EU Wheat Rally Stalls
04/01/12 -- EU grains ended with Jan 12 London wheat down GBP2.80/tonne to GBP152.50/tonne and Jan 12 Paris wheat fell EUR6.25/tonne to EUR202.75/tonne. New crop London wheat was down GBP4.00/tonne.
It was a strange sort of a day which started off quietly but suddenly turned sellerish mid-morning. It's difficult to say exactly why.
Whatever the reason merchants are reporting increased farmer selling today after three weeks of upside during which Jan 12 London wheat had put on GBP14.30/tonne based on last night's close.
A German bond auction was fully subscribed to, but in a manner than many described as disappointing. The market now appears to be thinking to itself "hmmm, if they aren't falling over themselves to buy German bonds what are they going to make of France's EUR7-8 billion auction tomorrow?"
The euro sank to one year low against the pound, and very close to last week's yearly low versus the dollar on the news.
Some weather forecasters are turning wetter for Argentina, although not until next weekend. QT Weather are talking of "a swath of 1.25-4.00 inch (rain) totals over Cordoba, Sante Fe and Entre Rios" in Central Argentina for the 14/15th January.
Russian customs authorities report that the country has shipped out 17.9 MMT of grains to Dec 29th, including 14.8 MMT of wheat, 2.0 MMT of barley and 0.75 MMT of corn.
That still leaves more than 7 MMT left to go before they hit their suggested self-imposed limit of 25 MMT. Exports are expected to slow up a little now, partly due to seasonal problems and also as much of what is left to export is located further away from the ports.
Winter wheat crop conditions in the top US producing state of Kansas have improved to 53% good to excellent from 47% just over a month ago, with Oklahoma ratings also jumping to 63% from 56%, say the USDA.
Early Call On Chicago
04/01/12 -- The overnight grains closed mostly lower with beans and wheat down around 2-3 cents and corn up one to down three. Crude oil is also lower.
Beans have added more than a dollar a bushel, or 11%, since the middle of December. Corn has put on almost 13% and CBOT wheat posting gains in excess of 12% during the same timeframe.
Fundamental reasons for the latter are particularly difficult to find.
Some reports filtering through today suggest a wetter outlook for South America next week. That should be sufficient to encourage some profit-taking after what has been 12 consecutive sessions of almost constant rises.
European jitters are also back on the table.
The USDA are out next week with their revised supply and demand estimates. Doubtless they will reduce their Argy corn production number from the existing 29 MMT, closer to the 24-25 MMT level that the trade already has factored in. Even so that would still be a record crop.
For Brazilian corn the USDA are currently at 61 MMT and the trade is estimating more like 59 MMT. That would also still be a record.
For beans they are currently saying 75 MMT for Brazil and 52 MMT for Argentina. The trade is thinking more like 72 MMT and 49 MMT respectively. Both would be the second highest on record.
Not surprising then that this rally is being seen as a selling opportunity by some producers who'd spent September through to mid-December fretting as the watched prices steadily decline.
Next month will see the USDA's annual outlook forum, at which we get the first tentative clues on their ideas on US farmers' spring planting intentions. Corn sowings are already predicted to be the highest since WWII. Soybean and wheat plantings are also seen higher as land comes out of the US Conservation Reserve Program.
US ethanol output meanwhile has been setting a succession of record weekly production levels at the end of 2011 as blenders there milked the tax credit for all it was worth. It will be interesting to see the January data now that they no longer have that particular benefit.
Early calls for this afternoon's CBOT session: corn flat to up 1 cent, wheat down 2-3 cents, beans down 3-5 cents.
Nurse!
04/01/12 -- A morning that started off quietly and slowly now sees front month Jan 12 London wheat down the very same GBP3.05/tonne it was up yesterday and with Jan 12 Paris wheat currently losing EUR4.00/tonne.
So what's made the wheels fall of this one? A German Bund auction found "muted but adequate demand" say Reuters. Which has doubtless served as a timely reminder that the European debt problems have most certainly not gone away.
All eyes will now be on how well, or otherwise, France's EUR7-8 billion offering tomorrow will be received. After that Spain and Italy are both set to hold their first bond auctions of 2012 next week.
The pound is up to 1.2020 against the euro, it's best in a year.
Elsewhere some reports I am reading are suggesting that the GFS model is "turning much wetter" for Argentina next week. We shall see...
EU Rapemeal Prices
04/01/12 -- Latest guide prices for EU rapemeal today, basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:
| Jan12 | 194.00 | +4.00 |
| Feb12 | 183.00 | +5.00 |
| Mar/Apr12 | 179.00 | +4.00 |
| May/Jul12 | 174.00 | +5.00 |
| Aug/Oct12 | 158.00 | +3.00 |
| Nov12/Jan13 | 161.00 | +3.00 |
| Feb/Apr13 | 1562.00 | +3.00 |
The Early Vibe
04/01/12 -- We've seen some fairly dramatic price increases in the grains sector in the past couple of weeks on the back of this South American weather scare. The question I am interested in is just how justified are they?
Despite downgrading their Argy corn crop production estimate to 24.5 MMT yesterday, Cropcast's forecast is still an all-time record.
Brazil's grain association Abiove still peg the country's soybean crop higher than last year at 74.6 MMT, whilst Celeres go a million tonnes higher than that.
