CBOT Close
08/06/11 -- Soybeans: Jul 11 soybeans closed at USD14.01 1/2, up 7 1/2 cents; Nov 11 soybeans closed at USD13.92 1/2, up 7 1/4 cents; Jul 11 soybean meal closed at USD372.80, up USD4.80; Jul 11 soybean oil closed at 57.94, up just one point. Beans closed higher on spillover support from corn. Brazil is estimated to have produced a (comfortable) record 75 MMT of soybeans according to CONAB, meanwhile the Argentine harvest is almost done and they will almost certainly have the second highest output in history. Crude oil rallied after OPEC failed to agree to Saudi demands for a production increase. No major changes are expected tomorrow for US soybean ending stocks for either crop year. Estimates for weekly export sales are 150-350 TMT.
Corn: Jul 11 corn closed at USD7.64, up 27 1/2 cents; Dec 11 corn closed at USD6.93 3/4, up 17 1/4 cents. Funds were estimated to have added a further 15,000 contracts to their already weighty corn length today. They simply can't get enough of the stuff, the problem is IF there is a bearish surprise in store tomorrow from the USDA then there will be a massive stampede for the exit corn door. Estimates for tomorrow’s weekly export sales report range from 550,000 to 900,000 MT. Crude oil rising the best part of two dollars after OPEC failed to find a unison on production increases also helped.
Wheat: Jul 11 CBOT wheat closed at USD7.48, up 14 1/4 cents; Jul 11 KCBT wheat closed at USD8.85, up 10 1/2 cents; Jul 11 MGEX wheat closed at USD10.21 1/2, up 36 3/4 cents. The USDA will release the June WASDE report, US winter wheat production estimates and ending stocks projections tomorrow along with the regular weekly export sales report. The latter is forecast to show sales of 200-400 TMT. The former could show anything, but is expected to show lower production from the EU, lower winter wheat output and reduced ending stocks for both crop years.
EU Grains Close
08/06/11 -- EU grains closed higher with July London wheat up GBP3.00 to GBP193.00/tonne and with new crop Nov up GBP4.50/tonne to GBP189.00/tonne. Nov Paris wheat closed EUR8.50/tonne firmer at EUR234.00/tonne whilst May12 rose EUR8.25/tonne to EUR237.50/tonne.
Although rains continued to fall today over northern France and Germany, the general consensus is that they are only likely to stop further deterioration in crop prospects rather than add to them.
The French Ministry pegged soft wheat production there at 30.9 MMT, which combined with durum output of 1.9 MMT, gives them a total all wheat crop of 32.8 MMT, 14% down on 2010.
Barley production will total 8.7 MMT, they said. That's some 1.5 MMT down on last year, or a near 15% fall.
The numbers are in line with ones from the USDA's agricultural attaché in Paris who estimates the wheat crop at 32.3 MMT, a fall of 15% on last year.
The USDA will report tomorrow on their official world supply and demand numbers, together with US ending stocks for 2010/11 and 2011/12. They had EU-27 all wheat production at 138.6 MMT last month, we will doubtlessly see that reduced this time round.
Included within that figure was French wheat output of 36.7 MMT, that in Germany of 24.75 MMT and 16 MMT from the UK. They had Europe down to produce 53.9 MMT of barley last month with Germany and France each accounting for 9.6 MMT of that and the UK a further 5.35 MMT.
Although the rains may be too late to increase wheat and barley potential in Europe they may be able to be of some benefit to corn output which the USDA had at 59.3 MMT last month.
Early Call On Chicago
08/06/11 -- The overnights closed mixed with wheat and corn failing rather miserably to hold onto early session gains. Beans finished 5-8c lower, with corn 2c up on old crop to 3c lower on new crop. Wheat was narrowly mixed either side of unchanged.
Crude oil is lower and the dollar a bit firmer. The market is nervous ahead of tomorrow's USDA stocks and WASDE data.
Flooding along the entire length of the Missouri River is keeping spring plantings from completion.
