earlier significant wetness." Both estimates are well below the USDA's current forecast of 27.5 MMT. Cordonnier pegged Brazilian corn production unchanged from last time at 70.0 MMT, the same as the USDA, whilst MDA CropCast go for 70.8 MMT. Indonesia's Ag Ministry forecast corn production there in 2013 at 19.831 MMT versus 18.962 MMT this year. The weekly US ethanol grind numbers are out tomorrow, production last week was 822,000 barrels per day, around the volume required to hit USDA targets for the season. Estimates for tomorrow's weekly export sales report are just 100-300 TMT.

Wheat: Mar 13 CBOT Wheat closed at USD7.72 1/4, down 2 1/4 cents; Mar 13 KCBT Wheat closed at USD8.23 1/4, down 1 1/4 cents; Mar 13 MGEX Wheat closed at USD8.64 3/4, down 4 1/4 cents. Wheat futures also attempted and failed to maintain an early rally. India are said to be offering a further 150 TMT of their surplus wheat stocks for export. Bangladesh bought 50 TMT of optional origin wheat in a tender for Dec-Jan shipment. Trade estimates for tomorrow's weekly export sales report are 500-700 TMT. Last week's total was 671,100 MT, although seasonal factors could easily see this week's total fall on the low side of expectations. Nevertheless, the trade is expecting a better performance on the export front from US wheat once we get into the New Year. Reuters were reporting temperatures in northwest Kansas hard red winter wheat areas as low as single digits Fahrenheit (minus 12 to minus 17 Celsius) on Wednesday morning.

EU Wheat Declines, Following US Lead, As Year-End Approaches

27/12/12 -- EU grains closed sharply lower with Jan 13 London wheat down GBP4.85/tonne to GBP205.65/tonne. Benchmark May 13 fell GBP3.20/tonne to GBP210.65/tonne and new crop Nov 13 was GBP2.55/tonne easier at GBP185.25/tonne. Jan 13 Paris wheat ended EUR5.75/tonne lower at EUR247.75/tonne.

For front month London wheat this was a 2-month closing low, whilst for Paris wheat it was the lowest on more than 5-months.

The markets were playing catch-up today with losses in Chicago from Boxing Day night generated by fund selling and year-end positioning. Paris wheat was under added pressure from the euro rising to it's best levels against the US dollar since April. Remember though that the markets are always pretty thin at this time of year, so price movements can be exaggerated.

Defra have confirmed the UK wheat crop in 2012 at 13.261 MMT, a 13% reduction on last year with yields down 14% to 6.7 MT/ha. The barley harvest was virtually unchanged from last year at 5.522 MMT, although yields were down 2.7% to 5.5 MT/ha. The OSR harvest was confirmed at 2.557 MMT, 7.3% down on last year with yields falling 13.6% to 3.4 MT/ha.

More heavy rain and widespread flooding over the Christmas period has the UK winter wheat crop for the 2013 harvest already looking pretty shoddy. Trade estimates over how much of the intended acreage had been planted are quite varied. If we use a mean of around 77.5% and yields similar to this year's disappointing result then we'd end up with a UK winter wheat crop of only 10.4 MMT in 2013. A return to the 7.7 MT/ha average yield of 2011 would still only return a crop of 11.9 MMT next year.

There will undoubtedly be an increase in spring wheat sowing, but even so the area planted is still likely to be relatively insignificant.

Of course many would argue that less than 77.5% of the intended 2 million hectares has been planted, and in addition that we will be lucky to get to 6.7 MT/ha next year - even if that was the lowest yield since 1988 - given the current state of the crop in the field.

Who knows what 2013 will throw at us, but we do know that there is a very long way to go yet. Whilst this degree of uncertainty remains supportive, along with the threat of at least the smallest wheat crop since 2001's 11.58 MMT, that doesn't necessarily mean that for UK wheat the only way is up.

The cost of imports will decide what, if any, upside there is for UK wheat prices in 2013 and many pundits are forecasting significantly lower world wheat prices in the second half of the year.

Chicago wheat futures meanwhile slumped to new 6-month lows overnight on continued fund selling on a combination of year-end related activity and continued concerns on whether an 11th hour deal can be done to avert the US tumbling over the edge of the rapidly approaching "fiscal cliff".

Whether fund money continues to exit the grains sector, or returns with renewed vigour in the New Year, may hold the key to price direction in Q1 of 2013.

Market Update

27/12/12 -- A quick update on what's happened over the Christmas period based on front month closes for each commodity:

CBOT Soybeans: Closed 9 cents higher Christmas Eve, but lost those gains and more to end Boxing Day 15 1/4 cents lower. Weekly export inspections of 44.486 million bushels released Boxing Day were pretty respectable and up 3.396 on the previous week. In addition the USDA reported fresh soybean sales of 115 TMT to China and 108 TMT to unknown destinations, both for 2012/13 shipment on Wednesday.

CBOT Corn: Finished Christmas Eve 2 1/2 cents higher, but fell sharply on Boxing Day closing 11 1/4 cents lower. Weekly export inspections for corn were modest once again at 13.475 million bushels. CBOT corn now at it's lowest levels in almost 6 months.

CBOT Wheat: Was 1 3/4 cents firmer on Christmas Eve, but shed 11 1/4 cents on Boxing Day. Export inspections were fairly modest at 15.128 million bushels. CBOT wheat now at it's lowest levels in almost 6 months.

CBOT Soymeal: Gained USD1.00 on Christmas Eve, lost USD3.50 on Boxing Day.

CBOT Soyoil: Added 23 points on Christmas Eve and fell 65 points on Boxing Day.

London Wheat: Unchanged Christmas Eve, market closed Boxing Day.

Paris Wheat: Unchanged on Christmas Eve and EUR1.00/tonne higher on Boxing Day.

Paris Corn: Unchanged on both Christmas Eve and Boxing Day

Paris Rapeseed: Down EUR0.25/tonne on Christmas Eve and unchanged on Boxing Day.

Further fund liquidation as we approach year-end remains the over-riding theme. China appear to be coming back to buy the beans they cancelled pre-Christmas at these lower levels, with further purchases this week. The Ministry of Commerce estimate that they will now import 6.31 MMT of soybeans in December versus previous estimate of 5.0 MMT - I can't find official clarification of this right now, but I think that this would be a record monthly volume.

Oil World estimate China's 2012/13 soybean imports at a record 61.7 MMT versus 59.2 MMT in 2011/12.

There's now talk of a strike by the longshoreman’s union at most of the US Pacific Northwest ports.

Michael Cordonnier has cut his Argentine soybean crop estimate by 1 MMT to 54.0 MMT on continued wetness. He also says however that the very first early-maturing soybeans have been harvested in Brazil's Mato Grosso state this week.

Safras e Mercado are said to have raised their Brazilian soybean production estimate to a record 84.3 MMT versus the USDA's 81.0 MMT and up almost 27% on the 66.5 MMT harvested in 2011/12.

Reuters are reporting temperatures in northwest Kansas hard red winter wheat areas as low as single digits Fahrenheit (minus 12 to minus 17 Celsius) on Wednesday morning. Let's hope that they have a protective snow covering in those areas.

India are offering a further 150 TMT of their surplus wheat stocks for export. Bangladesh have bought 50 TMT of optional origin wheat in a tender

Chicago Grains Stage Mini Recovery

21/12/12 -- Soycomplex: Jan 13 Soybeans closed at USD14.30 3/4, up 22 cents; Mar 13 Soybeans closed at USD14.29 1/4, up 24 1/2 cents; Jan 13 Soybean Meal closed at USD433.80, up USD6.10; Jan 13 Soybean Oil closed at 48.71, up 80 points. Despite today's rally Jan 13 beans were still down 65 1/4 cents on the week. Bargain hunting was the theme after a three day decline that tried, but failed, to break through support at USD14/bushel. Fresh news was lacking, and trade was thin in pre-holiday mode. The USDA said that a sale of 110 TMT of US soybeans to "unknown" announced earlier in the week was in fact not for export, but a domestic sale. That news, and this week's Chinese cancellations will doubtless cut next week's export sales report to much lower levels than we have witnessed in recent weeks. With net commitments already running at 83% of the USDA's target for 2012/13 a week or two of depressed holiday sales isn't going to make a great deal of difference. Chinese customs data puts Jan/Nov soybean imports at 52.5 MMT, up 11.37% from a year ago. The Argentine Ag Ministry said that soybean planting there is 73% complete versus 77% a year ago and 80% of the crop is rated good/very good.

