Wednesday Morning Roundup
The overnight eCBOT markets are lower Wednesday morning on follow through from last night's CBOT close, weaker crude and a firmer dollar.
Crude oil is down $1.22 at $47.93/barrel ahead of US stocks data later today expected to show inventories at their highest levels since 1993.
The US dollar extended gains against the euro and the pound as Asian and European stock exchanges followed Wall St lower on concerns about the impact of deepening global recession on the upcoming round of earnings reports.
The USDA releases its revised WASDE and US stocks data tomorrow. Further cuts can be expected to soybean production in Argentina, and a tightening old 2008/09 ending stocks in the US.
The cut in the size of the Argentine crop and nervousness over the ongoing dispute between the government and farmers there may keep major importing countries like China reluctant to commit to making too many purchases in that direction. That may keep the door open for US sales a little longer than normal.
The Chinese government however are expected to soon start winding down their domestic purchases of soybeans and corn, which may mean that local crushers and feed mills may scale back their buying of imported material.
Iraq bought 100,000MT of US wheat overnight, despite a $30+ price disadvantage to Russian wheat. this may signify that top quality Russian supplies are dwindling. Egypt has shown a few signs this past couple of weeks that it too may be having to spend a little bit more money elsewhere to at least get some high-grade wheats to mix in with some Russian material.
It is still to early to accurately predict the true impact of a severe drop to sub-zero temperatures in the Southern Plains on this season's US wheat crop. It certainly seems likely that some damage has been done with temperatures plunging to 10-12 degrees F in parts of the top wheat producing state of Kansas Monday/Tuesday.
Significant losses are also possible in Oklahoma, where wheat development was most advanced, with eighty six percent of the state's wheat crop jointing, according to StormX.
Further east & north it remains largely too cold and/or wet to crack on with plantings just yet. The Dakotas are still on flood alert which will also delay plantings, and possibly wipe out intentions for up to a million acres of spring wheat sowing according to some reports.
In the longer run, the current US weather pattern could mean more beans and less corn & wheat going into the ground. With farmers able to plant beans up until the end of June, and the associated lower inputs, last week's USDA estimate of 76 million acres could yet prove to be on the low side.
Overnight Grains
Grains are firmer on the overnight eCBOT market on news that the forecast weekend wintry conditions in the US were more severe than originally anticipated, and sub-zero lows are forecast to last at least until the middle of the week.
Winter wheat crops emerging from dormancy are at risk from winterkill as temperatures fall as much as 24 degrees below normal, this comes after a warmer than normal March "fooled" wheat into thinking spring had arrived early.
Freezing rain and snow will also keep farmers out of their fields, delaying spring planting of corn.
Soybeans continue to benefit from last week's acreage numbers. With spring plantings forecast up only 300,000 acres from last year to 76 million acres. While this will be the most acres of soybeans ever planted in the United States, industry participants were expecting 79.25 million acres.
Meanwhile US soybean exports are projected for a record 1.225 billion bushels in 2009/10, the Agriculture Department chief economist, Joe Glauber, said last week.
Outside markets are also supportive, with Japan's Nikkei closing at a three month high Monday, crude oil almost a dollar firmer and the US dollar lower across the board.
At 9.15BST soybeans were around 10-12 cents firmer, wheat up around 5-6 cents and corn 1-2 cents higher.
Overnight Markets
The overnight grains are up a little from last night's heavy losses with beans around 4-6 cents higher, and corn & wheat 1-2 cents firmer.
A weaker dollar and firmer crude oil lent a bit of support to the grains complex.
Although yesterday's USDA report was bullish for soybeans and corn, neither could hold onto early gains on Wednesday, dragged lower by the all too familiar doom & gloom mentality that is prevalent at the moment.
Talk of increased demand from the ethanol sector were backed up by the USDA yesterday cutting corn ending stocks due to a projected 100 million bushel increase in ethanol usage.
There are also strong suggestions that the US government will raise the limit on ethanol use in gasoline from 10% to nearer 15% sometime soon. That would certainly create more demand for corn.
Japan has bought 112,000mt of wheat in it's routine Thursday tender with 70,000mt of it being US origin.