Minneapolis wheat has opened up a large gap between it and Chicago and is now trading with huge volatility having closed almost limit down last night. It's had a USD1.38 trading range in the last two sessions after rallying to a new contract high of USD11.20 on Monday it closed at USD9.84 3/4 last night.
Historically the USDA does not change its spring wheat production forecast in June, having only done so once since 1990.
Only minor changes are expected to the 2010/11 ending stocks estimates from last month, the 2011/12 carryout will be potentially more interesting.
There has to be a distinct possibility that they will increase US wheat exports in the coming marketing year due to an expected cut in EU exports/production on the back of the drought here.
There is also a risk of a lower US winter wheat production estimate although early harvesting reports coming out of Kansas and Oklahoma report perhaps better than expected yields. That is better than what the farmer expected, not necessarily better than what the USDA had pencilled in.
Corn ending stocks for next season are expected to be trimmed from 900 million bushels to 817 million, although the lowest estimate in the range of analysts prediction is 548 million, so there's a pretty wide spread there.
By comparison soybean ending stocks are not expected to alter too much, rising from 170 million to 173 million in 2010/11 and from 160 million to 162 million in 2011/12.
Assorted analysts have cut their French wheat production estimates in the past 24 hours, indicating a crop of around 14-19% down on 2010.
In Brazil, Conab say that the final tally on the soybean crop there was a record 74.9 MMT, up 8.5% on last season.
Early calls for this afternoon's CBOT session: corn 2c firmer to 1c lower, beans 6-8c lower, wheat 1-2c firmer.
News Headlines
08/06/11 -- A selection of grain-related news headlines from around t'internet for your delight and delectation:
Canada downgrades grain stocks to record low
Russian wheat offered in port, export outlook up
Sterling slips as Moody's warns on UK outlook
Rain gives West European grain crops some respite
Kansas farmers begin one of the earliest wheat harvests in recent memory
Profits up at Milk Link despite tough market
....And The Lord Taketh Away
08/06/11 -- Offre et Demande Agricole have cut their French wheat production estimate to 31 MMT, 19% down on last season. It may be worth considering that the French consultancy have been particularly bearish on the extent of the damage done by the spring drought across Europe, coming in with the lowest estimate in a recent Bloomberg survey of seven leading analysts and traders into the size of the EU-27 wheat crop this year.
The USDA's agricultural attaché in Paris meanwhile estimates the wheat crop at 32.3 MMT, a fall of 15% on last year. FranceAgriMer have today pegged soft wheat output at 30.9 MMT and durum at 1.9 MMT, for a combined 32.8 MMT, 14% down on 2010.
To get things into perspective these numbers take around 6 MMT off the world export market in 2011/12. Yet Russia alone is seen adding that kind of volume, with a further 7.5 MMT coming onto the market from Ukraine and Kazakhstan.
All we are seeing here is the balance of exporting power switching away from the EU and the US back to the Black Sea next season. Remember that as recently as three years ago the EU was only exporting 12 MMT of wheat a year. Despite production downgrades this will be the fifth year in a row that the EU will produce more wheat than it consumes.
Although yields will be low I think that quality will be good this year as things stand at the moment.
The 2010/11 season was an opportunity to fill the void left when the cheap shops had all sold-out and make some nice money. I'd say that 2011/12 might be more of a year to let Matalan and Primark swamp the market with their cheap tat whilst picking off the occasional discerning Algerian fashionista that wanders into our designer boutique.
The Early Vibe
08/06/11 -- The overnight Globex market is around 2-3c firmer on wheat and corn and 2-4c weaker on beans around 8.30am London time. Crude oil is around half a dollar lower and the pound is down to 1.1150 against the euro. It hasn't traded below 1.11 since early May, and then only briefly. We have to go all the way back to Feb/Mar 2010 to find it trading at that sort of level for any length of time.
The reason for that seems to be Moody's saying that the UK could lose it's AAA credit rating if growth remains weak and the government don't get their finger out.
Significant rains fell in northern France and western Germany yesterday afternoon and overnight. Joachim, my German correspondent, says they picked up 20mm in Rhineland in a "long lasting thunderstorm". Paris has picked up a similar 23mm in the past 24 hours.
