Argentine Wheat News Lifts Market

18/10/13 -- The overnight Globex grains see wheat trade 8-10 cents firmer by mid-morning, with corn up 2-3 cents and soybeans 3-5 cents higher.

There's a feeling that the USDA could announce export sales for both corn and soybeans of around 3 MMT, along with maybe 1.5 MMT or so for wheat accumulated during the US government shut-down. When these announcements will start to trickle through is still unclear.

The big news overnight is undoubtedly the Argy government pegging this year's wheat crop at only 8.8 MMT due to frost damage and dryness issues. Normally I'd take whatever they say with a pinch of salt, but I have a feeling that they may be pretty close to the truth with this one.

There's been talk of production below 10 MMT lately, although most public estimates have been in the 10.1-10.9 MMT region, apart from the USDA of course who went 12 MMT in the September WASDE report.

The Argy government pegged the 2013/14 barley crop at 4.5 MMT, a 12.8% drop on last year, but not too bad considering that plantings are down 22.7%. They forecast sunflower plantings for 2013/14 down 18% at 1.36 million hectares, with corn plantings down 6.6% to 5.7 million hectares and the soybean area up 3.25% to 20.65 million hectares.

They said that the sunflower crop was 16% planted as of Oct 10 versus 36% a year previously at that time. They said that only 12% of the corn crop was sown at the same date versus 36% in 2012.

Despite Brussels only passing 269 TMT of soft wheat export licences this past week, which off the top of my head is probably the low of the marketing year so far, cumulative exports are still way ahead of last year and the level needed to hit the USDA's projected record volume of 23 MMT this year.

The Argy news is enough to see European markets pressing onto new highs for the recent move. Nov 13 Paris wheat currently trades EUR2.50/tonne firmer at EUR202.00/tonne. A close there tonight would be the highest since the beginning of June on the weekly chart. London wheat is going along for the ride, with Nov 13 up GBP1.75/tonne to GBP164.70/tonne.

In other news, Russian winter grains have now been planted on 12.1 million hectares, or 74% of the originally planned 16.4 million. That's behind last year's pace of 15.1 million, but a lot better than was thought likely a fortnight ago.

The Russian grain harvest now stands at 86.1 MMT off 88.3% of the combinable area. Wheat accounts for 52.2 MMT of that off 92.7% of plan. That would suggest that a wheat crop of maybe 55-56 MMT in bunker weight should be feasible.

Canada's farm ministry are now forecasting a record wheat crop there of 33.2 MMT this year.

Ukraine's 2013 corn harvest now stands at 12.8 MMT off 46% of the planned area, say the Ministry.

If the cure for high prices is high prices, then surely the same must also be true for low prices? Dr Michael Cordonnier reports that Brazilian farmers in Mato Grosso will plant 9% less corn for the 2013/14 harvest. They will also plant cheaper hybrid varieties and reduce their fertiliser inputs. This will cut yields in the state by 20%, taking production down 27%, according to the Mato Grosso Institute of Agricultural Economics (Imea), he says.

The reason for the shift is prices of the 2012/13 corn crop in the state being below the cost of production, Dr Cordonnier explains. Mato Grosso is the largest corn producing state in Brazil, and the situation in Parana, the second biggest grower is similar, although not quite as dire, he adds.