Despite increased rain coverage and amounts this weekend Kansas and the majority of the HRW crop will see net drying for the week as well as next two weeks, according to Allen Motew of QT Weather.
Beneficial rainfall will cover Texas and the Gulf States during this same period while the Plains and Corn Belt see significant drying, which may be a good thing going into the Spring freeze-thaw period, he concludes.
Overnight Grain Markets
The overnight eCBOT grains are mixed with beans around 7 cents easier, wheat down 3-4 cents and corn nominally a cent or so higher.
The main factors driving the demise of soybeans the last few sessions are talk of Chinese cancellations and the expectation for a big increase in US plantings this spring.
In addition rains in Argentina appear to have arrived just in time to at least stabilise the soy crop.
Sharply higher US soybean plantings of course conversely mean lower corn acres. In addition corn export sales have been in excess of a million tonnes five weeks running, with another solid number expected this afternoon.
Reports of lower wheat acres around the world are filtering through to the market, which should provide solid underlying support. Russia continues to soak up most of the decent export orders however. Until the US and EU start picking up some of this business it may be difficult to get too much of a fire going underneath wheat.
In it's weekly export sales report due at 13.30GMT the USDA is expected to report corn sales of 750-950,000MT; wheat 300-400,000MT; soybeans 550-850,000MT.
Overnight Grains
The overnight grains are slightly firmer this morning, with beans around 6c higher and wheat and corn both 1-2c firmer.
Asian stock markets are up after their US counterparts gained the most in a month last night, as 230 point rally in the Dow lifted trader’s spirits.
Crude oil is a little firmer too, back up above $40/barrel, ahead of Energy Dept stocks data due later today.
No news came out of the Argy farmers meeting with the government who re-iterated their "the lady's not for turning" stance on export taxes.
US wheat crops face very dry conditions as they emerge from winter dormancy, and the forecast isn't for much relief anytime soon.
Conditions appear to have improved in China, especially in the south where around a third of their wheat crop is grown.
Overnight Grains
The overnight eCBOT grains are a tad lower Tuesday morning in a dearth of fresh fundamental news.
Falling crude oil and the general global economic depression are enough to weigh on the sector this morning.
Argy farmers have a meeting with the government scheduled for later today. Their recent strike is supposed to end today, we will see what happens from here on in, but this one can be expected to run & run methinks.
Above normal precipitation fell across Northeast China last week (Feb 14-21) but more rain and snow is needed to alleviate drought conditions there, according to Allen Motew of QT Weather. Heavy precipitation will fall mid-week over the Yangtze Basin with no precipitation farther north across China’s Winter Wheat Belt, he adds.
The newly released outlook for March shows drying for the Southern Plains, Gulf States and Southeast. Early season row crops may get off to a poor start if this forecast verifies, he concludes.
China has bought at least 90,000mt of soyoil the last few days and is actively seeking more according to media reports.
Overnight Grains
The overnight markets are mixed, mostly a little higher Friday morning with soybeans up around 4 cents, wheat a cent or so firmer and corn slightly lower.
For wheat there seems to be far more concern developing over drought in the US southern plains than in China. It appears to be a case of the closer to home the problem, the more important it becomes.
"The newly released outlook for March shows drying for the Southern Plains, Gulf States and Southeast. Early season row crops may get off to a poor start if this forecast verifies," says Allen Motew of QT Weather.
The worst Chinese drought in fifty years has officially been downgraded to level two, with the government now saying that things are no worse than this time last year. They couldn't possibly be lying could they?
For soybeans the announcement of a four day strike by Argy farmers last night ahead of talks with the government next Tuesday is obviously supportive.
Talk of possible upcoming Chinese cancellations on soybeans will keep traders cautious from getting too carried away to the upside.
The USDA will release it's weekly export sales data at 13.30GMT. Here is what is expected: Wheat 250-450,000MT: Corn 850-1,500,000MT; Soybeans 700-850,000MT. Some pretty solid numbers there. I thought there was a recession on?
