Chicago Retreats On Pre-Weekend Profit-Taking

13/09/13 -- Soycomplex: With the exception of expiring from month Sep 13, the remainder of the soybean contracts gave up a fair chunk of yesterday's gains in what looks like pre-weekend profit-taking. There's up to 1 1/2 inches of rainfall in the forecast for some parts of the Midwest this weekend, and they could still be of benefit to some of this late planted and slow maturing soybean crop. As things currently stand though the odds seem to be stacked in favour of a greater chance of final US yields, and therefore production, ending lower than the 41.2 bu/acre and 3.149 billion bushels that the USDA gave us yesterday. "Soybean production estimates on September 1 are notoriously unreliable in years with August drought, being based primarily on a pod count. However, it is the size and number of the soybeans that determines the yield. Once harvesting begins, revealing ground truth, production estimates can sometimes decline sharply," caution Martell Crop Projections. Further significant US soybean yield/production losses potentially place 2013/14 ending stocks in a perilously tight situation, given that cumulative export sales for 2013/14 are already running at 58% of the USDA forecast for the season versus a 5 year average of 43% at this time. As noted yesterday, the South America cavalry are coming to save the day (hopefully), for the second year in a row. What would happen to soybean prices meanwhile should they get a serious weather scare in Brazil/Argentina is anybody's guess. In Brazil’s top soybean-growing state, Mato Grosso, it is illegal to plant soybeans before Sunday (in an effort to contain the Asian Rust virus). Planting began in earnest around Sep 22 last year, but current conditions in the state are said to be too hot and dry, leaving Brazilian growers weather-watching for rain, but there are only scattered light showers in the forecast for the week ahead. Goldman Sachs have now raised their 3-month CBOT soybean price forecast to USD12.50/bu versus a previous estimate of USD10.50/bu. Sep 13 Soybeans went off the board at USD14.88 3/4, up 46 3/4 cents; New front month Nov 13 Soybeans closed at USD13.81 1/2, down 14 1/2 cents; Sep 13 Soybean Meal closed at USD496.20, up USD15.30; New front month Oct 13 Soybean Meal closed at USD444.60, down USD4.60; Sep 13 Soybean Oil closed at 42.22, down 47 points; Oct 13 Soybean Oil closed at 42.34, down 44 points. For the week Sep 13 beans gained 51 3/4 cents, and Nov 13 added 13 3/4 cents. Sep 13 meal posted a gain of USD14.10 versus last Friday and Sep 13 oil fell 114 points.

Corn: Unlike soybeans, the expiring front month Sep 13 corn contract was friendless, crashing 29 cents lower at the close. Other months posted losses of around 6-7 cents for a second session in a row. The USDA report gave the market better than expected yields and production in the US this year, along with higher 2013/14 ending stocks. In short there was nothing bullish for corn aside from a bit of spillover support from soybeans. There is still however the possibility that the USDA's acreage estimates are overstated for both corn and soybeans. The USDA's Farm Service Agency are expected to release updated estimates on the area of corn than went unplanted this spring on Tuesday next week. Reports continue to circulate of better than expected yields out of the southern Midwest, the southeast and Mississippi delta regions, but it's how things shape up once the harvest moves onto the heart of the Corn Belt that will decide where we go from here. The harvest lows might not be in yet for corn. The southest and delta are set to stay largely dry for the weekend and into the early part of next week, which will accelerate harvest activity. Goldman Sachs left their 3-month corn price forecast unchanged at USD4.25/bu. Russia and Ukraine have just begun harvesting what is also expected to be a record corn crop, with the former around 5% done and the latter just 2% into what is expected to be a 29-30 MMT crop. Corn growing conditions in Ukraine have been said to be "near ideal" this year. The two FSU nations are expected to export 20-21 MMT of corn in 2013/14. The Ukraine Ag Ministry said that Ukraine has exported 4.61 MMT of grains between July 1st and Sept 13th, including 2.26 MMT of wheat, 1.47 MMT of barley and 600 TMT of corn - up 10.7% from a year ago. They are expected to be very aggressive sellers of corn come October/November. Despite a production downgrade this week, Europe's corn crop will still rise 11% on last year to 64 MMT, according to Strategie Grains. The USDA see the European crop even higher at 65 MMT. FranceAgrMer today increased the proportion of the French corn crop rated good/very good by one point to 56%, although that still lags last year's level (69%) significantly. The latest Commitment of Traders report showed managed money increasing their net short position in corn by 180 contracts for the week through to Tuesday night, bringing their total net short position to 64,686 contracts. Sep 13 Corn closed at USD4.50, down 29 cents; Dec 13 Corn closed at USD4.59, down 7 1/4 cents. On the week that puts Sep 13 corn down 41 1/2 cents and Dec 13 is 9 1/2 cents weaker.

Wheat: Where corn goes, wheat follows. Whilst the expiring front months did their own thing, generally CBOT wheat finished with losses of around 11-13 cents, with Kansas wheat down 10-12 cents and Minneapolis wheat closing in the region of 7-9 cents easier. The trend for wheat remains lower, dragged down by falling corn. New front month Dec 13 CBOT wheat closed at USD6.41 1/2 tonight, last November it was over USD9.00/bu and has been in terminal decline ever since. So where has it all gone wrong for wheat? The USDA gave us record world production yesterday, up 8.2% to 709 MMT, although consumption is only seen rising by less than half that pace, up 3.8%, in 2013/14. As ever, it's not just how much, but who? And with wheat, we have large production increases coming from quality sellers like Canada, Europe and Australia along with big leaps in output from the cheaper end of the market - Russia, Ukraine and Kazakhstan. This should keep them all six of these major sellers aggressive in the export market whilst the US continues to be generally overpriced. Demand is also seen taking a hit from the impending record world corn crop. US wheat exports are however holding up well this year, thus far, although this is largely due to new business from the likes of Brazil and China. The former won't be buying from the US once it's own (and Argentina's) wheat harvest begins towards the end of the year however, so this is a relatively short-term boost. There have been unconfirmed rumours of Canadian wheat trading into Brazil this week. China meanwhile has gone quiet of late, particularly in relation to purchases from the US. Canada and Australia are also well placed to service their needs. Saskatchewan's grain harvest as of September 9th was said to be 30% complete, with better than average yields being seen. The Buenos Aires Grains Exchange said that beneficial rains fell this week in Argentine wheat areas. There's talk of potential quality problems with Russian and Kazakh wheat which have seen an unusually wet finish to the growing season. Although Russia is expecting a sharp rise in wheat production this year, they may only reap 14 MMT of so-called third grade milling wheat, according to one analyst quoted on Reuters today. That's less than the 19 MMT of 3rd grade milling wheat they harvested last year. That potentially leaves a large surplus of 4th grade biscuit and feed wheat around and looking for a cheap export home in 2013/14. Sep 13 CBOT Wheat closed at USD6.27 3/4, down 14 cents; Sep 13 KCBT Wheat closed at USD6.85, down 21 3/4 cents; Sep 13 MGEX Wheat closed at USD7.05 1/4, down 1/4 cent. For the week that puts CBOT wheat 7 1/4 cents lower, with Kansas down 23 1/2 cents and Minneapolis losing 2 1/2 cents.