Nogger's Blog

EU Rapemeal Prices

07/02/13 -- Rapemeal prices on the continent are mostly lower today, in line with a slump in soymeal values in Chicago last night and again this morning. Nearby availability remains tight.

Guide prices, basis FOB Lower Rhine in euros/metric tonne, with change from previous session:

Chicago Closing Comments - Wednesday

06/02/13 -- Soycomplex: Mar 13 Soybeans closed at USD14.87 1/2, down 8 cents; May 13 Soybeans closed at USD14.77 1/4, down 8 1/2 cents; Mar 13 Soybean Meal closed at USD437.10, down USD1.40; Mar 13 Soybean Oil closed at 52.45, down 53 points. Fund selling in beans was estimated at a net 3,000 contracts on the day. The market seems reluctant to break through USD15/bu ahead of Friday's USDA report, having put in a half-hearted effort to break through this level a couple of times this week and failed. Production prospects in Brazil are holding steady, or even increasing in some cases, although estimates for output in Argentina are falling. "Argentina weather remains threatening for corn and soybeans with ongoing heat and dryness. Maximum temperatures are predicted above 90 F, starting Friday and continuing through next week with hardly any rainfall. Drought has intensified in top farm provinces Buenos Aires and eastern Cordoba with only 10-40% of normal rainfall over the past month. Shallow-rooted crops, planted into wet fields, are in jeopardy," said Martell Crop Projections. Lanworth Inc estimated the Brazilian soybean crop at 80.3 MMT versus a previous estimate of 80.9 MMT. They placed Argentine output at 51.6 MMT compared to a previous estimate of 53.1 MMT. Michael Cordonnier estimated the Brazilian bean crop at 81.0 MMT, unchanged from previous estimate. He pegged the Argentine bean crop at 51.0 MMT, down 1 MMT from his previous estimate. CONAB comes out tomorrow with their Brazilian crop estimates, their previous estimates were for a bean crop estimated at 82.68 MMT and 2012/13 bean exports of 36.4 MMT (versus 82.5 MMT and 38.4 MMT from the USDA in January). Estimates for tomorrow's weekly export sales report for beans are a robust 800 TMT to 1.3 MMT. Chinese New Year starts this weekend, so some of next week's demand may get brought forward, with next week expected to be quiet.

Corn: Mar 13 Corn closed at USD7.22 1/2, down 6 1/2 cents; May 13 Corn closed at USD7.24, down 6 3/4 cents. Funds were said to have been net sellers of around 5,000 corn contracts on the day. The weekly ethanol production data disappointed, but maybe didn't surprise, with output up only marginally from last week's low of 770,000 barrels/day to 774,000 bpd. This is well under the level required to hit the USDA's demand target from this sector. With 37 US ethanol production plants currently closed the USDA may decide to reduce that target slightly on Friday, although there is some talk of margins having improved a little in the last couple of weeks. Michael Cordonnier forecast the Brazilian corn crop at 70.0 MMT and the Argentine corn crop at 22.5 MMT, both are unchanged from his previous estimates and below the USDA's 71 MMT and 28 MMT respectively. Lanworth Inc placed the Brazilian corn crop at 75.6 MMT versus a previous estimate of 75.8 MMT. In Argentina they went 25.1 MMT versus a previous estimate of 25.6 MMT. They also released tentative early projections for US corn yields and production in 2013/14, going for 155.6 bu/acre and a crop of 13.8 billion bushels. These would represent increases of 26% and 28% respectively if achieved. CONAB release their February Brazilian production estimates tomorrow. Last month they estimated the corn crop at 72.19 MMT and exports at 15.0 MMT. Estimates for tomorrow's weekly export sales are a modest 150-400,000 MT