Overnight Market Developments
The eCBOT market is modestly higher Thursday morning supported by new that Argentine farmers will stage a rally in Cordoba on Feb 20th, after Argy president Cristina Fernandez said that the government will not be budging on the issue of export tax repeals on grains.
Indeed Fernandez went some way towards admitting that the country had little option as it was far too heavily reliant in the taxes to do anything else but press ahead with them. The taxes are "an essential part of the country's economic balance," she is quoted as saying Wednesday.
A repeat of last years four month long dispute looks like it could be on the cards, which will certainly disrupt grain supplies and probably adding a bit of front-end premium.
Japan bought 117,000mt of milling wheat in a tender overnight, with 75,000mt of it US origin. Syria, Iraq, South Korea, Pakistan, Bangladesh, Egypt and the Philippines are all in the market for wheat too. Congestion at the ports is said to be putting Australia out of the equation until at least April. Still, Russia seems to have any quantity and any quality you want at heavily discounted prices.
China continues to play down the effects of drought on it's wheat crop this year, saying that rain and irrigation over the last couple of weeks has seen the area affected fall by two-thirds.
On the other hand it has also said that it will buy up to 10mmt of corn on the domestic market between now and the end of April to boost reserves and support prices.
Crude oil is flat around $35/barrel ahead of today's delayed stocks data from the US Energy Dept., those figures are expected to show stocks rising by more than 3 million barrels.
The pound is up against both the dollar and euro in early trade, so I guess we will see London wheat open lower again later this morning.
Overnight Grains Lower
The overnight grains are mostly lower after a long weekend in the US, with soybeans leading the way.
US farmers will plant 5% more soybeans and 2.4% less corn this spring according to a survey by ArgriSource. A stronger dollar and weaker crude oil are also bearish influences this morning.
Heavy rains may arrive in Argentina by the end of the week according to QT weather. Whilst these may be too late for much of the corn crop, they could certainly add a bit of extra production onto soybeans. January expectations for a crop under 40mmt seem to have disappeared with most analysts now predicting a crop in the region of 41-43mmt.
China's wheat crop remains at risk from drought, but you can now throw frost, rust and insects into the mix, according to media reports this morning.
ABARE upped their estimate for the final output of this season's Australian wheat crop to 21.4mmt.
Syria is tendering to 200,000mt soft milling wheat, with Russia the likely favourite to get the order.
Overnight Markets
The overnight grains markets are a little steadier this morning on strong US export sales, a weaker dollar and book-squaring ahead of a three day weekend.
Weekly corn sales came in above expectations yesterday at over 1.5mmt, with soybeans also strong at more than 1mmt, whilst wheat came in in-line with trade guesses at 411,700mt.
In addition to that, the Korea Feed Association bought 165,000mt of US/South American corn and 110,000mt South American soymeal overnight. Also another branch of the same association bought 110,000mt of corn from Cargill overnight. This last deal was of unspecified origin, but is thought likely to be US material.
In South America it really is a game of two halves, as they say in football. For the rest of February there is virtually no rain in the forecast for Argentina at all. In Brazil, the opposite is true, you could even make out a case for their being too much rain. Up to fourteen inches may fall in Mato Grosso in the next fortnight. And as Mrs Nogger will testify, that's a lot of inches.
There is no drought in China, so stop going on about it will you? And if there was a drought, which there isn't, it would only be a small drought. And if that drought was to do any damage, which it won't, it would only be minimal damage. Got it?
Overnight Markets - "Methinks Thou Doth Protesteth Too Much"
There isn't a lot of change in the overnight eCBOT markets this morning. As freight rates continue to rise, the Baltic Dry Index was up for the 17th day in a row yesterday, importers are coming in for cover before things get worse.
Japan bought 132,000mt of US, Canadian and Australian wheat overnight, the majority of which was US origin. South Korea are in the market to buy 165,000mmt of corn and 55,000mmt of soybean meal. Egypt are in for at least 55,000 tons of wheat.
China's Vice Agriculture Minister Wei Chaoan says that the government is confident of a good harvest in 2009 despite the drought, and that he doesn't anticipate a problem as the government has adequate supplies to counter any shortfall.