Corn: Mar 13 Corn closed at USD7.02, up 5 1/2 cents; May 13 Corn closed at USD7.04 3/4, up 5 cents. Corn managed to claw its way back up above the USD7/bu mark in subdued low volume trade, even so Mar 13 finished the week with losses of 28 3/4 cents. Chinese customs data puts Nov corn imports at 384,213 MT, up 56.98% from a year ago. That takes their calendar year to date imports to just under 5 MMT, up sharply versus 2011. The Argentine Ministry sees the corn crop there at 67% planted versus 75% a year ago, with 91% of the crop rated good/very good. On the Argentine weather front "while some drier weather is expected today and tomorrow, rains will return to the region on Sunday, with heavy rains expected on Monday and Tuesday, which will lead to more significant planting delays and widespread wetness," say MDA CropCast. South Korea's NOFI bought 193 TMT of optional origin corn for May/Jun shipment, US corn was allowed (they'd earlier excluded it from the tender) although South American corn is the most likely origin. The commitment of traders report shows funds dumping more than 50,000 corn futures and options in the week through to Tuesday, and they've probably sold a further 20-25,000 since then.

Wheat: Mar 13 CBOT Wheat closed at USD7.92, up 1 1/2 cents; Mar 13 KCBT Wheat closed at USD8.42, down 1 3/4 cents; Mar 13 MGEX Wheat closed at USD8.81 1/2, down 2 1/4 cents. For the week as a whole Mar 13 Chicago wheat fell 22 cents. The commitment of traders report shows "managed money" selling around 17,500 Chicago wheat contracts on the week through to Tuesday night, along with more than 10,000 Kansas wheat lots. As with corn they are said to have been further net sellers since. They are now net short on Chicago wheat. Taiwan has bought 75,600 MT of US wheat overnight for Feb/Mar shipment. South Korea's NOFI bought 60 TMT of feed wheat for March shipment, possibly of Indian origin. There's widespread talk of Brazil switching their attention to US wheat as reports come in of sharply lower Argentine production combined with serious quality issues. The Argentina Ag Ministry say that the wheat harvest there is 58% complete versus 69% a year ago. Reports that they were to restrict Jan/Feb wheat exports to 2 MMT have now been superseded* by suggestions that they are to halt all wheat exports until the harvest is completed at the end of January. Chinese customs data shows them importing 117,900 MT of wheat in November, taking their Jan/Nov imports to 3.68 MMT, up sharply on a year ago.

* Looks wrong to me but it isn't. In fact this is supposed to be the English word most commonly spelt incorrectly in published documents and on the internet. So stick that where the sun doesn't shine, which is most of the UK today as it happens.

EU Grains Recover Some Lost Ground To End Week

21/12/12 -- EU grains regained some of the week's losses on bargain-hunting with Jan 13 London wheat up GBP3.50/tonne to GBP210.50/tonne, May 13 GBP4.00/tonne higher to GBP215.00/tonne and new crop Nov 13 gaining GBP4.30/tonne to GBP189.30/tonne. Jan 13 Paris milling wheat rose EUR5.50/tonne to close at EUR254.50/tonne.

Despite today's gains Jan 13 London wheat was still GBP7.00/tonne lower for the week, with May 13 down GBP4.50/tonne and new crop Nov 13 falling a more modest GBP1.20/tonne. Jan 13 Paris wheat finished the week with net losses of EUR5.75/tonne.

Fundamentally nothing much has changed in the grains markets, but heavy fund selling tied to year-end book-squaring and the failure to seal a deal to ensure that the US doesn't fall off it's self-imposed "fiscal cliff" has driven the market sharply lower.

When I say nothing much has changed, in some cases things have got worse not better. The Argentine Ag Ministry cut their forecast for wheat production there to 10.5 MMT, although many analysts think that this is optimistic. The Argentine government have a vested interest in over-estimating the crop in an attempt to keep inflation under control.

The Bahia Blanca Grain Exchange say that Argentina's wheat crop could be as low as 8 MMT this year. The Buenos Aires Grain Exchange cut their estimate to 9.38 MMT. The USDA say that last season's crop was 15.5 MMT, so these forecasts represent a production cut of 39-48% on output in 2011/12. Quality is also a serious issue this year.

A report on Bloomberg says that the Argentine government are to halt wheat exports until the end of January "to avoid a domestic shortage" whilst the size and quality of this year's crop is assessed. Harvesting is currently only around halfway complete.

The bulk of Argentina's wheat exports normally go to neighbouring Brazil, although they have reportedly switched their attention elsewhere recently, including supposedly buying German wheat.

Brazil imported 4.4 MMT of wheat from Argentina in 2011, or around 56% of their total wheat import needs. Trade talk today suggests that Brazil have bought US wheat for Jan shipment this week and are actively looking for more for Apr/May shipment.

Meanwhile Ukraine and Russia are effectively out of the wheat export market for the next six/seven months, and EU wheat shipments are running 28% ahead of last year's levels (and accelerating) despite a 4% decline in production in 2012.

The Morning Vibe

21/12/12 -- It's a sea of green, as Ringo would say from his yellow submarine vantage point, with the overnight grains higher on bargain-hunting with beans 15-20 cents firmer, corn 3-4 cents better and wheat 2-3 cents higher.

What were this week's Chinese cancellations all about then? If I were to hazard a guess they were nothing more than an attempt to get out of some higher priced contracts. Beans are trading higher this morning on the Chinese Dalian Exchange, not following last night's Chicago lower.

The US now has 83% of the USDA's 36.6 MMT export target already shipped or on the books. South American new crop can't come fast enough. By the time we start to get the inevitable logistical problems there availability in North America will be tighter than a sharks arse at fifty fathoms.

There are signs now that US wheat is now competitively priced and that sales will improve in the second half of the season. Argentina, the wheat Primark of the southern hemisphere, is only around halfway through harvesting a small and low quality wheat crop, which will minimise it's ability to drive world prices down.

Taiwan has bought 75,600 MT of US wheat from Columbia Grain/Toepfer overnight for Feb/Mar shipment.

US corn remains the "Billy no mates" of the grain world.

Tonight we will get the weekly commitment of traders report, which will put a bit of flesh on the bones of exactly how much length has been removed from the market of late (although this data will only be a snapshot of how things looked as of Tuesday night).

The big question now is will it be a case of new month, new year, new money come January or will fund money continue to exit? The answer to that probably depends on what happens with regards to the US fiscal cliff.

As far as trying to get your head around that conundrum is concerned, someone emailed me yesterday to very helpfully reduce it all down to terms that even a monkey could understand:

U.S. Tax revenue:         $ 2,170,000,000,000
Fed budget:                 $ 3,820,000,000,000
New debt:                    $ 1,650,000,000,000
National debt:            $ 14,271,000,000,000
Recent budget cuts:          $ 38,500,000,000

Let's now remove 8 zeros and pretend it's a household budget:

Annual family income:                  $ 21,700
Money the family spent:                $ 38,200
New debt on the credit card:          $ 16,500
O/s balance on the credit card:    $ 142,710
Total budget cuts so far:                 $ 38.50

It all looks a bit scary when you look at it like that doesn't it?

The other analogy he used was suppose that you come home from work one day and find that the sewerage system in your street has completely blocked up and there's raw sewage throughout the house all the way up to the ceiling. What do you do, raise the ceilings or remove the shit?

Over to you Mr President...

Chicago Slumps Further On Chinese Cancellations

20/12/12 -- Soycomplex: Jan 13 Soybeans closed at USD14.08 3/4, down 28 1/4 cents; Mar 13 Soybeans closed at USD14.04 3/4, down 26 1/4 cents; Jan 13 Soybean Meal closed at USD427.70, down USD8.80; Jan 13 Soybean Oil closed at 47.91, down 50 points. The big news of the day for beans was Chinese cancellations of 540 TMT, meaning that they've cancelled around 1 MMT this week. That knocked the market for six even though the USDA reported actual shipments this week of 1.35 MMT, of which almost 1 MMT did go to China. That's the 12th week in a row that exports have topped 1 MMT, which in itself is a record. Weekly export sales were 619,400 MT (plus 20,500 MT for 2013/14), a little below trade expectations of 650-800 TMT. Nevertheless accumulated exports of 18.9 MMT, plus outstanding sales of 11.4 MMT, mean that the US already has 83% of the USDA's full season target on the books even with today's cancellations. Argentina is in for more rain, prompting MDA CropCast to cut their soybean production estimate there by 2 MMT from last week to 53.17 MMT. Ag Canada cut their forecast for Canadian 2012/13 canola ending stocks from 450 TMT to 350 TMT - less than half those of 2011/12.

Corn: Mar 13 Corn closed at USD6.96 1/2, down 6 1/2 cents; May 13 Corn closed at USD6.99 3/4, down 7 1/4 cents. Corn set new 5-month lows, aided by another disappointing set of weekly export sales. These came in at only 114,400 MT for 2012/13 (plus 5,800 MT for 2013/14) against trade expectations of 325-550 TMT, and only around a third of the pace needed to hit the USDA export sales target. South Korea’s Kocopia bought 55 TMT of what will probably be Brazilian corn, whilst South Korea’s largest animal feed miller, Nofi, is tendering for 210 TMT of corn specifically excluding US origin based on price. Japanese government data shows that corn utilisation in animal feed in October matched September's 20 year low of 42.5%. Japan imported 12.27 MMT of corn between January and October, 80% of which was came from the US versus 92.5% a year ago. The Argentine Ag Ministry cut their corn planting forecast from 5 million hectares to 4.6 million. They rate 90% of the crop as being good/very good.

