Chicago Close - Soybeans The Leader
24/08/12 -- Soycomplex: Sep 12 Soybeans closed at USD17.37 1/2, up 10 1/4 cents; Nov 12 Soybeans closed at USD17.31 1/2, up 16 1/2 cents; Sep 12 Soybean Meal closed at USD533.40, up USD5.60; Sep 12 Soybean Oil closed at 56.24, up 12 points. Funds fancied adding to their length heading into the weekend and were said to have been net buyers of around 6,000 contracts on the day. For the week, Sep 12 beans were 66 1/2 cents higher, with Nov 12 beans up 85 3/4 cents. Sep 12 meal added USD10.70 ans Sep 12 oil 313 points. Taiwan bought three cargoes totalling 173,000 MT of US and Brazilian soybeans for November, March and July shipment. The IGC yesterday pegged world soybean production at 255 MMT in 2012/13, around 5.5 MMT lower than the USDA's current estimate. Brazil will produce 76 MMT, they said, which is 5 MMT less than the USDA said earlier this month, although more than 10 MMT up on this year's drought reduced crop. After the close the Pro Farmer Crop Tour placed 2012 US soybean yields at 34.8 bu/acre, with production at 2.6 billion bushels. Both numbers are around 3.5% down on the USDA's yield of 36.1 bpa and a production number of 2.692 billion bushels issued a fortnight ago, and according to them crop conditions have improved slightly since then. China will auction off another 400,000 MT of government-owned soybeans in the coming week in an attempt to cap domestic price rises. Market rumour suggests that China bought over 1.0 MMT of US beans this week.
Corn: Sep 12 Corn closed at USD8.02 1/4, down 6 1/2 cents; Dec 12 Corn closed at USD8.08 1/2, down 6 1/4 cents. For the week that places Sep 12 corn 4 cents higher, with Dec 12 up just 1 1/4 cents. Unlike soybeans, corn seems to be struggling to add to the upside, with funds net sellers of an estimated 7-8,000 corn contracts on the day. Based on tonight's close new crop Dec 12 corn is only 3 1/4 cents higher on the month of August than it began it, whilst new crop Nov 12 beans have shown a net gain of 90 1/2 cents. Weekly US corn exports remain sluggish at these levels, whilst soybean exports are robust, seemingly almost unaffected by price. US corn faces competition on the export arena from the likes of Brazil, and also soon from what will be a newly harvested Black Sea corn crop, whilst for soybeans the US has the market more or less to itself. The IGC pegged Ukraine's 2012 corn crop at 20 MMT, a little below the USDA's 21 MMT and 21.2 MMT from MDA CropCast. Ukraine, Brazil and Argentina are expected to export around 43 MMT of corn between them in 2012/13, almost 10 MMT more than the US who are projected to have their lowest export volume since 1985/86 in the coming season. The Pro Farmer Crop Tour wound up by giving us a final projected US corn yield of 120.25 bu/acre after the close, with production set at 10.478 billion bushels, some 2.8% lower than the current USDA estimate. In English money that's an output of just over 266 MMT, some 9 MMT less than the IGC's estimate of 275 MMT released yesterday.
Wheat: Sep 12 CBOT Wheat closed at USD8.67 1/2, down 7 cents; Sep 12 KCBT Wheat closed at USD8.76 1/4, down 6 3/4 cents; Sep 12 MGEX Wheat closed at USD9.18 1/2, down 2 cents. On the week Chicago wheat was 7 cents lower, with Kansas wheat down 9 1/4 cents and Minneapolis 9 cents easier. Funds were said to have been net sellers of around 3,000 CBOT wheat contracts on the day. HRW wheat farms in Kansas and Oklahoma are expecting good rains over the coming days that should improve field moisture for seeding. "Statistics Canada projected a record large 2012 Canadian wheat harvest this week, due largely to a 9.7% increase in plantings," said Martell Crop Projections. Similar to here in Europe, crop conditions look variable. "Excessive wetness in Saskatchewan, the top wheat province, is a threat to grain quality and yields. Since April 1, west central Saskatchewan has received 150-200% of normal rainfall. Alberta growers meanwhile anticipate an excellent harvest. Conditions Aug 7, the most recent provincial crop report, were 88-89% good-excellent in spring wheat and canola. This is Canada’s largest canola province and second biggest wheat grower. Manitoba crops were adversely affected by extreme July heat in the flowering and grain filling stages. Spring wheat and canola quality was very good, but a smaller seed size is expected to reduce the yield," they add.
EU Wheat Consolidates Ahead Of Weekend
24/08/12 -- EU grains ended mixed, but mostly lower, with Nov 12 London wheat down GBP2.70/tonne to close at GBP203.70/tonne and with Nov 12 Paris wheat EUR3.75/tonne easier at EUR260.25/tonne.
For the week Nov 12 London wheat still added GBP3.45/tonne, although its Paris counterpart shed EUR2.50/tonne. That reflects UK wheat production estimates declining, whist those across the Channel are rising.