Ar you familiar with the expression "methinks thou doth protesteth too much" Wei? Is that burning smell your trousers or the wheat fields behind you?
Congestion at Australian ports may well redirect some shipping interest away from that region so the US and EU may pick up a bit of extra wheat business on that back of that.
A stronger dollar looks like capping any rally attempts in Chicago, not that this will help UK prices too much today with the pound about as popular as piles.
London wheat should find enough impetus from an ailing sterling to move a little higher.
Overnight Markets
eCBOT grains are mixed in quiet trade ahead of the USDA's stocks & world production numbers due at 13.30GMT.
Soybeans are around 5c higher, and wheat and corn 1-2c lower in light positioning ahead of the data.
South American production numbers are expected to be lowered for corn & soybeans.
For soybeans expect the Argy crop to be reduced from 49.5mmt to around 45mmt, in Brazil from 59mmt to 57-58mmt.
In corn we can also expect to see the Argy crop cut from 16.5mmt to 13-14mmt, and in Brazil from 53.5mmt to around 51-52mmt.
For US ending stocks it is expected that corn will be increased, soybeans decreased and wheat left roughly unchanged. For corn that means going from 1.79 billion bushels to around 1.9 billion; for beans from 225 million to 200 million; and for wheat staying around last month's 655 million.
In other news Iraq bought 350,000mt Canadian, Australian, German and Russian wheat yesterday, whilst Tunisia bought 50,000mt of any origin milling wheat.
Japan are in the market for their usual combo of US, Canadian and Australian wheat in a tender due to be concluded Thursday. Of this 86,000mt is expected to be US wheat.
Pakistan may retender this week for 250,000mt wheat ahead of their own harvest in March/April
Taiwan are on the prowl for 60,000mt US corn.
Nobody seems to know what is really going on in China, one minute they are having the worst drought for 100 years, the next minute there isn't a problem.
.
Overnight Grains
eCBOT grains are showing little different from Friday night's close overnight with wheat around 3c firmer, corn 3c lower and soybeans around unchanged.
Corn is under a bit of pressure on ideas that the USDA will increase ending stocks in tomorrows report as demand from the US ethanol sector wanes.
Crude oil is lower this morning, sub-$40 once again, so that will provide little in the way of support for corn.
Tomorrow's WASDE report is expected to show a reduction in world soybean supply with sharp cuts in Argentina and also a lower Brazilian crop.
Corn output in both South American countries is also likely to be reduced.
Uncertainty over the impact of drought in China on it's winter wheat crop and also some crop concerns on the US Plains are supportive to wheat.
The dollar is already around a cent off the days lows at $1.4775 against the pound.
Overnight Markets Push Higher
The overnight grains are firmer, adding to last night's gains as the dollar continues to slide. Beans currently around 10-12c higher, wheat and corn up 2-3c. Latest eCBOT prices are on the right.
The dollar is lower in cautious trade ahead of key US jobs data later today that is expected to paint an even bleaker picture of the US labour market.
The pound is higher against the euro too, as traders conclude that yesterday's half point cut in interest rates was already factored into the market. The ECB will cut in March, according to just about the entire world. It may be a case that the BOE cut is being seen as more pro-active than the dithering approach adopted by Mr Trichet.
Conab cut it's Brazilian soy & corn crop estimates yesterday. The USDA are likely to do the same when they release their latest WASDE figures next week. They are also, of course, expected to slash output forecasts in Argentina. The US Attache dropped his estimate for Argy soy production to 42.5mmt from 49.5mmt earlier in the week.
Upside potential for corn will be limited by the USDA likely raising their stocks estimates as 21% of the US ethanol industry out of action (according to ADM this week) due to poor margins. With crude at $40/barrel, that doesn't look like changing anytime soon.
Hurrah!! We appear to be returning to the good old days where grain is grain, not a raw material for fuel. Fundamentals are what the market should trade on, lets get back to focusing on crop production, weather, supply, demand not whether rebels have shut down a Shell refinery in Nigeria.
South Korea remain big buyers, booking 330,000 of corn yesterday in what seems to be a move to get the orders in before freight goes even higher. They have now booked around a million tonnes of feed wheat and corn in the last fortnight.