Meanwhile wheat is going up "just because" on the back of rising corn despite the lack of a bullish storyline of it's own and ending stocks estimated within less than 2 MMT of the highest on record at the end of 2011/12.
Kansas winter wheat is now rated 53% good to excellent from 47% a month ago and conditions in Oklahoma in the top two categories have jumped to 63% from 56% in late November, according to the USDA yesterday.
If there REALLY is a crisis then I'm struggling to see it right now.
That's not to say that the South American situation won't get worse, but prices where they are aren't perhaps really justified at this exact moment in time.
Meanwhile it remains to be seen how US domestic demand for corn holds up now that the ethanol blenders' tax credit has expired and the duty on imports has been lifted.
On top of that there's the not insignificant matter of the Eurozone debt crisis which the market seems to have almost forgotten about.
Jan Paris malting barley and corn expire tomorrow and Jan milling wheat next Tuesday, followed by Jan soy complex contracts next Friday. Sandwiched in amongst that are weekly export sales from the USDA on Friday (and next Thursday) plus the USDA's WASDE also next Thursday.
Chicago Close
03/01/12 -- Soybeans: Jan 12 Soybeans closed at USD12.18 1/4, up 19 3/4 cents; Mar 12 Soybeans closed at USD12.27 1/2, up 19 3/4 cents; Jan 12 Soybean Meal closed at USD315.80, up USD6.40; Jan 12 Soybean Oil closed at 52.80, up 71 points. A hot and dry long weekend in South America saw beans close at two month highs, even if they were closer to the lows of the day rather than the highs at the end of play. Cropcast lowered its Argentine soybean production estimate by 1.6 MMT to 49.8 MMT which is 2.2 MMT lower than the latest USDA figure. Crude oil was sharply higher which also lent support.
Corn: Mar 12 Corn closed at USD6.58 1/2, up 12 cents; May 12 Corn closed at USD6.67, up 12 1/4 cents. Funds were said to have bought 13,000 contracts on the day enthused by the drought in parts of South America. New Year, new money is what they say. Cropcast cut its forecast for Argentine corn production by 3 MMT to 24.5 MMT, 5.5 MMT lower than the USDA, but even so still a record volume. The next significant rain event on the forecasts for Argentina is around 10 days away and the trade is getting jittery that this is still the case.
Wheat: Mar 12 CBOT Wheat closed at USD6.57, up 4 1/4 cents; Mar 12 KCBT Wheat closed at USD7.12 1/2, down 4 1/2 cents; Mar 12 MGEX Wheat closed at USD8.44 1/4, down 5 1/4 cents. Despite closing higher wheat was also far closer to being at the lows of the day rather than the highs. Funds were said to have bought around 2,000 CBOT contracts on the day on spillover support from corn. Outside markets also helped as did a weaker US dollar.
EU Wheat Maintains Upwards Trajectory
03/01/12 -- EU grains extended their recent gains with Jan 12 London wheat climbing GBP3.05/tonne to GBP155.30/tonne, Jan 12 Paris wheat rising EUR2.50/tonne to EUR209.00/tonne.
The rest of the EU grains complex also posted strong gains with corn and rapeseed both up EUR6.75/tonne nearby.
For London wheat this was the straight sixth up day during which time it has risen GBP10.80/tonne, or 7.5 percent. Paris wheat has now been up for 11 of the past fourteen sessions and has now risen 17 percent since the last day of November.
It's not particularly demand for wheat, or even damage to developing wheat, that is behind this rally. It's the developing drought in South America damaging corn and soybean production there.
The trade is now talking a Brazilian soybean crop some 3 MMT or so below the current USDA estimate and a Argentine one of around 4 MMT less than the USDA predict. Corn production potential in the latter is thought to be as much as 6 MMT lower than the USDA's 29 MMT estimate.
Even so losses of this kind of magnitude are hardly critical. A 23 MMT Argentine corn crop would still be only 0.3 MMT away from being the highest in history.
What is more important right now is how does the trade perceive these losses, and if they will be the catalyst to encourage fund money back into the grains sector in the New Year we now find ourselves in.
EU Wheat Starts 2012 On The Offensive
02/01/12 -- You can say what you like about the French, and I usually do, but our Gallic mates across the Channel dragged their sorry backsides into work today unlike much of the rest of Europe and the US.
Paris grains started 2012 where they left 2011, on the offensive, with Jan 12 Paris wheat rising EUR4.00/tonne to EUR206.50/tonne. Corn, rapeseed and malting barley futures also posted solid gains of around EUR3-4/tonne to kick off the New Year.
It was thin trade with much of the rest of the world taking a day off, but Jan 12 Paris wheat pushed on to post its highest close since September.
Parts of Brazil got rain over the festive period, although not enough for soil moisture deficits to fully recover. Meanwhile Argentina, where around 20% of the soybean and corn crops were still to be planted as of last week, remained dry.
As well as having a dry weekend, temperatures in Argentina were said to have been above to well above normal, particularly in western growing areas with highs across the country ranging from 32-39C.
A strong short wave trough offers the best chance for some moisture relief, but that doesn't show up until early next week.
Closer to home, weekend rain and snow across much of western and central Europe will have helped replenish soil moisture for winter wheat, although parts of Hungary and Romania and much of Ukraine are still dry.