Wheat: Mar 13 CBOT Wheat closed at USD7.90 1/2, down 15 1/4 cents; Mar 13 KCBT Wheat closed at USD8.43 3/4, down 14 1/4 cents; Mar 13 MGEX Wheat closed at USD8.83 3/4, down 11 3/4 cents. Like corn, wheat also stumbled to 5-month lows even though weekly export sales were higher than trade expectations, and of those for corn and soybeans. At 651 TMT (plus 20,000 MT for 2013/14) they were 46 percent above the prior 4-week average. Maybe we really finally are seeing a world demand switch? Whilst Japanese usage of corn in animal feed slumps to a 20-year low, for wheat it is running at a 20-year high, albeit only at an inclusion rate of 4.5% in October. Japan bought 121 TMT of mostly US wheat in their regular tender today. The Argentine Ag Ministry cut their wheat production forecast to 10.5 MMT, still a bit better than many other analysts who line up in the 9.5-10.0 MMT area. If the Ministry are correct then that would be a drop of more than 25% on last year. MDA CropCast left their estimate unchanged at 9.98 MMT. The Ministry said harvesting was 45% complete. A a new round of storms in the week ahead will do little to help.

EU Wheat Slump Continues

20/12/12 –- EU grains were down again, extending recent losses, with Jan 12 London wheat ending GBP5.00/tonne lower to GBP207.00/tonne, with benchmark May 13 falling GBP4.75/tonne to GBP211.00/tonne and new crop Nov 13 GBP3.00/tonne easier at GBP185.00/tonne. Jan 13 Paris wheat fell EUR5.75/tonne to EUR249.00/tonne.

A sharp year-end related sell-off in Chicago grains also has the European market backpedalling as we head towards the end of 2012. US corn and wheat futures both slumped to fresh 5-month lows today as fund money continues to exit the grains.

These recent developments appear to have little to do with market fundamentals however.

Brussels had another busy week, issuing 537 TMT of soft wheat export licences to bring the marketing year to date total to 9.12 MMT, a very impressive 28% up on year ago levels. At the start of November, when Russia and Ukraine were still active in the market, exports were only 6% up on last season, so the incredibly rapid rate of acceleration in shipments is there for all to see.

German customs data out today shows that they exported 899 TMT of wheat in October, a 55% increase on September's shipments and a massive 165% more than a year previously. Cumulative exports for the 2012/13 marketing year are now 2.2 MMT, up more than 26% on a year ago. Based on the information coming out of Brussels these percentage increases are probably even larger now.

Heavy rains across the UK and France are allowing wetness concerns to redevelop, say MDA CropCast. They forecast the EU-27 2013/14 wheat crop at 132 MMT, only a relatively modest 4% increase on this year's crop, and substantially less than Copa Cogenca's estimate of 138.3 MMT released earlier in the week.

The German Statistical Office say that winter wheat plantings there are 7% up on last year at 3.1 million hectares, with barley plantings up 11% and OSR sowings 10% higher. It is of course a very long time before these crops are in the barn however.

The Ukraine Ministry are said to have authorised the release of a further 300 TMT of wheat for export, which should take their net total to around 6 MMT this season with 5.7 MMT already shipped. There's a possibility that they may review the situation in the spring and allow a little bit more to be exported depending on how crops that are in the ground now survive the winter.

There are reports that bitterly cold temperatures in parts of Russia may be causing some winterkill on crops unprotected by a decent covering of snow.

Winter wheat's chances of some much-needed moisture on the parched US Plains seem to be improving. "A band of heavy snow developed from northeastern Colorado to southern Wisconsin overnight. Snowfall in northern Kansas and southern Nebraska converted to water would be 10-25 mm, the first important precipitation in more than 60 days," say Martell Crop Projections.

The Morning Vibe

20/12/12 -- It's a sea of red again this morning, with beans showing double digit losses down 12-14 cents, corn 6-8 cents lower and wheat down 10-12 cents.

Wheat has fallen below USD8/bushel and corn is now under USD7/bu on heavy fund liquidation.

It all looks like pre-Christmas, month-end, quarter-end, year-end, let's all jump off the fiscal cliff together like Thelma and Louise end of the world-end book-squaring.

In fact talking of the fiscal cliff the nice people at Saxobank have come up with a infographic to explain it all to you here.

This particular current demise has little to do with grain market fundamentals.

Syria has bought 100 TMT of wheat of unspecified origin. Morocco has bought 185 TMT of the same.

The Moroccan government have said that they are to extend the zero duty tariff on soft wheat imports until the end of April 2013. Their Jun/Nov imports are up 63% at 2.79 MMT.

Egypt meanwhile bought 290 TMT of US wheat yesterday.

This afternoon's USDA weekly export sales report will be of particular interest to see if soybean sales remain buoyant after the Chinese cancellations that were reported earlier in the week.

It will also be interesting to see how US wheat sales fare, is demand finally switching there? And is there any demand at all for US corn?

Chicago Nosedives Led By Corn

19/12/12 -- Soycomplex: Jan 13 Soybeans closed at USD14.37, down 29 cents; Mar 13 Soybeans closed at USD14.31, down 29 1/2 cents; Jan 13 Soybean Meal closed at USD436.50, down USD8.40; Jan 13 Soybean Oil closed at 48.41, down 76 points. Funds dumped another 8,000 lots of their soybean length in further year-end liquidation. Spillover weakness from corn also drove beans lower despite US analytical firm Informa Economics cutting their forecast for 2013 soybean plantings in t he US by more than a million acres to 78.9 million. Yesterday's Chinese cancellations still has the soybean market rattled. Tomorrow's weekly export sales report will therefore be of particular interest, with the trade expecting soybean sales of 650-800,000 MT.

Corn: Mar 13 Corn closed at USD7.03, down 17 cents; May 13 Corn closed at USD7.07, down 16 3/4 cents. Corn took a complete bath, with prices now threatening to fall below USD7.00/bushel for the first time for a front month since the first trading day of July. Informa increased their corn planting estimate for 2013 in the US to 99 million acres, 1.3 million more than their previous forecast. If true this represents an increase of 2.1 million acres on this year's planted area, and that was the largest acreage in 75 years. Unlike soybeans, US corn sales have consistently disappointed in recent weeks. Trade estimates for tomorrow's weekly export sales are 325-550,000 MT. Brazilian corn still undercuts US origin material into Asia, whilst Ukraine corn is also competitive.

Wheat: Mar 13 CBOT Wheat closed at USD8.05 3/4, down 5 1/2 cents; Mar 13 KCBT Wheat closed at USD8.58, down 2 1/2 cents; Mar 13 MGEX Wheat closed at USD8.95 1/2, down 6 cents. Wheat got support from a clean sweep in the latest GASC tender, plus the announcement by the USDA of a further additional sale of 110 TMT to the private Egyptian buyers. Acute weakness in corn however proved too strong to resist. The trade is optimistic that US wheat sales will finally now start to pick up as Black Sea offers have dried up and European availability also starts to tighten. Trade estimates for tomorrow's weekly export sales are 400-600,000 MT. Informa lowered their US winter wheat plantings estimate to 42.2 million acres from 42.5 million, with the spring wheat area left unchanged.

EU Wheat Declines

19/12/12 -- EU grains closed mostly lower although Jan 13 London wheat was unchanged at GBP212.00/tonne. Benchmark May 13 fell GBP0.25/tonne to GBP215.75/tonne and new crop Nov 13 was GBP0.60/tonne easier at GBP188.00/tonne. Jan 13 Paris wheat ended EUR1.00/tonne lower at EUR254.75/tonne.

EU grains followed US markets lower.

The Russian Ministry estimated the winter grains crop to be harvested in 2013 at 36.8 MMT, a 26% increase on this year.

Customs data showed that the UK only exported 90,355 MT of wheat in October, a 67% decrease on October 2012, taking cumulative exports for the 2012/13 marketing year to date to 379,358 MT, 57% below last year's total at this time.

Domestic wheat imports in October were in fact far higher at 220,874 MT reflecting the poor quality, and quantity, of this year's crop. That puts 2012/13 imports so far at 811,136 MT.

That would suggest that the Defra estimate on full season imports of just over 2 MMT will be on the low side. Private trade estimates suggest that 2.5-3.0 MMT may be nearer the mark.

Egypt's GASC bought 180 TMT of US wheat in it's tender, taking advantage of the recent price dip that's driven Chicago wheat prices to their lowest levels since early July.

In addition to that business the USDA also reported the sale of 110 TMT of US hard red winter wheat to private Egyptian buyers.

Bangladesh announced that it plans to buy 500 TMT of wheat over the next 6 months, most likely that will come from India who say that they expect their 2013 harvest, which begins in March, to be their third bumper crop in a row.