More than 10 million acres of wheat in China is on the country's highest level of alert following more than three months of drought. That is keeping the wheat market on it's toes.
Overnight Markets
eCBOT is mostly a little steadier overnight with soybeans 1-2c higher, wheat and corn around 1c firmer.
Export interest is quite buoyant. South Korea bought 165,000mt each of wheat and corn earlier in the week and are back in the market today for a further 275,000mt of corn.
Japan bought 128,000mt wheat overnight with 86,000mt coming from the US.
With the harvest just about wrapped up the US attache in Australia said that final wheat production Down Under will be 20.15mmt.
It sees like it is still too early in the day to accurately assess the impact on yields of this weeks rains in Argentina.
Drought in China is also a concern with 9.50 million hectares of wheat now affected. Last year China produced around 112.5mmt of wheat, only 20mmt less than this years anticipated production for the whole of the EU-27.
The pound is flat ahead of the Bank of England's announcement on interest rates due at lunchtime today.
Overnight Developments - US Auto Bailout Fails
The US auto industry bailout has failed to get past the Senate. The failure came after bipartisan talks on the rescue plan collapsed over Republican demands that the United Auto Workers union agree to swift wage cuts.
"I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight," said Senate majority leader, Harry Reid.
The news brought a sharp fall in share prices in Japan, Taiwan, South Korea and Australia. London is expected to follow suit when it opens later this morning.
Crude oil is down a couple of dollars at $45.95, having risen 10% yesterday. The bailout failure raising concern that a prolonged recession will reduce fuel demand.
eCBOT grains are weaker with soybeans 12-15c down, wheat 12 lower and corn off around 8-9c.
In overnight trade the pound stands at $1.4930 against the dollar and 1.1256 against the euro, close to yesterday's all-time low.
Nogger is off to Liverpool today for the LCFTA Christmas Draw, so I may see a few of you there. Normal updating of the blog will resume Monday.
Meanwhile forex and futures prices will update automatically on www.noggersworld.co.uk and/or www.noggermobile.co.uk from your mobile phone.
Overnight Developments
Grains are mixed, mostly a little easier in the overnight eCBOT market with wheat down 7c, corn 1c easier and soybeans around a cent firmer.
The USDA S&D report due at 13.30GMT is not expected to throw up any major surprises, just a bit of tinkering with exports & ending stocks.
The pound has set a fresh all-time low against the euro of 1.1361, and currently stands at 1.14 exactly.
Against the dollar sterling is a little firmer, with the Fed widely expected to cut US interest rates a half to 0.5% next week. At 9am GMT the pound was at $1.4924.
Japan has confirmed the purchase of 83,000mt wheat, a mixture of US and Australian.
Crude is marginally weaker, 17c down at $43.35/barrel.
Overnight Developments
The overnight market is lower Tuesday morning, on ideas that last night's rally was overdone.
It didn't take too long for the "Obama Magic" to wear off then.
Beans are around 10c easier, with corn 3-4c easier and wheat off around a couple of cents.
Confusion over the full implications of China's plans to shore up the domestic market by buying beans, corn & rice are keeping traders cautious.
Crude is flat, 35c easier at $43.36/barrel. Analysts are now talking that OPEC may attempt to shock the market next week with a production cut of up to 3m barrels.
It is interesting to note that, now that we have become used to crude having a daily movement of $4 say, at current levels that represents a 10% fluctuation. Yesterday's $2.90/barrel increase was 7.1%. Whichever way the market is heading from here, it looks like it's going to do it in some pretty big chunks.
Whatever OPEC say, the market will need to see some major degree of compliance, if we are to see any kind of a sustained rally. It's a supply & demand market, and it doesn't look like it's going to go higher from the demand side of the coin anytime soon.
Sony Corp. plans to eliminate 8,000 jobs in the largest reduction announced by a Japanese company since the credit crunch drove the world into a recession.
Democrats in Congress drafted a plan to aid U.S. automakers with $15 billion in loans. Now they must find enough Republican votes to pass it.
