Chicago Grains: Christmas Review

27/12/14 -- We'll start off with a quick summary of the week, just in case the entire thing passed you by...

Jan 15 Soybeans closed Monday at $10.38 1/4, up 7 3/4 cents; Tuesday $10.38 1/2, up 1/4 cent; Wednesday $10.28 3/4, down 9 3/4 cents; Friday $10.47 1/2, up 18 3/4 cents. Net change for the week is up 17 cents.

Jan 15 Soymeal closed at $368.40, up $4.90; $371.30, up $2.90; $371.40, up 10 cents; $379.70, up $6.30. Net change for the week, up $16.20.

Jan 15 Soybean Oil closed at 32.04, up 7 points; 32.22, up 18 points; 31.93, down 29 points; 32.46, up 53 points. Net change up 49 points.

Mar 15 Corn closed at $4.11 3/4, up 1 1/4 cents; $4.14, up 2 1/4 cents; $4.07 3/4, down 6 1/4 cents; $4.14 3/4, up 7 cents. Net change up 4 1/4 cents.

Mar 15 Wheat closed at $6.25 3/4, down 6 1/2 cents; $6.35 1/2, up 9 3/4 cents; $6.11 1/2, down 24 cents; $6.10 3/4, down 3/4 of a cent. Net change down 21 1/2 cents.

For the record, Mar 15 Kansas wheat finished with a net loss of 21 3/4 cents for the week, and Mar 15 Minneapolis wheat was down 16 3/4 cents.

Weekly export sales from the USDA, usually released on a Thursday, are delayed until Monday due to the holiday. The regular Friday weekly commitment of traders report is also due for release Monday. Fresh news was relatively scarce, and trade was thin, as you might imagine. Beans, and oil all posted decent gains for the week, corn managed modest advances and wheat was lower, courtesy of a Christmas Eve rout. This may have been linked to profit-taking, and was possibly overdone due to the lack of participants. Fund money was given credit for being a net seller of around 2,500 Chicago wheat on the day, a modest volume that wouldn't normally see a 24 cents collapse. Kansas and Minneapolis wheat saw losses of around 20 cents that day too.

Despite the continued collapse in crude oil values, down more than 4% again last week, weekly US ethanol production came in at a record high 992k barrels/day last week - the fourth record week in the past five. Grain prices are becoming divorced from crude oil, and this appears to be directly linked to the "incentive for the world to use more grain based ethanol to meet inclusion mandates" say the HGCA.

There's talk of $40/barrel being the level at which Saudi Arabia might reach for the panic button and start choking off excess supply in the market. NYMEX crude closed below $55/barrel on Friday, so we are now only $15/barrel away from being there, and it's only taken a month to lose that much on the way down to where the market currently stands, so we might get to $40/barrel sooner than the Saudi's think.

Russia apparently confirmed on Christmas Day that the level set for the much talked about export duty on wheat would be a minimum of EUR35/tonne, which is about USD43/tonne, starting Feb 1. Yet the US wheat markets closed around unchanged on Friday. Was this "buy the rumour, sell the fact" or simply that what few traders were at their desks were unaware of this apparently significant development? Monday's trade might give us the answer to that one.

Russian news agency TASS says that Russia has agreed to provide Egypt with 120 TMT worth of wheat before the new rules kick in. To me that would appear to suggest, reading between the lines, that it will not be a free-for-all export deluge between now and the end of next month. It looks like the current unofficial "red tape" export restrictions will persist depending on who the buyer is (and maybe even despite who they are).

TASS say that Russia is the third largest wheat supplier to Egypt, accounting for 26% of their imports across the last 6 months. The largest is France (36%) followed by Romania (27%). The EU then certainly look well placed to be the main beneficiary of this new wheat Iron Export Curtain coming down, assuming that they can come up with the quality (France) and/or volume (Romania) required.

The Buenos Aires Grain Exchange said that Argentina's 2014/15 wheat harvest is now past 75% complete. They estimate production unchanged from previously at 11.5 MMT, which is up nicely on a year ago. Neighbouring Brazil will be in the market for most, if not all, of their surplus though, meaning that not much of it is likely to travel as far afield as North Africa or beyond. Happy New Year France!