Wheat: Mar 13 CBOT Wheat closed at USD7.61 1/2, up 4 cents; Mar 13 KCBT Wheat closed at USD8.09 3/4, up 2 1/2 cents; Mar 13 MGEX Wheat closed at USD8.44 3/4, up 3 cents. Wheat garnered support from talk that Russia may have already bought US wheat under the table. Even if they have it is only likely to be the odd cargo or two of high quality milling wheat. If they were to show up in tomorrow's or next week's weekly export sales report it would be interesting. Estimates for tomorrow are 200-500,000 MT. Old crop wheat sales need to be around 490 TMT/week to reach the USDA's target for this marketing year. Lanworth Inc estimated the US wheat crop in 2013/14 at 1.932 billion bushels versus a previous estimate of 1.941 billion. That's 52.6 MMT in English money and would represent a decline of 15% on the USDA's estimate of production in 2012/13. The USDA haven't yet put a figure on production this year, but the Congressional Budget Office released their 2013 US baseline projections today (made in October/ November). Back then they were forecasting a 2013/14 US wheat crop of 2.2 billion bushels, which is just under 60 MMT. Crop conditions have deteriorated markedly since then. MDA CropCast say that the 31-60 day outlook is trending warmer and drier, so there may not be too much improvement in sight for winter wheat. "The continued drier pattern across the Plains and western Midwest will maintain notable moisture shortages there, which will stress wheat as the crop greens up," they said.

EU Wheat Lower Despite Russian Import Duty Waiver

06/02/13 -- EU wheat futures closed mixed but lower with Mar 13 London wheat down GBP1.50/tonne to GBP210.50/tonne, benchmark May 13 falling GBP1.50/tonne to GBP212.50/tonne and new crop Nov 13 GBP1.45/tonne weaker at GBP188.30/tonne. Mar 13 Paris wheat fell EUR0.25/tonne to EUR246.00/tonne.

Confirmation that Russia had decided to remove it's 5% import duty on grains only made minor ripples when it was revealed that the action could take until April to implement and that the volumes concerned weren't likely to be very large. Most of what they require will continue to come via an existing duty-free agreement in place with neighbouring Kazakhstan it would seem.

The Russians sold another 60 TMT of their intervention stocks today, in their second tender of the week. That brings the total volume sold so far to 1.684 MMT. They've authorised the release of government-owned intervention stocks at the rate of around 130 TMT/week for the remainder of the season, which should effectively clear them out by harvest time. Total grain stocks at the end of the season are estimated at 7.7 MMT, including those held in commercial and private hands, which is far less than the 19 MMT left over at the end of 2011/12.

Even so, it looks like Russia may just scrape through to the next marketing year with only minimal imports. Production potential for 2013/14 will obviously want monitoring closely.

Ukraine said that it has exported 16.5 MMT of grains to the end of January, with the Ministry cutting their full season export forecast from 23.2 MMT to 21.0 MMT. January exports were 1.9 MMT, of which only 175,500 MT was wheat, with the vast majority of what is left to ship now being corn (accounting for 1.5 MMT of exports last month).

In Europe "Winter weather conditions have vacillated from unseasonably warm to cold calling into question the hardiness of winter grains. Nueremburg, Germany, recorded a 29 degree F temperature swing, from 51 F Christmas Eve to 22 F four weeks later in mid January," say Martell Crop Projections.

"Winter temperatures have been mostly moderate in the 3 top winter wheat producing countries France, Germany and United Kingdom. As long as bitterly cold weather does not develop (that would be zero F), winter grains should be safe from freeze damage. The bigger worry may be is persistently wet field conditions in winter wheat in United Kingdom and northern France," they add.

Agritel also noted that excessive wetness in many parts of France is a problem for winter wheat and rapeseed.

In the US the updated forecast is suddenly drier in hard red winter wheat areas. "The High Plains would receive spotty and light rain, at best, while central Kansas and Oklahoma get .10 to .50 inch rains. This is a major change from yesterday’s forecast that was very wet in the top 2 wheat states Kansas and Oklahoma. Springlike temperatures occurred yesterday in Southern Plains wheat, with low-mid 60s F, as warm and dry air streamed northward out of the Mexico desert. Perhaps there will be another rain event next week. The 6-10 forecast gives the Great Plains a 40-50% chance of showers, not terribly promising for drought relief," report Martell Crop Projections.

Following their own disappointing crop, and similar problems in neighbouring Argentina, the Brazilian government announced that they would exempt 1 MMT of wheat from outside of the Mercosur trade block from import tariffs between April and July.