Jordan bought 100 TMT of optional origin barley in a tender.

Argentina announced that it would limit Jan/Feb wheat exports to a total 2 MMT before reviewing the situation in March.

Chicago Soya Dives On Chinese Cancellations

18/12/12 -- Soycomplex: Jan 13 Soybeans closed at USD14.66, down 30 1/4 cents; Mar 13 Soybeans closed at USD14.60 1/2, down 27 3/4 cents; Jan 13 Soybean Meal closed at USD444.90, down USD10.50; Jan 13 Soybean Oil closed at 49.17, down 62 points. Beans capitulated sharply on profit-taking. For all the recent talk of China buying US soybeans under the counter, the USDA today announced Chinese soybean cancellations of 300 TMT along with "unknown" cancelling a further 120 TMT. Just to confuse the issue a bit more "unknown" also bought 110 TMT. All of this was for 2012/13 delivery. Funds dumped an estimated 8,000 soybean contracts on the day. Safras e Mercados said Brazilian soybean plantings are 98% complete versus 94% a week ago and 96% for the 5 year average. Celeres estimated the Brazilian soybean crop at 79.0 MMT, 2 MMT less than the USDA. AgRural yesterday said 82.2 MMT. Opinions on Argentina's production potential differ widely, with some estimates as low as 45-47 MMT and others as high as 55-57 MMT. Monsanto say that Paraguay could have a record 8.6 MMT soybean crop in 2012/13 if the weather remains co-operative. Informa Economics will release their US 2013 prospective planting estimates tomorrow.

Corn: Mar 13 Corn closed at USD7.20, down 4 cents; May 13 Corn closed at USD7.23 3/4, down 3 3/4 cents. Fund selling was estimated at 4,000 contracts on the day. Michael Cordonnier estimated the Brazilian corn crop at 70 MMT, unchanged from his previous estimate and the same as the USDA. He pegged the Argentine crop at only 22.5 MMT, which is 5 MMT less than the USDA. He said 63% of the Argentine corn crop has been planted versus 57% a week ago and 73% on average at this time. Argetina looks wet again in this week's weather forecast, prompting ideas that not all the intended corn will get planted. Informa are out tomorrow with their latest US 2013 planting forecasts. Last month they had corn acres at 97.7 million. Copa Cogenca estimated the 2013 EU-27 corn crop at 62.2 MMT, which they say is only 1.4% up on this year's 61.3 MMT, although most other analysts have the 2012 EU-27 corn crop at around 55 MMT.

Wheat: Mar 13 CBOT Wheat closed at USD8.11 1/4, up 3 1/4 cents; Mar 13 KCBT Wheat closed at USD8.60 1/2, up 4 1/4 cents; Mar 13 MGEX Wheat closed at USD9.01 1/2, up 5 1/4 cents. Wheat was lower in early trade but recovered by the end of the session on news that Egypt's GASC was back in the market, tendering for wheat for Feb 10-20 delivery. The US won a majority share in their last tender you may recall. The results of this tender should be known tomorrow. There's talk of Brazil wanting US wheat due to lower output and quality issues with their usual supplier - Argentina. Copa Cogenca see the 2013 EU-27 soft wheat crop at 127.7 MMT on improved yields. Russia’s December 1st grain stocks were said to be 29.7 MMT, down 30% from a year ago. Informa will release their 2013 US wheat area estimates tomorrow, last month had all wheat at 57.1 million acres.

EU Grains Lower Once More

18/12/12 -- EU grains closed mostly lower once more with Jan 13 London wheat down GBP5005/tonne to GBP212.00/tonne, May 13 down GBP2.00/tonne to GBP216.00/tonne and new crop Nov 13 GBP1.40/tonne easier at GBP188.60/tonne. Jan 13 Paris milling wheat fell EUR2.00/tonne to close at EUR255.75/tonne.

The market is under pressure from year-end liquidation and fund money pulling out of the grains sector.

Copa Cogenca estimated the UK wheat crop at only 13.5 MMT in 2013, despite a return to "normal" 7.7 MT/ha yields, as plantings slump to just 1.756m ha.

They also placed the UK barley crop at 6.52 MMT in 2013, (+18% on 2012) as spring plantings jump 40% to 865K ha.

In addition they pegged the UK rapeseed crop unchanged at 2.56 MMT in 2013, with plantings down 3% and yields up to 3.5 MT/ha.

As far as the whole of Europe is concerned they go for a modest 2.2% increase in soft wheat output to 127.7 MMT, with barley production falling by 2.7% to 54.1 MMT and the OSR crop climbing 8.8% to 20.96 MMT by virtue of a 6.3% increase in area and a 3% rise in yields.

Elsewhere, the Ukraine Ministry say that 92% of winter grains in good/satisfactory condition vs 66% this time a year ago.

Russia sold 61 TMT of the intervention grain offered up at this week's government auction, bringing the total amount sold since sales began on Oct 23 to just over 1 MMT.

"Snow cover increased across south central North Caucasus and eastern Ukraine over the past week, which has increased winterkill protection there. However, snow remains very limited across northern portions of North Caucasus as well as southwestern Volga Valley," say MDA CropCast.

What's Going On?

18/12/12 -- There seems to be a bit of end of year panic setting in, in a most unfestive manner all of a sudden. On the overnight market beans are suddenly 15-20 cents lower, with wheat and corn both 5-6 cents easier.

The jitters have spread to this side of the pond with front month Jan 13 London wheat down GBP4.00/tonne, Paris wheat around EUR3.00/tonne weaker and Paris rapeseed tumbling EUR5.00/tonne or so.

The US dollar is under pressure on "fiscal cliff" fears, and it's suddenly all looking very year-endish.

End users will be saying "I told you so" and there may be an element of nervousness now creeping in from those still sitting on ex farm wheat at home with Jan 13 London wheat now GBP14/tonne off the highs and even new crop Nov 13 currently down GBP13/tonne off the contract high set on Nov 28th.

So is this a time for capitulation, or time to stand firm?

Copa Cogenca have released their first peep into 2013/14 production, forecasting only a fairly modest rebound in EU-27 wheat production - up 2.2% to 138.3 MMT. Barley output is seen 2.7% lower at 54.1 MMT and rapeseed output up 8.8% to 20.96 MMT.

So there's nothing to dramatic and life-changing there.

There are a few signs that the US Plains may be in for some wetter weather ahead. It sure needs it. Warmer than normal conditions may mean that whatever rainfall they get may do more good than you might expect at this time of year for wheat that hasn't gone into dormancy yet. Even so the last USDA crop ratings of the year were the worst on record by fully ten percentage points, so it's difficult to imagine that being turned around overnight by a few light showers.

Argentina's wheat crop is getting worse not better. They clearly aren't going to be exporting the 7.5 MMT that the USDA optimistically suggested last week, especially not with the mooted government imposed 4.5 MMT limit. The 3 MMT that was over-estimated has a fair chance of coming from the US.

We still have EU wheat exports running at a rapid pace, and availability from here set to tighten by the spring, so there could be a sting in wheat's tail yet.

South American soybean production meanwhile does appear to be in with a decent chance of record, or near record, crops all round in 2013. Although that will come hand-in-hand with record shipping delays too no doubt. Nothing fresh that we don't already know there then either.

I'd still maintain that the fund's appetite for grains holds the key to price direction in 2013, with a break to new highs in Q1 still a quite likely scenario if we see fresh money come back in once we enter the New Year.

The further forward we go in 2013, the greater the downside risk in my humble opinion. The cash market may not follow the futures prices quite so closely in the first half of the New Year however. Technical shortages of physically available wheat and soybeans are not difficult to imagine for those needing supplies at short notice.

Quiet Day, Quiet Week, So Far

18/12/12 -- The overnight grains are mostly a little lower, with beans down 6-8 cents, wheat mostly 1-2 cents weaker and corn 2 cents lower to 1 cent firmer.

The pound is up to it's best levels against a weak dollar since late September, and not far off breaking through the 1.63 mark - we haven't spent any length of time up there for 16 months.

Fresh news is pretty thin on the ground, with the trade already looking decidedly "holiday-ish".

The Australian wheat harvest is said to be about halfway done, and ABARES 22.3 MMT and the USDA's 22 MMT estimates are thought to be optimistic.

Japan is shopping for 121 TMT of mostly US wheat in a routine tender to be concluded Thursday.

The US Southern Plains got some light/moderate rain over the weekend. "Winter wheat in western Kansas and west Texas received .25 - .50 inch of precipitation Friday with a storm that moved northeast....Stormy conditions are expected to continue this week with .50 to .75 inch of additional precipitation. Rain and snow showers would target the central Great Plains and Midwest in a wide swath from Kansas and southern Nebraska eastward into Illinois and Indiana," say Martell Crop Projections.

Monsanto say that Paraguay could have a record 8.6 MMT soybean crop in 2012/13 if the weather remains co-operative. The USDA currently estimate 7.75 MMT. Blimey, the USDA on the low side, that's a first.