Joachim incidentally tells me that there is a lot of concern amongst Germany farmers that they may have oversold their crops going forward. A meeting he attended in Sohren yesterday where 40 farmers were expected, had 140 turn up to discuss the possibility of claiming force majuere.
Is the drought there a legitimate "act of God" event? Not according to the lawyer that they had speaking, who told them that under previous Supreme Court rulings only a once in a 100 years event is sufficient to claim force majuere.
Chicago July corn is currently trading at a premium to CBOT wheat for only the second time in the last 15 years.
Chicago Close
07/06/11 -- Soybeans: Jul 11 soybeans closed at USD13.94, up 10 3/4 cents; Nov 11 soybeans closed at USD13.85 1/4, up 12 1/2 cents; Jul 11 soybean meal closed at USD368.00, up USD8.60; Jul 11 soybean oil closed at 57.93, down 10 points. The late planting storyline rumbles on with the USDA reporting only 68% of the crop in the ground as of Sunday night, somewhat lower than the 70-75% the trade estimated. That may be due to farmers concentrating a little bit more of their efforts into getting the last of the corn in. Funds bought an estimated 5,000 contracts of beans today as the weak dollar also lent some support. The trade is now focused on Thursday's upcoming stocks and WASDE report.
Corn: Jul 11 corn closed at USD7.36 1/2, up 4 1/2 cents; Dec 11 corn closed at USD6.76 1/2, up 9 1/2 cents. The USDA said that 6% of the crop remains unplanted as of Sunday, that equates to around 5.5 million acres. Funds bought an estimated 5,000 contracts on the day. Private exporters announced the sale of 548,640 MT of new crop corn, along with a further 274,320 MT for 2012/13 delivery all to Mexico. In Thursday's stocks report 2010/11 carryout is estimated at 715 million bushels, 15 million down on last month and almost a billion below the levels of 2008/10. New crop ending stocks are pegged at 817 million, down from 900 million in May.
Wheat: Jul 11 CBOT wheat closed at USD7.33 3/4, down 10 1/4 cents; Jul 11 KCBT wheat closed at USD8.74 1/2, down 15 1/2 cents; Jul 11 MGEX wheat closed at USD9.84 3/4, down 57 1/4 cents. Reports of European rains weighed on sentiment. US winter wheat good/excellent improved one point last night, but to only 34% as opposed to 66% a year ago. Early harvest reports coming out of Kansas suggest better quality than expected with good test weights and decent proteins. Yields are down, but given the very dry spring some are being described at "a pleasant surprise". Spring wheat planting is only 79% done compared with 98% on average and 87% a year ago (itself a wet spring).
EU Grains Close
07/06/11 -- EU wheat futures closed lower with Jul London wheat down GBP2.50/tonne to GBP190.00/tonne and with new crop Nov falling GBP5.00/tonne to GBP184.50/tonne. Nov Paris wheat was down EUR4.00/tonne to EUR225.50/tonne whilst May12 declined EUR3.25/tonne to EUR229.25/tonne.
This was the lowest close for a front month on London wheat since Mar 17, when the market was rebounding from the aftermath of the Japanese earthquake and subsequent tsunami.
Recent significant rains across northern France and central/western Germany are seen benefiting crops there. Southern areas of the UK have at least received something, although coverage here has been more localised.
Despite weather problems in Europe and America the trade seems to be coming to terms with the notion that the crops in eastern Europe and the FSU are looking if not bumper at least ample.
The three lions of the Black Sea - Russia, Ukraine and Kazakhstan - are back on the prowl eager to gobble up any export order going.
Ukraine's Deputy Farm Minister pegs the wheat crop there at no less than 20 MMT, an increase of a minimum 19% on last year. Exports are estimated to be anywhere from 8.5-10.0 MMT, a rise of 140-185% on 2010/11.
The Russian Deputy Agriculture Minister says that their wheat exports may reach 13 MMT in 2011/12, 3 MMT more than the USDA estimate and a 225% increase on the current marketing year.
Wheat production and exports in Kazakhstan meanwhile are seen rising by at least 50% in the season ahead.