The trade remains locked into a cautious mode ahead of Friday's USDA WASDE report. As far as wheat goes the trade is expecting maybe reduced export potential from the US, although that could at least partially be balanced by increased feed usage. Ending stocks there are forecast to rise, but only slightly, to around 728 million bushels (19.8 MMT from 19.5 MMT last month). World ending stocks are expected to fall from 176.64 MMT to 175.54 MMT, which would be 10% down on 2011/12 stocks of 195.78 MMT.

Syria announced a new tender for 100 TMT of wheat for March/May shipment. Black Sea origin was said to have won the business last time. The deadline for bids is March 4th so there's a good bit of time yet before we know the results of that tender.

Russia Latest: Another Non Event

06/02/13 -- The Russians have agreed to lift their 5% import duty on grains it would finally appear, although as ever things aren't quite as straightforward as they might seem.

Namely, the move needs regulatory approval, which could take a couple of months to sort out. Neighbouring Kazakhstan is already able to export wheat to Russia duty-free under the rules of a Customs Union launched in January 2010 between Russia, Kazakhstan and Belarus which effectively removed customs controls from the internal borders of all three.

Essentially it would seem that Kazakhstan will at the very least continue to supply whatever Russia's import needs will be until at least April, keeping the potential impact in Europe and beyond relatively minimal. It may at least make Kazakhstan less of a competitor on the global export market between now and the autumn. Having said that, India would appear to be more than capable and only too willing to take up any slack.

EU Rapemeal Prices

06/02/13 -- Rapemeal prices on the continent are firmer again, extending their recent bullish run although most gains in Chicago soymeal values last night have been subsequently eroded in overnight trade.

Latest guide prices for EU rapemeal today, basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:

Confusion: Read All About It

06/02/13 -- Various news reports started to emerge late yesterday afternoon that Russia had after all lifted the 5% import duty on grains, although official confirmation of this still seems to be lacking this morning.

What we do know is that the Minister of Agriculture is currently forecasting grain stocks in Russia to fall to 7.7 MMT by the end of the current season. Whether that total includes any provision for further grain imports between now and then is unclear.

This figure of 7.7 MMT does seem to stack up alongside 2012 grain production, plus carry-in, minus domestic consumption and exports. Whether that is enough of a comfort zone is another matter.

Agritel say that "the authorities estimate that 10 MMT of stocks are necessary in order to secure the end of campaign transition period." Clearly 7.7 MMT is below that threshold, causing Russia's discomfort.

The HGCA meanwhile say this morning that the import tariff HAS been lifted and that 2012/13 ending stocks of 7.7 MMT are "above the USDA’s estimate of 5.60 MMT but the lowest since 2007/8." Although they seem to be getting slightly confused between grain ending stocks and wheat ending stocks.

Elsewhere I read that "grain closing stocks could hit 7.7 million tonnes by July vs. the current USDA estimate of 10.50 million tonnes." Exactly where the figure of 10.5 MMT comes from is unclear. The USDA's own Jan WASDE report places Russian wheat ending stocks at 5.6 MMT and coarse grain stocks at 1.2 MMT.

We do know that the Russians have sold off around 1.6 MMT of intervention stocks between late October, when sales began, and now. They say that they were sitting on 3.3 MMT worth of intervention stocks in late January, and that they expect to sell around 3 MMT of these before the end of the season. They should certainly have little trouble doing that as they've just announced that as from next week they will also begin selling in other parts of European Russia (sales thus far have almost exclusively been in Siberia and the Urals).

What most people do seem to agree on is that even if they have, or do, lift the import tariff then it won't suddenly mean that Russia suddenly become a huge importer of grain. A 5% import duty surely doesn't make that much difference between minimal and large-scale imports? Watch this space.

In other news, cheap as chips India have apparently received a top bid of USD312/tonne in a tender to sell 35,000 MT of wheat by March 10 from the eastern port of Vizag, along with a best bid of USD312.20/tonne in s separate tender to sell 55,000 MT of wheat, also for shipment by March 10, from the eastern port of Karaikal.

