Chicago Market Subdued Ahead Of USDA Report

11/09/13 -- Soycomplex: The soy market gave the impression that traders have positioned themselves where they want to be heading into tomorrow's USDA report for a second day, closing with only marginal gains. The most active Nov 13 soybean contract had a trading range of less than 13 cents during the daytime open outcry session. Satellite technology firm Lanworth Inc estimated this year's US soybean crop at 3.113 billion bushels, down a fraction from their previous estimate of 3.114 billion. They have the world soybean crop in 2013/14 at 278 MMT, unchanged from their previous estimate and a little below the USDA's 281.7 MMT forecast. Planting in South America will be underway within days, and both Brazil an Argentina are expected to ramp up the seeded area in preference to corn. In the Brazilian state of Parana the local Ag Department said that they expect farmers to sow 4.85 million hectares of soybeans, a 4% increase on last year and almost seven times the area that will be sown to corn (710,800 ha), producing a record crop of 16.1 MMT in 2013/14. The Chinese government are to auction off another 500 TMT of state-owned soybean reserves tomorrow. CNGOIC estimated China's 2013 soybean crop at 12.5 MMT, down 4.2% from a year ago. All we can do now is sit and wait for tomorrow's USDA report. There's a feeling that, taken at face value, this might be bearish for beans. However, the trade is already starting to discount this report before it's even been released. The late maturity of the crop makes final yields more of a guess than normal in a September report, there is also a feeling that harvested acres might not be revised lower until next month. Combine both of those factors and we have the potential for production and yields to maybe come in higher than the average trade guess of 3.14 billion bushels and 41.17 bu/acre respectively. The average trade guess for 2012/13 US soybean ending stocks is 123 million bushels, even though the USDA have steadfastly refused to go lower than 125 million for months now. Carryout for 2013/14 is expected to be cut sharply for the second month in a row, to 165 million bushels from 220 million last month. Sep 13 Soybeans closed at USD14.05 1/4, up 1 1/2 cents; Nov 13 Soybeans closed at USD13.58 1/4, up 3 1/4 cents; Sep 13 Soybean Meal closed at USD460.90, down USD1.60; Sep 13 Soybean Oil closed at 42.65, down 8 points. Note that Sep 13 contracts go off the board on Friday so some volatility in those positions could be expected. The large disparity between Sep 13 and Nov 13 beans (and Oct 13 meal) could mean that the new front months attempt to add in some premium over the deferreds. Trade estimates for tomorrow's weekly export sales report for beans are 650-800,000 MT.

Corn: The corn market also posted modest gains heading into tomorrow's report. Lanworth raised their forecast for US 2013 corn production from 13.33 billion bushels to 13.396 billion, up 24% on a year ago and a new record. Lanworth estimated US 2013 corn yields at 152.2 bu/acre. They upped their estimate for the world corn crop by 2 MMT to 942 MMT thanks to larger output from the US and Ukraine. In the latter they increased their estimate by 3% from previously to a record 26.4 MMT. The Ukraine Ag Ministry are even more bullish on corn production prospects this year, they raised their forecast to 29-30 MMT amidst what has been described as near perfect growing conditions helped by recent rains. That potentially would give them a total grain crop in excess of 60 MMT this year. Getting it to market will now be their biggest problem. There's talk of Argentina raising their corn export quota by a further 3 MMT to 20 MMT. The French Ministry say that their corn crop will be up 2.8% on last year to 15.9 MMT despite unhelpful weather. The average trade estimate for tomorrow's US 2013 corn crop is 13.620 billion bushels, from within a range of estimates of 13.330–14.013 billion. The USDA's August estimate was 13.763 billion and 2012 final production was 10.780 billion. Yields are seen averaging 153.69 bu/acre, from within a range of estimates of 150.2–157.2 bu/acre. The USDA's August estimate was 154.4 bu/acre and 2012 final yields were 123.4 bu/acre. China's CNGOIC said that their 2013 corn crop will be a record 215 MMT, and that domestic consumption in 2013/14 will be just under 200 MMT. They only forecast imports at 5.5 MMT which is 1.5 MMT less than the USDA. Chinese private mills currently have an annual corn import quota of just under 2.9 MMT, with state-owned mills having a further 2.6 MMT, which is where CNGOIC's estimate of 5.5 MMT comes from. Feed millers have been buying US sorghum and DDGS as a corn alternative by all accounts. Taiwan have signed a deal to buy 5 MMT of US corn and to 500 TMT of US DDGs over the next 2 years. Weekly export sales also due out tomorrow are expected to come in between 400-600,000 MT. Sep 13 Corn closed at USD4.79 3/4, up 5 cents; Dec 13 Corn closed at USD4.72 1/2, up 3 1/2 cents.

Wheat: The wheat market also managed modest gains ahead of tomorrow's report. This was likely due to light short-covering just in case the USDA spring a surprise. If they do it is more likely to be for corn or soybeans than wheat, but where corn goes wheat follows so a bit of prudence was probably in order. US wheat remains priced out into Egypt. The USDA did however announce the sale of 120 TMT of HRW US wheat sold to Nigeria for 2013/14 delivery. Russia's grain harvest stands at 67.2 MMT off 63.4% of the planned area. The Russian wheat harvest currently stands at 42.3 MMT off 63.9% of the expected area, with yields up 39.7% at 2.64 MT/ha. Rain is making for slow progress, as indeed it is also in Kazakhstan. Quality downgrades in wheat are possible in both. Northern Kazakhstan is sid to have had 36mm of rain in the past two days. The French wheat crop is getting larger now that the harvest is over, the Farm Ministry there raised their forecast to 37 MMT, up 4% on last year and a 9 year high. Separately FranceAgriMer forecast 2013/14 French soft wheat exports rising to 18.1 MMT, a 5.2% increase versus 17.2 MMT last season. Exports to non-EU destinations are forecast to rise more than 11% to 11 MMT, and some private estimates are as high as 12 MMT. The average protein content in this year's French wheat crop is said to be 11.2% versus 11.4% last year. Bangladesh picked up a best offer of just over USD288/tonne C&F in their tender to import 50 TMT of wheat. Iran said that they might need to import as much as 7.5 MMT of wheat in 2013/14 "due to shortcomings in the agricultural sector." Lanworth estimated the world 2013/14 wheat crop at 702 MMT, unchanged from their previous forecast. There's talk of India wanting to sell 2 MMT of state-owned wheat, although the rupee has fallen considerably of late price could still be an issue as the Indian government have paid over world prices for the stock that they own. Trade estimates for tomorrow's weekly export sales report for wheat are 400-650 TMT. Sep 13 CBOT Wheat closed at USD6.35, up 1 1/4 cents; Sep 13 KCBT Wheat closed at USD7.08 1/4, up 1 1/2 cents; Sep 13 MGEX Wheat closed at USD7.05 1/2, up 4 1/2 cents.