European jitters are starting to resurface, keeping traders nervous. The Greek Prime Minister met with German Chancellor Angela Merkel in Berlin today, apparently asking for more time than previously agreed to comply with economic reforms. He's due to fly into Paris tomorrow to plead his case further to French President Hollande.
Meanwhile there's continued talk that the Spanish government may be the next to formally ask the Eurozone for aid. Its ailing banking sector got a handout earlier in the summer, but the government themselves have thus far managed to dodge the bullets.
After the meteoric rise in wheat prices (and those of corn, soybeans and rapeseed too) over the past eight months there seem to be a few around, amongst the speculative fraternity at least, willing to bank a few profits at these lofty heights.
The HGCA said that this year's delayed UK wheat harvest is "on par with that of 2008." Adding that final yields and quality remain uncertain, tentatively placing the former in the 7.1-7.5 MT/ha range, significantly below the 5-year average of 7.8 MT/ha.
In contrast, winter barley yields are good and should beat the 5-year average of 6.3 MT/ha, they add.
On the continent, German trading house Toepfer said that the wheat crop there would come in at 22.8 MMT, very similar to last year's 22.7 MMT in 2011 and a little above the USDA's estimate of 22.5 MMT. Their figure is almost a million tonnes higher than that of the German Farmers' Associations 21.9 MMT released earlier in the week.
Toepfer were also bullish on rapeseed production potential, pegging the German crop almost 33% higher than last year at 5.16 MMT, with full EU-27 output forecast at 19.64 MMT, a 3% increase on last year. They estimate the UK rapeseed crop at 2.49 MMT, a 10% reduction on last year. The HGCA say that thanks to an increase in the planted area the UK rapeseed crop could still be sizeable, although oil contents appear to be lower this year.
Russia's wheat crop keeps shrinking as harvesting progresses into the Urals and Siberia. The IGC cut their Russian wheat production estimate 4 MMT to 41 MMT yesterday, a drop of around 27% on last year. Even so, that's still around 2 MMT higher than the likes of SovEcon (39 MMT) and MDA CropCast (39.3 MMT), suggesting that further reductions could still be on the cards next month.
The Morning Paper
24/08/12 -- The overnight electronic market is doing it's best to recover some of last night's losses I see, with beans 12-17 cents firmer, corn up 3-5 cents and wheat up a similar amount.
Toepfer have released some crop production estimates, pegging the EU-27 rapeseed crop at 19.64 MMT, which they make as being a 3% increase on last year (and more than 1 MMT higher than the USDA currently say). This is almost entirely due to a sharp rebound in German output to 5.16 MMT, up by almost a third on last year's 3.89 MMT, Last season's crop was a total bummer you will recall.
Interestingly their estimate is miles above the German Farmers' Association figure of only 4.4 MMT released earlier this week. Now far be it from me to suggest that the German equivalent of the NFU would be lie through their back teeth in the interest of their members, so I won't. Let's just say that their estimate is well below everybody else's.
Toepfer peg the UK rapeseed crop at 2.49 MMT, which would be over 10% down on last year's bumper harvest, and probably about right.
Elsewhere the French oilseed institute Cetiom say that the rapeseed crop there will exceed 5.45 MMT, a modest increase on last year's 5.37 MMT, and slightly above the USDA's 5.36 MMT and FranceAgriMer's 5.3 MMT.
Toepfer see Europe's fourth largest rapeseed producer, Poland, as seen having a crop of 1.85 MMT, about the same as last year and 200,000 MT above the USDA's estimate.
Toepfer also estimated Germany’s 2012 wheat crop at 22.8 MMT vs. 22.7 MMT in 2011 and the USDA's 22.5 MMT.
The results of the Pro Farmer Crop Tour are out this afternoon and may provide some market direction at the end of a week that hasn't had a great deal of fresh news. As ever whether the funds fancy trimming some of their longs, or adding to them, going into the weekend is likely to be the determining factor.
The European debt storm clouds seem to be gathering again, with France and Germany in particular showing signs of reaching the end of their tether with Greece. Citigroup yesterday said that there was a 90% of a Grexit within the next 12-18 months. Jesus, do we still have to wait that long for a resolution to this whole sorry mess?
This is still the number one factor that could cause a major market reversal in my humble opinion, if it ignites a major flight to safety, as I think it would.
Yes, I know about the Russian drought, the US drought, and all the other underlying and undeniably bullish market fundamentals. With those in place, and Greece, Spain, Italy and the rest all managing to keep their heads above water and fund money continuing to support the market then we could most certainly go higher than this. Even a lot higher.
However, a messy and disorderly Greek exit from the eurozone, and the risk of a very swift contagion effect would surely see a large scale fund withdrawal from anything deemed even the slightest bit risky. World stock markets would collapse, and the dollar would surge.