Chicago Soybeans Rise, Corn And Wheat Fall Again

05/02/13 -- Soycomplex: Mar 13 Soybeans closed at USD14.95 1/2, up 6 3/4 cents; May 13 Soybeans closed at USD14.85 3/4, up 5 1/2 cents; Mar 13 Soybean Meal closed at USD438.50, up USD4.20; Mar 13 Soybean Oil closed at 52.98, down 13 points. Funds were said to have ended as net buyers of around 1,000 soybean contracts on the day. A tentatively wetter outlook for Argentina a week from now kept a lid on potential price rises. Mar 13 beans had another attempt at reaching USD15/bu but failed. Aboive estimated Brazil’s 2013 soybean crop at 82.3 MMT versus their previous estimate of 81.6 MMT. Ahead of Friday's USDA report the average trade estimate for Brazilian soybean production this year is 83.1 MMT from within a range of estimates of 81.5-84.0 MMT. The January USDA estimate was 82.5 MMT and last year's crop was 66.5 MMT. Argentina's soybean crop is estimated at an average 53.0 MMT out of a range of estimates of 51.0-55.7 MMT. The USDA's previous estimate was 54.0 MMT and the 2011/12 crop was 40.1 MMT. The trade is also anticipating a likely reduction to US 2012/13 ending stocks of 6 million bushels to 129 million, given the strong pace of exports and robust domestic crush.

Corn: Mar 13 Corn closed at USD7.29, down 5 1/4 cents; May 13 Corn closed at USD7.30 3/4, down 5 1/2 cents. Fund selling was estimated at around a net 7,000 contracts on the day. The demand side of the coin for US corn isn't anything like as rosy as it is for soybeans. Export sales continue to disappoint and ethanol plants are closing on a weekly basis. Brazil remain an aggressive exporter of corn at prices around USD15-20/tonne below those from the US. The average trade estimate for the Brazilian 2012/13 corn crop on Friday is 71.1 MMT, from within a range of estimates of 69.75–73.0 MMT. The USDA's January estimate was 71.0 MMT and the 2011/12 crop was 73.0 MMT. Argentina's crop is seen being reduced from last month's 28.0 MMT to an average 26.6 MMT, from within a range of estimates of 25.0-28.0 MMT and the 2011/12 crop of 21.0 MMT. Stats Canada's estimated corn stocks on Dec 31st there up 9.8% from a year ago at 10.365 MMT. The US Energy Dept will issue their weekly ethanol production data tomorrow. Last week's output was only 770,000 barrels/day - a new lowest weekly total since they starting issuing data in mid-2010. The trade is expecting only a relatively modest rise in US 2012/13 corn ending stocks to 615 million bushels in Friday's report. Last month's forecast was 602 million bushels.

Wheat: Mar 13 CBOT Wheat closed at USD7.57 1/2, down 5 1/2 cents; Mar 13 KCBT Wheat closed at USD8.07 1/4, down 9 3/4 cents; Mar 13 MGEX Wheat closed at USD8.41 3/4, down 5 1/4 cents. Fund selling was estimated at a net 2,000 Chicago wheat contracts on the day. Acute dryness for winter wheat on the Great Plains may finally be in for a break. "The Southern Great Plains may receive heavy rainfall on the weekend that boosts wheat development. The southern jet stream is making a new appearance, after a prolonged absence, improving chances for significant rainfall. Rainfall would be heaviest in Kansas, the top US wheat state, with 0.50-0.75 inch of rainfall in the western half of the wheat belt, and 0.75–1.25 inches in central Kansas. Oklahoma is also is slated to receive soaking rains from 0.50 to 1 inch. One inch of rainfall would go a long way, cutting the soil moisture deficit in half to 1.1 inches, compared to 2 inches presently," said Martell Crop Projections. A decline in US wheat exports may see the USDA raise 2012/13 US ending stocks on Friday to 728 million bushels, from within a range of trade estimates of 706-783 million and the USDA's January estimate of 716 million.

EU Wheat Down But Off The Lows

05/02/13 -- EU wheat futures closed mostly lower with Mar 13 down GBP0.50/tonne at GBP212.00/tonne, benchmark May 13 also down GBP0.50/tonne at GBP214.00/tonne and new crop Nov 13 GBP0.25/tonne lower at GBP189.75/tonne. Mar 13 Paris wheat was EUR1.25/tonne lower at EUR246.25/tonne. May and Nov London wheat did at least close a pound or two up off the lows of the day, whilst Mar Paris wheat was a couple of euros off the intra-day low.