Militant French farmers apparently dumped 20 tonnes of shit outside government offices in Rouen yesterday in protest against what they an unfair Nitrates Directive. They then planted a Christmas tree on top of the shit heap before handing the rest of it out in plastic bags to unsuspecting passers-by to take home an put on their gardens. Class.

Chicago Soybeans Fail To Hold Early Gains

17/12/12 -- Soycomplex: Jan 13 Soybeans closed at USD14.96 1/4, up 1/4 cent; Mar 13 Soybeans closed at USD14.88 1/4, down 3 1/4 cents; Jan 13 Soybean Meal closed at USD455.40, down USD2.30; Jan 13 Soybean Oil closed at 49.79, down 20 points. Beans broke through the USD15/bu mark, but failed to hold at that level, which will be a set-back for the bulls. The very strong pace of early season US exports was underlined once more when the USDA announced the sale of 151,000 MT of soybeans to unknown destinations. Of that total, 91,100 MT is for delivery in 2012/13 and 60,000 MT for 2013/14 delivery. Much of Argentina got heavy rains over the weekend that will have disrupted corn and bean plantings once more. Even so the Argentine Ag Ministry now say that soybean planting is 73 percent complete vs 77 percent last year. On Friday the Rosario Grain Exchange estimated the Argentine soybean crop at 53 MMT versus the USDA's 55 MMT. In Brazil, Ag Rural upped their soybean production estimate by 0.3 MMT to a new record 82.2 MMT and versus the USDA's 81 MMT. Ag Rural said Brazil’s bean planting is 98% complete.

Corn: Mar 13 Corn closed at USD7.24, down 6 3/4 cents; May 13 Corn closed at USD7.27 1/2, down 6 1/4 cents. Weekly export inspections of 15 million bushels were at least an advance on last week's appalling 8 million, but still well short of the level required to come close to hitting the USDA target for 2012/13. The Rosario Grain Exchange estimate Argentine corn production at 24 MMT, well below the USDA's 27.5 MMT, although not the lowest number in the arena. Sinograin said that China's corn crop is closer to 198 MMT than the 208 MMT that the USDA now predict. Ukraine said that it has exported 5.46 MMT of corn to date in this marketing year. CFTC data from Friday shows spec money cutting their corn length by more than 50,000 contracts in the week through to last Tuesday night. They are estimated to have shed a further 4,000 lots today.

Wheat: Mar 13 CBOT Wheat closed at USD8.08, down 6 cents; Mar 13 KCBT Wheat closed at USD8.56 1/4, down 8 cents; Mar 13 MGEX Wheat closed at USD8.96 1/4, down 6 3/4 cents. Weekly export inspections of 16.355 million bushels were no better that average even if they did beat last week's total of 13.938 million. Ukraine said it had exported 13 MMT of grains so far this marketing year, an increase of 71% on year ago levels. Of that total 5.65 MMT is wheat with a further 190 TMT of wheat said to be at the ports waiting to load. The government are said to have agreed an "informal" limit of 5.8 MMT with exporters there. Ukraine’s December 1st wheat stocks are said to be 6.5 MMT compared to 8.2 MMT a month ago. The Rosario Grains Exchange cut their Argentine wheat production estimate to 9.5 MMT, which is 0.3 MMT lower than the Buenos Aires Grain Exchange's Thursday forecast and 2 MMT beneath that of the USDA. The latter's Argentine wheat export forecast of 7.5 MMT in 2012/13 looks increasingly unlikely.

EU Wheat Ends Lower Again

17/12/12 –- EU grains closed lower, with Jan 12 London wheat down GBP0.50/tonne to GBP217.00/tonne, with benchmark May 13 falling GBP1.50/tonne to GBP217.50/tonne and new crop Nov 13 GBP0.50/tonne lower at GBP190.00/tonne. Jan 13 Paris wheat fell EUR2.50/tonne to EUR257.75/tonne.

For Jan 13 Paris wheat this was the fifth lower move in six sessions, and for Jan 13 London wheat it was the sixth in seven.

The trade is still trying to figure out what is the right price for wheat following last week's bearish USDA data.

Last week was in fact the first upwards revision for world wheat production for some time - the USDA had pegged global output lower for six months in a row prior to last Tuesday.

This time round they found 3.7 MMT more wheat world-wide than in November, the main upwards revisions coming from China (+2.6 MMT), Australia (+1 MMT) and Canada (+0.5 MMT). That helped to raise world 2012/13 wheat ending stocks by 2.2 MMT to 177 MMT.

Of those stocks 44% are held by India and China, in addition the latter country alone in fact also holds more than half of global corn inventories.

China's production and stocks of anything are always shrouded in mystery, that they do have 55.5 MMT of wheat in hand looks questionable given the recent pick up in imports that we have seen from them. Meanwhile Rabobank estimate the Australian wheat crop at 20.2 MMT, which is 1.8 MMT lower than the USDA's revised forecast.

Tuesday's numbers also includes an unchanged review of wheat production in Argentina this year at 11.5 MMT. The Buenos Aires Grain Exchange forecast that at 9.8 MMT on Thursday and the neighbouring Rosario Grain Exchange pegged output even lower at 9.5 MMT late on Friday.

Whilst we are casting a critical eye over last week's USDA numbers it is also worth noting their surprise upwards revision for corn production in China - up 8 MMT to 208 MMT. That outshines even the normally equally optimistic China Grain Reserves Corp (Sinograin) who say that output is likely to be closer to 198 MMT.

Meanwhile the entire state of Kansas, the top wheat producing state in the US, is in at least "severe" drought and 78% of it is in the grip of "extreme" drought, according to the latest data from the National Weather Service.

The recent demise in Chicago wheat probably has more to do with fund liquidation (estimated at more than 22,000 contracts in the week through to last Tuesday) than a wholesale change in the fundamentals. Year-end repositioning and US "fiscal cliff" fears, and what damage a resolution might have on the US economy, appear to be encouraging a risk-off move.

Just a week ago, prior to the release of the USDA report, the differential between front month CBOT wheat and corn was 106 cents. Today that has narrowed to around 85 cents, a more than 10% switch.

Chicago Close - Friday

14/12/12 -- Soycomplex: Jan 13 Soybeans closed at USD14.96, up 19 1/2 cents; Mar 13 Soybeans closed at USD14.91 1/2, up 19 cents; Dec 12 Soybean Meal closed at USD460.10, down USD0.40; Dec 12 Soybean Oil closed at 49.63, up 101 points. Dec contracts went off the board today. For the week Jan 13 beans were 23 3/4 cents higher, with Dec 12 meal USD9.60 firmer and Dec 12 oil losing 119 points. The NOPA monthly crush for soybeans in November was 157.308 million bushels, which was in line with trade estimates, but still the largest monthly crush in almost two years. The number represents an increase of more than 16 million on Nov 2011. On top of the recent succession of strong weekly export sales and shipments, buoyant domestic demand for soybeans will continue to tighten availability until South American supplies come along in the spring. Argentine soybean plantings still lag. The Buenos Aires Grain Exchange weekly report from yesterday said that 63.3% of the bean crop has been planted versus 72.9% a year ago. Meanwhile "widespread rains over the past week have favoured corn and soybeans across Brazil, with the heaviest amounts favouring central and western Mato Grosso and western Rio Grande do Sul," say MDA CropCast.

Corn: Dec 12 Corn closed at USD7.18 3/4, up 6 1/2 cents; Mar 13 Corn closed at USD7.30 3/4, up 10 1/2 cents; For the week that places Dec 12 corn, which went off the board today, losing a net 14 cents. Export demand for US corn continues to lag. Yesterday's weekly export sales of 258,900 MT were uninspiring. South Korea has bought around 630,000 MT of optional origin corn over the past few days, with very little, if any, of that likely to come from the US at this stage. Offers out of South America continue to undercut US corn, with logistics and maybe quality issues the most likely reason for Asian buyers to switch back into US corn. Japan and Taiwan are both said to have recently done so due to port congestion and delayed loading times in Brazil. China are now reported to have an issue with two containers of corn from Argentina containing traces of GMO varieties that are not approved for entry into the country. Some reports suggest that Chinese imports of all corn from Argentina will now be halted until the issue is resolved. It is unclear what kind of volume is in jeopardy, but it's unlikely to be huge. Coceral cut their forecast for EU-27 corn production in 2012 from 56.0 MMT to 54.7 MMT. The Buenos Aires Grain Exchange weekly report said that 61% of the Argentine corn crop has been planted versus 71% a year ago.