The amount is significantly lower than the $34 billion the Big Three were asking for.
With President-elect Barack Obama’s Illinois Senate seat now unoccupied, the Democrats’ majority has narrowed to 50-49, including two independents. That means Democrats, even if they are unified, must attract 10 Republican votes to overcome filibusters.
Overnight Market Developments
The overnight eCBOT market is mixed, with beans and wheat a couple of cents firmer and corn a couple lower.
Crude is again firmly entrenched below $50 at $47.95/barrel as more evidence emerges that the global recession is going to get substantially worse before it gets better.
US stocks closed sharply lower last night and Asia has picked up on that theme this morning, with Japan's Nikkei falling 6.4%, and Hong Kong's Hang Seng dropped 4.9%.
Stock markets in South Korea, the Philippines, Taiwan and Singapore also fell.
The FTSE100, the French CAC40 and German DAX have all opened around 1% lower in early trade,
There are some signs that the grains sector is managing to divorce itself a little from these outside markets.
Wheat is a little firmer though, after the Canadian Wheat Board said that it expects world plantings to be 3% lower next season, that is almost double the figure estimated by the IGC last week, and to my mind still a bit ambitious.
Even with plantings down "just" 3% it is the final production numbers that are going to be of more importance. As mentioned last week, on the balance of probability, yields could be significantly reduced in 2009, leading to a sharply lower world output.
Japan is looking for 72,000mt of US/Canadian wheat in a tender this week.
The Eastern Australian harvest is now said to be running around three wheeks behinds schedule, after more heavy rains battered NSW and southern QLD at the weekend. Trade estimates are that somwhere in the region of 1-2mmt of wheat will be downgraded to feed as a result of these rains.
Of an estimated 40-50% of the northern NSW crop still to be harvested, at least 60% is likely to be downgraded, one analyst said. With feed wheat around A$100/tonne cheaper than milling wheat, this will have a significant impact on farm incomes in the region, he added.
The pound is lower again, fresh from yesterday's largest one-day drop in percentage terms since 1992, hurt by falling stocks and data showing the slump in housing and manufacturing is deepening.
At 9.15am GMT the British currency was $1.4830 against the dollar from $1.4884 late yesterday. It was at 85.06 pence against the euro from 84.67 pence yesterday.
The BOE and ECB are both expected to cut interest rates further later this week.
Certainly it would seem that the outlook for the pound isn't too rosy at the moment. This of course will mean that falling feed prices in USD terms, won't necessarily be translated into lower prices here in the UK. It may also provide some degree of support to domestic wheat futures.
Overnight Grains Higher
Grains are mostly higher on the overnight markets following the US Thanksgiving Day holiday. News that Egypt bought US wheat, not Russian, French or any other wheat offered is seen as being supportive to the grains complex.
Egypt, the world’s largest wheat importer, agreed to buy 55,000 metric tons of US wheat from Alexandria Grain at $174.99/tonne FOB for shipment Dec21-31 yesterday.
The is dollar headed for its biggest weekly decline in almost three years against the euro on speculation policy makers’ steps to spur growth and lending will reduce demand for the relative safety of U.S. assets.
South Korea bought 55,000mt optional origin corn from Glencore overnight at $169/tonne, reportedly the cheapest corn purchased so far this year by any Korean miller.
Japan said it had bought 600,000mt various origin corn so far this month, including 75-90,000mt Ukraine corn, which offers a $15/tonne discount to US corn at the moment. As with wheat however, Ukraine corn is inferior in quality to US corn, and Japanese buyers are reluctant to purchase too much of it due to broken kernels.
China slashing interest rates earlier in the week is also fostering ideas that this decision will pave the way for increased imports of foreign grains.
The recent Chinese melamine scandal is also seen as increasing imports of "safer" foreign raw materials. "Contamination is not merely endemic in China's dairy products or exported chocolate bars. With melamine having been found in fish and eggs, foreign feed grains are being substituted in place of contaminated domestic feed materials," says one Chinese news agency.
At 8.30am GMT wheat is trading around 3-5 cents firmer, with corn unchanged and soybeans 2 1/2 cents higher.