After a brief one day respite, the pound was back under the cosh again, falling close to the 1.15 level against the euro in late trade. The recent strength of the euro has really knocked EU wheat prices despite exports themselves running well ahead of last season. US dollar strength also seems to be harming America's export hopes, with many expecting the USDA to revise downwards their projections for US wheat sales this season in Friday's WASDE report, with an at least partially corresponding jump in ending stocks.

Monday's weekly export inspections of only 15.206 million bushels were another setback for a US wheat market aiming to export 29.5 MMT in 2012/13. To do that they need exports in excess of 26 million bushels, and time is running out with the US wheat marketing year ending in May. Egypt's weekend purchase of just one cargo of US wheat offered little encouragement. Aside from a couple of tenders in the pending tray until the middle of the month from Jordan and Iraq there's little foreign interest around for America to get it's teeth into. India meanwhile seem to have opened up their own new discount store to fill the void left by Ukraine and Russia.

There are reports of an Indian delegation being sent to Australia to investigate better ways of storing/handling wheat to improve quality and efficiency and thereby open up a wider export market for themselves, embracing this new found way of earning dollars.

Funds also seem to have lost their confidence in grains, at least for the time being. Maybe the recent gains in equities around the world are proving more enticing? Whatever the reason, Friday's Commitment of Trader's Report showed trend-following funds holding a net short position of 50,125 CBOT wheat contracts, up 3,667 lots on the week through to last Tuesday night. Maybe the size of that short itself could offer a glimmer of hope for the bulls? Only time will tell.

It's not like there isn't any supportive news out there though. For one, America's own wheat crop for the coming 2013 harvest is looking in a very shabby state.

For two, unconfirmed reports circulating late in the day suggested that Russia had indeed decided to suspend it's 5% import tax on grains, although before everyone gets too excited their Ag Ministry said that they only expect the country to import a relatively modest 800 TMT of grains in the Jan/Jun 2013 period. That would take their 2012/13 marketing year total to around 1.2-1.3 MMT. The Ministry did confirm that they'd sold another 60 TMT of grains in their weekly intervention sale, bringing the marketing year-to-date total to 1.624 MMT so far. They expect that to reach 3 MMT by the end of the season.

Sales thus far have largely been confined to Siberia and the Urals, but these will apparently be extended into the European part of Russia next week to attempt to keep a lid on surging domestic food prices. It seems highly likely that at the very least Russia will have only minimal carryover stocks going into the 2013 harvest, although for the time being they say that they are confident of a rebound in production to around the 95.0 MMT mark, up 34% versus 70.7 MMT in 2012/13. Even so, some of that extra production will be wanted to replenish minimal domestic stockpiles.

Meanwhile, Stats Canada released their Dec 31 stocks numbers today, pegging all wheat inventories at 20.7 MMT, down slightly from 20.83 MMT a year previously and some 1 MMT below the average trade estimate. Also coming in lower than anticipated were barley stocks of 5.1 MMT (versus the 5.3 MMT expected and 5.5 MMT at the end of 2011) and canola stocks at a 6-year low of 7.4 MMT (versus 7.5 MMT expected and 9.7 MMT at the end of 2011).

On a more negative note, Ukraine announced that they'd exported 16 MMT of grains in the July/January period, up 46% on a year previously. That total included 7.8 MMT of corn, 6.0 MMT of wheat and 2.0 MMT of barley. They are also confident of a sharp recovery in grain and oilseed production in 2013/14 and would normally be expected to "hit the ground running" with regards to exports as early in the season as possible.

"Fairly widespread rain and snow last week further improved soil moisture in most (Middle Eastern) areas, which will favour the wheat crop," said MDA CropCast. In North Africa "heavy rains are expected in far northern Algeria and far northwestern Tunisia this week, which will likely lead to some areas of wetness. Dryness will remain a concern across southwestern Morocco, but some minor improvement is expected in central Tunisia," they add.