Wheat: Dec 12 CBOT Wheat closed at USD8.01, up 8 cents; Dec 12 KCBT Wheat closed at USD8.52 1/4, up 1 1/2 cents; Dec 12 MGEX Wheat closed at USD8.84 3/4, unchanged. Wheat corrected some of the week's sharp declines but CBOT still ended with losses of 43 1/4 cents versus last Friday. Technical buying, short covering and profit-taking was a feature on the day. US wheat badly needs signs of a prolonged pick-up in world demand for it. Yesterday's export sales were OK at 518,600 MT, but more will be needed to convince the market that world demand is switching to the US. Bangladesh bought 50 TMT of what will probably be Indian wheat in a tender, although South Korea did buy 47 TMT and 24 TMT of US wheat in two separate deals for April/May shipment. There's a chance of some long awaited and much-needed rain on the US Plains today, although hard wheat areas are only set to get "light-moderate showers" rather than the soaking they'd like. In a first look into the future, the IGC estimated next year's 2013/14 global wheat crop at 690 MMT, up 5.4% from this year's output. The Argentine wheat crop is just over 42% harvested, according to the Buenos Aires Grain Exchange. Both quality and quantity are likely to be an issue this year due to heavy flooding and persistent rains.

EU Wheat Recovers Some Of Thursday's Losses

14/12/12 -- EU grains closed higher, recovering some of yesterday's losses on bargain hunting. Jan 13 London wheat closed GBP2.25/tonne higher at GBP217.50/tonne, with benchmark May 13 up GBP1.75/tonne at GBP219.50/tonne and new crop Nov 13 gaining GBP0.75/tonne to GBP190.50/tonne. Jan 13 Paris wheat ended EUR4.50/tonne firmer at EUR260.25/tonne.

For the week however there were still some fairly steep losses attributed to a bearish, at least for wheat, USDA report on Tuesday. Jan 13 London wheat finished with losses of GBP7.00/tonne for the week, with May 13 down GBP8.00/tonne and Nov 13 also falling GBP8.00/tonne. Jan 13 Paris wheat shed EUR8.50/tonne.

After a sharp sell-off yesterday the trade seemed to re-focus on strong world demand for wheat, and that Europe is winning an increasingly larger share of that. Yesterday's 583 TMT of soft wheat export licenses takes the 2012/13 marketing year-to-date total to almost 25% ahead of this time last season.

Ukraine's grain harvest is just about over at 46.61 MMT in bunker weight, and so too would appear to be it's wheat export campaign. The corn harvest is said to be 99% complete at 20.27 MMT, also in bunker weight. They should remain active corn sellers at least until the spring.

Ukraine's Stae Statistics Service said that December 1st grain stocks were 21.4 MMT, down 27% from a year ago. Of that, wheat stocks were only 6.5 MMT, barley stocks 2.1 MMT, and corn stocks 11.2 MMT.

It will be the spring before Abengoa's Rotterdam bioethanol facility is back in the market for corn, having taken a reported "voluntary" 3-month shut-down in order to resolve various issues with the plant. EU bioethanol margins are said to have "turned sharply negative" in recent weeks, so the timing of this downtime may also be tied to that.

Coceral today cut their forecast for the 2012 EU-27 soft wheat crop from 124.69 MMT last time to 123.97 MMT, a drop of 5% on last year's production. They now peg the UK crop at 13.35 MMT this year, broadly in line with the HGCA's 13.3 MMT.

In other news, the Buenos Aires Grain Exchange said that 42.4% of the wheat crop there has been harvested so far versus 50.4% a year ago. They now estimate production at only 9.8 MMT this year, a drop of almost 37% on last year.

The Morning Vibe

14/12/12 -- Guess what? This day in 2011 was the bottom of the soya market. Front month Jan 12 beans closed at USD11/bu a year ago, and never looked back until they got past USD17/bu, apart from a May dip that is. Meal had bottomed a few days earlier at USD275.50. Corn and wheat this time last year were both under USD6/bu, for interest.

Wouldn't it be nice to have a crystal ball and know where things are headed in 2013? There seem to be quite a few of the banks calling for the year's highs to be set in the first quarter, followed by a steady decline throughout the rest of the year, weather depending of course.

For once I have to say that I agree with them.

As ever, how high those highs are will depend on to what extent our old chums the funds fancy the grains sector in 2013. That one is a bit more difficult to predict unfortunately.

Soybean are back up this morning following yesterday's once again impressive weekly export sales and shipments. The USDA surely will be forced to up their forecast on US soybean sales next month, although via the marvels of creative accountancy will probably do so in conjunction with a hike in 2012 yields, thereby managing to keep ending stocks from falling any lower than the current 130 million bushels predicted.

Wheat is also 2-3 cents firmer in overnight trade. Export sales here were towards the upper end of trade estimates of 300-600 TMT at 518,600 MT for 2012/13 and of 54,900 MT for delivery in 2013/14.

It's far too early to say that this is the start of the much heralded switch in demand to US supplies, although it is interesting that Strategie Grains chose to say that there was "absolutely no room for EU wheat to attract any additional demand" in their press release yesterday.

Again, I have to say that I agree with them. EU exports have picked up at a quite alarming rate versus 2011/12 lately. As noted yesterday, at the start of November these were running only 6% up on last season and that figure is now close to 25% - a startling rise, especially when you consider that production is around 4% lower this year.

Argentina's wheat crop is clearly a bag of shite this year, to use a technical term, and the USDA's 11.5 MMT estimate released only on Tuesday is patently as closely linked to reality as Doctor Who's magic screwdriver. In fact somebody who shall be nameless emailed me to describe the USDA's attache in Argentina as "not the sharpest tool in the box". A tool for sure, just not a sharp one, it would seem.

As well as having a wheat crop of 10 MMT at best, it appears that quality as well as quantity has also taken a hit, or rather a bath in this case, this year. It would therefore seem about as likely that Argentine will export 7.5 MMT of wheat this season as Kylie and Dannii inviting me round to their house for an alcohol-fueled game of "strip twister" over the festive period.

New crop northern hemisphere wheat suddenly looks a long, long, way away. Our mates Down Under will no doubt do what they can to keep Asia going with their kangaroo poo infested 20 MMT or whatever they've got. India, always looking for an opportunity, will also feature amongst the not so picky buyers. Bangladesh have bought 50 TMT of what will probably be Indian wheat overnight in fact.

If you're a bit more discerning though, readily available decent quality wheat could be pretty hard to find in Q1 of 2013.

Chicago Closing Comments - Thursday

13/12/12 -- Soycomplex: Jan 13 Soybeans closed at USD14.75 1/2, up 2 cents; Mar 13 Soybeans closed at USD14.72 1/2, up 2 cents; Dec 12 Soybean Meal closed at USD460.50, up USD1.00; Dec 12 Soybean Oil closed at 48.62, down 56 points. Weekly export sales for soybeans in excess of 1.3 MMT comfortably beat trade expectations of 550-900 TMT. Once again weekly shipments were also strong, coming in above the 1 MMT mark for the 11th week in a row, matching a record of unbroken 1 MMT plus per week of exports on records stretching back to 1990. Total net soybean commitments are now in excess of 80% of the USDA's target for the full season. The November NOPA domestic soybean crush report will be released tomorrow with the average trade guess coming in at 157.5 million bushels.

Corn: Dec 12 Corn closed at USD7.12 1/4, down 8 3/4 cents; Mar 13 Corn closed at USD7.20 1/4, down 5 1/4 cents. Weekly export sales of 258,900 MT were an improvement on last week's paltry effort and within trade expectations, but still fell well short of the level required to hit the USDA's full season target. Net total corn commitments at this stage are only 43% of the USDA target for 2012/13. Corn planting in Argentina is said to be 61% done, with a few more dry days on the cards before showers return on Sunday. MDA CropCast raised their 2012 Chinese corn production estimate to 202.8 MMT, even so that's still considerably less than the USDA's 208.0 MMT forecast released on Tuesday. They estimate Brazilian output at 70.7 MMT and Argentine production at 25.2 MMT, both unchanged from a week ago.

Wheat: Dec 12 CBOT Wheat closed at USD7.93, down 1 3/4 cents; Dec 12 KCBT Wheat closed at USD8.57 3/4, up 4 1/2 cents; Dec 12 MGEX Wheat closed at USD8.86 1/4, down 3 3/4 cents. Weekly export sales for wheat were decent at 518,600 MT, and for once beat the weekly level required to hit the USDA's target for 2012/13. That was helped by sales of 183,000 MT to Egypt, most of which was already known about last week. Japan bought 134,157 MT of mostly US wheat in its regular weekly tender. The Buenos Aires Grains Exchange cut its forecast for Argentine wheat production by 320 TMT to 9.8 MMT, well below the USDA's 11.5 MMT estimated on Tuesday. The Rosario Exchange are said to be about to issue a similar sub-10 MMT number on Friday. Harvesting is 42% complete, according to the BAGE.

Paris Wheat Ends At 4-Month Low

13/12/12 -- EU grains closed mostly lower with Jan 13 London wheat down GBP5.25/tonne at GBP215.25/tonne, May 13 also down GBP5.25/tonne to GBP217.75/tonne and new crop Nov 13 GBP4.15/tonne easier at GBP189.75/tonne. Jan 13 Paris milling wheat fell EUR5.50/tonne to close at EUR255.75/tonne.

This was a 4-month closing low for a front month on Paris wheat.

We have an interesting scenario developing between a very tight 2012/13 supply and demand equation in Europe against a more liberal one for 2013/14.

French analysts Strategie Grains today raised their estimate on EU soft wheat exports for the current season by 1 MMT from last month to 18.8 MMT (and versus 16.6 MMT in 2011/12 according to the USDA).

Citing strong demand from Iran and reduced competition from Argentina they said that there was "absolutely no room for EU wheat to attract any additional demand."

Trade gossip suggests that both the Rosario and Buenos Aires Grain Exchanges will cut their Argentine wheat production estimates to below 10 MMT today/tomorrow, contrary to the USDA holding their output forecast unchanged at 11.5 MMT on Tuesday.

MDA CropCast reduced their Argentine wheat crop estimate by 660 TMT today to 9.98 MMT "due to continued wetness."

In their first look into 2013/14 however Strategie Grains forecast EU-27 soft wheat production rising 9% to 134.2 MMT and that of durum wheat increasing 4% to 8.3 MMT. That would give Europe an all wheat crop of 142.5 MMT next year (versus the USDA's forecast for 2012 of 131.7 MMT), assuming a return to trendline yields.

Corn production is seen doing even better, witrh output up 16% to 63.0 MMT, albeit from a sharply reduced 2012 crop.

In other news Brussels issued 583 TMT of soft wheat export licenses this week, bringing the marketing year-to-date total to 8.56 MMT, a 24.4% increase on last year. This percentage has been increasing dramatically in recent weeks. At the beginning of November exports were only 6% up on last season.

Another interesting development to emerge this week is news that the Abengoa facility in Rotterdam, which produces bioethanol from corn and churns out DDGS as a by product, is to "voluntarily" close for three months.

Chicago Closing Comments - Wednesday

12/12/12 -- Soycomplex: Jan 13 Soybeans closed at USD14.73 1/2, up 1 1/2 cents; Mar 13 Soybeans closed at USD14.70 1/2, down 3/4 cent; Dec 12 Soybean Meal closed at USD459.50, up USD4.50; Dec 12 Soybean Oil closed at 49.18, down 69 points. The dollar was lower, adding support. Tuesday's USDA WASDE report, which confirmed the acute tightness in US supplies this year, may in fact have been understated given the robust nature of soybean (and soymeal & oil) sales and exports so far this season. Tomorrow's weekly export sales report will therefore be of particular interest. Last week's soybean sales of 1.14 MMT were more than double trade estimates of 300-500 TMT and between 4-5 times larger than the volume required to hit the USDA's 2012/13 export target of 36.6 MMT. Trade estimates for tomorrow's soybean sales are 550-900,000 MT. Sales at the upper end of that scale would bring total commitments for the season to date to around 80% of that target little more than a quarter of the way into the season.

Corn: Dec 12 Corn closed at USD7.21, down 3 1/4 cents; Mar 13 Corn closed at USD7.25 1/2, down 2 1/2 cents. South Korea's NOFI bought 238 TMT of mostly South American corn for April/May delivery. Despite reports that US corn had been excluded, one cargo was said to have been traded as US/South African origin. Unlike for the soy products, corn sales are lagging the pace needed to hit the USDA 2012/13 export target. Last week's sales were a paltry 51,600 MT against expectations of 300-500 TMT. That brings net commitments for 2012/13 so far to only 42% of the USDA's target. Tomorrow the trade is looking for sales of 150–400 TMT, which in itself is a fairly modest amount for this time of year. Anything less than that would be another disappointment for corn bulls. China's CNGOIC says that the country's corn import needs will fall by more than half in 2012/13. The weekly ethanol grind fell 11,000 barrels/day to 824,000 bpd, although that is in line with the required pace to meet USDA projections for the current season.

Wheat: Dec 12 CBOT Wheat closed at USD7.94 3/4, down 11 cents; Dec 12 KCBT Wheat closed at USD8.53 1/4, down 15 1/2 cents; Dec 12 MGEX Wheat closed at USD8.90, down 6 3/4 cents. Wheat was the weakest leg for the third day running, pressured by the fall-out from Tuesday's bearish USDA report. Tomorrow's export sales will be interesting, as the trade keeps talking about world demand switching to the US, but with little hard evidence so far to back that assumption up. Last week's sales of 353,100 MT were in line with expectations, but hardly spectacular, and below the 511 TMT/week required to hit USDA targets. That target has now been lowered a little, but sales still need to average 500 TMT/week to get to the 29.5 MMT of sales forecast by the USDA in 2012/13, exactly halfway through the wheat marketing year. There are plenty of wheat tenders around, the US now needs to start winning a larger share of them than it has been. FranceAgriMer raised it's forecast for French wheat exports to non-EU destinations to 10 MMT, up 0.5 MMT from last month and a 1.5 MMT increase on last season.

EU Wheat Lower As USDA Fallout Continues

12/12/12 –- EU grains closed lower, with Jan 12 London wheat down GBP1.00/tonne to GBP220.50/tonne, with benchmark May 13 also down GBP1.00/tonne to GBP223.00/tonne and new crop Nov 13 GBP1.10/tonne lower at GBP193.90/tonne. Jan 13 Paris wheat fell EUR0.50/tonne to EUR261.25/tonne.

The market is still coming to terms with yesterday's bearish wheat numbers from the USDA, and figure out how close to reality some of the figures are really likely to be.

Certainly some of them at least look questionable, but at least for now that's what the market is stuck with, even if world ending stocks increased from 174.2 MMT to 177.0 MMT, they are still 9.6% down on last season.

FranceAgriMer came out today with some revised production and stocks numbers for 2012/13 themselves. They estimate soft wheat production there at 35.8 MMT in 2012, a 5.4% increase on last year, with durum output up 20% at 2.4 MMT. The bottom line is an all wheat crop of 38.2 MMT versus 36.0 MMT last year and very similar to the USDA's 38.15 MMT estimate.

Exports of soft wheat to non-EU destinations were raised 0.5 MMT from last month, reflecting strong demand from North Africa and the Middle East, to 10.0 MMT, a 17.6% increase on last year's 8.5 MMT.

French soft wheat ending stocks were placed 14% down on year ago levels to 1.96 MMT.

Ukraine said that its domestic grain harvest is now 99% complete at 46.43 MMT, down 20% on a year ago. Exports however are 71% up at 12.78 MMT as of Dec 11, including 5.65 MMT of wheat with a further 178 TMT of wheat sitting at the ports waiting to load. That will likely conclude their wheat export programme for 2012/13.

The corn harvest there is almost over at 98% done, producing 20.06 MMT in bunker weight so far.

Hidden in amongst yesterday's USDA data was an unchanged look for UK wheat production in 2012 of 13.5 MMT, around 200 TMT more than the HGCA estimate, with yields at 6.75 MT/ha versus the HGCA's 6.68 MT/ha.

USDA Report Reaction - And Another Joke

12/12/12 -- I love it when the date is a palindrome. Or does today really qualify? Technically in a court of palindrome law I suppose it isn't, but it's close enough for me. Anyway, stop going on about the date will you, there's work to be done. It's Christmas, and what do we get at Christmas time boys and girls, that's right MAGIC!

Our chums at the USDA have sprinkled a bit of fairy dust around the world, given everything a good old shake up and come up with some magic all of their own.

First off we have the glaringly obvious question that is "how can Argentina export 7.5 MMT of wheat this year when the government have already said they are capping exports at 4.5 MMT?" Unless the USDA IS the Argentine government, and knows that it's only mucking about.

That's before we even get onto the question of Argentina producing 11.5 MMT of wheat this year after all the problems that they've had from plantings that were said to be their second-smallest wheat area in 110 years.

There are possible question marks too over Australian wheat production at 22 MMT and Chinese output of 120.6 MMT, and that's before we get onto China's massive new 208 MMT corn crop. If in doubt raise China's production, nobody knows what's going on there anyway so who can say it's wrong?

Then we get onto the subject of not increasing US soybean exports for 2012/13 with 78% of the current projection already either shipped or on the books. Sales of 1 MMT in tomorrow's report would take that past 80%.

Bah, humbug. Anyway I'm going to tell you a magic joke to cheer you up....

Snow White, Tom Thumb and Quasimodo are sitting in a pub.

Snow White says, "There's no doubt about it, I'm the fairest in the land."

Tom Thumb says, "There's no doubt about it, I'm the smallest in the land."

Quasimodo says, "There's no doubt about it, I'm the ugliest in the land."

To prove it all three head off to the magic all-knowing mirror in the bogs at the back of the pub.

A few minutes later, the bog door bursts open and Snow White runs in and says, "It's official...I am the fairest in the land!"

Shortly afterwards, the door again bursts open and Tom Thumb runs in and shouts, "It's official...I'm the smallest in the land!"

Five minutes later, the door gets booted open and Quasimodo storms in and says, "Who's Iain Dowie?"

If you're foreign, or a girl, and especially if you're a foreign girl going "Who is Iain Dowie?" then either you must be Quasimodo or you need think carefully before you click the link to find out:

Iain Dowie: Snog, Marry, Is It Human?

Chicago Lower, After Bearish USDA Wheat Numbers

11/12/12 -- Soycomplex: Jan 13 Soybeans closed at USD14.72, down 2 3/4 cents; Mar 13 Soybeans closed at USD14.71 1/4, down 4 1/4 cents; Dec 12 Soybean Meal closed at USD455.00, up USD2.60; Dec 12 Soybean Oil closed at 49.87, down 96 points. There were only minimal changes to the world supply and demand balance sheet for soybeans, with perhaps the most salient alteration being the cut in US ending stocks to 130 million bushels. This was in line with trade estimates, but reinforces the view that there's little room for slip ups from South America come the spring as North America will be pretty much a spent force by then. The USDA left production estimates unchanged in Brazil and Argentina at 81.0 MMT and 55.0 MMT respectively. US soybean oil exports were hiked 50% from last month to 817 TMT (last month's target has already been surpassed). Given the very strong pace of US soybean weekly sales and shipments it was a bit of a surprise that 2012/13 exports weren't increased, although that would have made ending stocks even tighter. Perhaps that will come next month? January often brings a reassessment on final US production, which may allow the USDA to increase 2012/13 exports whilst not tightening carryout further by virtue of extra 2012 output. The USDA also separately announced a 115,000 MT soybean sale to China for 2012/13 delivery under the daily reporting system.

Corn: Dec 12 Corn closed at USD7.24 1/4, down 2 1/2 cents; Mar 13 Corn closed at USD7.28, down 2 cents. US corn ending stocks were left unchanged in today's USDA WASDE report, contrary to trade expectations for a 16 million bushels increase. World production was hiked around 10 MMT though, courtesy of a 8 MMT increase for Chinese output to a record 208 MMT. Global consumption was also increased, by around 9 MMT, meaning that there was little actual change to the overall level of world ending stocks. Argentine production was only trimmed by 0.5 MMT, the trade had been expecting a 2 MMT cut to 26 MMT. Yet, private analyst Michael Cordonnier sees output there at only 22.5 MMT. Exports from both the South American suppliers were left unchanged. The USDA left demand from the ethanol sector the same as last month at 4.5 billion bushels. Tomorrow we get the weekly ethanol grind numbers, with around 825,000 barrels/day needed to hit that target. Thursday we get the latest weekly export sales, these have been consistently poor of late, with the odd exception. Around 435 TMT/week is pace needed to match the USDA's unchanged 2012/13 export target of 31 MMT. Last week's total was just 51,600 MT.

Wheat: Dec 12 CBOT Wheat closed at USD8.05 3/4, down 27 cents; Dec 12 KCBT Wheat closed at USD8.68 3/4, down 21 1/4 cents; Dec 12 MGEX Wheat closed at USD8.96 3/4, down 13 3/4 cents. Wheat got the bearish surprised this month, with world production seen rising from 651.4 MMT last month to 655.1 MMT this time round. Ending stocks were increased accordingly from 174.2 MMT to 177.0 MMT, although that's still 9.6% down on last season. The trade was however expecting a decrease to 173.4 MMT. Australian output was raised 1 MMT to 22 MMT, China's crop was increased 2.6 MMT to 120.6 MMT - largest production since 1997/98 - and Canada's upped 0.5 MMT to 27.2 MMT. Argentina's crop was surprisingly left unchanged at 11.5 MMT. Argentina, Australia, Europe, India, Paraguay and "Others" all saw their exports raised, whilst those of the US were cut 1 MMT to 29.5 MMT, increasing carryout there by almost 1.4 MMT. Argentina's wheat exports were in fact forecast at 7.5 MMT, which is interesting on a number of counts, not least that the government there are said to have capped the volume at 4.5 MMT within the last few days.

EU Wheat Falls On Bearish USDA Report

11/12/12 -- EU grains closed lower after a bearish, at least for wheat, USDA report. Jan 13 London wheat closed GBP0.25/tonne lower at GBP221.50/tonne, with benchmark May 13 down GBP1.70/tonne at GBP224.00/tonne and new crop Nov 13 falling GBP2.25/tonne to GBP195.00/tonne. Jan 13 Paris wheat ended EUR4.25/tonne easier at EUR261.75/tonne. For Paris wheat this was the lowest close for a front month in almost 8 weeks.

The USDA basically surprised the market by coming out with a world wheat production increase of 3.7 MMT in 2012, resulting in an ending stocks increase of 2.8 MMT to 177 MMT, versus trade expectations of a decrease of 750 TMT to 173.4 MMT.

They upped this year's Australian wheat production estimate by 1 MMT to 22 MMT and left Argentina's unchanged at 11.5 MMT. The latter, if not the former, was certainly a surprise.

For soybeans the USDA numbers were a little bullish, whilst they were neutral for corn. The trade now needs time to assimilate how accurate these figures are. The answer is maybe not very.

In other news, Russia said that it had sold 63,800 MT of intervention wheat this week, bringing the total volume sold since such sales began on Oct 23 to 884 TMT.

They also announced that total grain exports for the marketing year to date are 12.1 MMT (to Dec 10), down 24% on last year's 16.0 MMT. Full season exports are pegged at 15.5 MMT, down 43% on last year's 27.2 MMT, according to the Ministry.

Now that the USDA figures are out of the way the market may begin to refocus on world supply and demand for the early part of 2013.

On the wheat supply side, things could quickly soon start to get considerably tighter. Demand meanwhile isn't seen shrinking any time soon.

That possibly augurs well for prices in Q1 of 2013, especially with the supply side of the coin likely to switch to the US whilst winter wheat production prospects there decline.

However, the market is the market. As ever, money outflows can always over-ride market fundamentals, and what may spark those are sometimes not easy to predict.

Lunchtime News

11/12/12 -- Well we've all been waiting on the USDA and their numbers were a bit of a mixed bag, but for once didn't contain a major shock.

US soybean 2012/13 ending stocks were cut to 130 million bushels, in line with trade ideas and very tight. That should be supportive to the market going forward, considering the USDA's reputation for caution.

The number is in reality probably still too high as it came courtesy of an increase in the domestic crush (you will recall that the US had already surpassed the USDA's soyoil export target for the entire 2012/13 season, so a crush increase was always on the cards).

They resisted the temptation to raise US soybean exports however, despite that fact that 78% of the anticipated 1.345 billion bushels of foreign sales is already on the books.

Both Brazilian and Argy soybean production potential was left unchanged from last month at 81.0 MMT and 55.0 MMT respectively.

As we know caution is their watchword, so they only cut Argy corn output by 0.5 MMT to 27.5 MMT, contrary to trade expectations for a 2 MMT reduction to 26.0 MMT. Braz corn production was left unchanged at 70.0 MMT.

Chinese corn output was raised a surprising 8 MMT to a record 208 MMT.

US corn ending stocks weren't raised as the market expected, they left them unchanged at 647 million bushels. Demand from the ethanol sector was left the same as last month at 4.5 billion bushels, which is fair enough. US corn exports were also left unchanged at 1.15 billion bushels, which looks increasingly optimistic with each week of shitty export sales that passes.

Wheat got a bearish surprise with world production seen rising from 651.4 MMT last month to 655.1 MMT this time round. Ending stocks were increased accordingly from 174.2 MMT to 177.0 MMT. The trade was expecting a decrease to 173.4 MMT.

Australia's wheat crop was raised from 21.0 MMT to 22.0 MMT, in line with ABARES recent forecast. Argentina's production was left unchanged at 11.5 MMT, contrary to local forecasts of a crop closer to 10.0 MMT.

In other news the USDA have today separately announced a 115,000 MT soybean sale to China for 2012/13 delivery. Already that adds to the notion that 130 million bushels of ending stocks is too high.

USDA Crop Numbers

11/12/12 -- The USDA's eagerly awaited raft of important numbers are out, here's some of the main ones:

South American 2012/13 Crop Production (MMT):

































Product
USDA
Avg Est
Range
USDA Nov
Brazil Soy
81.0
80.8
78.8-82.0
81.0
Brazil Corn
70.0
70.2
69.0-73.5
70.0
Argy Beans
55.0
54.5
52.5-56.5
55.0
Argy Corn
27.5
26.1
24.0-28.0
28.0

USDA 2012/13 US Ending Stocks Estimates (billion bushels):




























Product
USDA
Avg Est
Range
USDA Nov
Wheat
0.745
0.718
0.690-0.754
0.704
Corn
0.647
0.663
0.493-0.752
0.647
Beans
0.130
0.130
0.123-0.145
0.140

USDA 2012/13 World Ending Stocks Estimates (MMT):




























Product
USDA
Avg Est
Range
USDA Nov
Wheat
177.0
173.4
170.0-175.7
174.18
Corn
117.6
118.0
115.7-125.1
117.99
Beans
59.9
59.4
56.7-60.7
60.02