None of those things would be beneficial for the grain markets. Consider how many days do you read "Chicago soybeans closed 25 cents higher. Funds were net sellers of 10,000 contracts on the day." The answer is hardly ever. If funds are net sellers then the market goes down, regardless of the fundamentals. And likewise if they are net buyers.
Chicago Consolidates From Recent Gains
23/08/12 -- Soycomplex: Sep 12 Soybeans closed at USD17.27 1/4, down 20 3/4 cents; Nov 12 Soybeans closed at USD17.15, down 12 3/4 cents; Sep 12 Soybean Meal closed at USD527.80, down USD7.90; Sep 12 Soybean Oil closed at 56.12, down 5 points. Fund selling was said to have been around 7,000 contracts in soybeans on the day, enough to send the market tumbling following recent gains despite some decent fresh export sales business. The USDA reported the sale of 202 TMT of US beans to unknown along with 165 TMT to China, both for 2012/13 delivery. South Korea bought 110 TMT of US beans for Dec/Jan shipment and the USDA also reported the sale of 55 TMT of new crop US bean oil to China. All of those were on top of the usual weekly export sales report. That gave us sales of 132,900 MT for old crop and 585,800 MT for new crop beans, beating expectations for combined sales of 500-650 TMT. The 4th day of the Pro Farmer crop tour in Southern Minnesota found average bean pod counts of 1,003.7 pods in a 3 foot square area versus 1,124.3 pods a year ago and 1,115.9 pods for the 3-year average. That's a 10.7% reduction on last year versus the USDA's current projection that yields in the state will only decline by 1.3% this year.
Corn: Sep 12 Corn closed at USD8.08 3/4, down 21 1/2 cents; Dec 12 Corn closed at USD8.14 3/4, down 20 cents. Fund selling was estimated at 16,000 corn contracts on the day. Weekly export sales of 108,400 MT of old crop and 217,000 MT fell within the range of trade estimates for sales of a combined 200-350 TMT. The IGC estimated the 2012/13 global corn crop at 838 MMT versus their previous estimate of 864 MMT and 875 MMT last year. The US crop was estimated at 10.83 billion bushels versus their previous estimate of 11.81 billion although marginally above the USDA's current 10.78 billion. They did however also cut global corn consumption by 25 MMT, and raise world ending stocks for 2012/13 by 5 MMT from last month to 120 MMT, of which stocks amongst the major exporting nations were increased 8 MMT. This coming year will be the first time that we see a year-on-year fall in global corn consumption since 1993/94, they noted. "Exportable supplies in the US and Ukraine have tightened and, while the next crops in Brazil, Argentina and South Africa may be large, harvests are still several months away," they observed. The Pro Farmer crop tour in Southern Minnesota found average corn yield of 137.6 bpa versus 175.9 bpa a year ago and 182.2 bpa for the 3-year average. Final estimates from the tour are expected to be published tomorrow prior to the opening of the daytime open outcry CBOT session.
Wheat: Sep 12 CBOT Wheat closed at USD8.74 1/2, down 22 cents; Sep 12 KCBT Wheat closed at USD8.82 1/4, down 23 cents; Sep 12 MGEX Wheat closed at USD9.20 1/2, down 21 1/4 cents. Funds were said to have been net sellers of around 4,000 Chicago wheat contracts on the day. Weekly 2012/13 export sales of 468,800 MT (plus a further 6,000 MT for delivery in the 2013/14) were in line with trade estimates of 400-550 TMT. The IGC cut their world wheat production estimate by 3 MMT from last month to 662 MMT, some 34 MMT below last season’s record. World trade was also forecast to fall, by 13.3 MMT from last season’s record to 132.7 MMT. "Black Sea exporters have captured a high proportion of recent demand, but availabilities were soon expected to become short," they noted. Russia’s Ag Ministry said that the country has harvested 50.0 MMT of grains so far, of which 29.9 MMT is wheat with an average yield of 2.07 MT/ha, down 31.5% from a year ago. They cut their total grain harvest forecast to around 75 MMT. SovEcon suggest that even that is optimistic and estimate 70 MMT. A big rain event is in the forecast for the southern US Plains, ahead of wheat planting which is set to begin around a month from now. "The top US winter wheat states Kansas and Oklahoma are expecting heavy, soaking, rains with the updated forecast predicting 2-4 inches," say Martell Crop Projections.
EU Wheat Ends Mixed, Russian Output Marked Down Again
Russia’s Ag Ministry estimated their 2012 grain crop at 75 MMT versus a previous estimate of 75–80 MMT and 20% down on last year's 94.2 MMT in 2011.
That however is at the top end of private trade estimates. SovEcon predict a grain crop of 70 MMT, of which wheat will account for only 39 MMT, a more than 30% decrease on last year and less than the amount that sparked the 2010 export ban.
A Bloomberg survey predicts that Russia will run out of it's 2012/13 exportable surplus of 10-14 MMT by the end of November.
At home the HGCA said that the winter wheat harvest is 25% done with yields "currently ranging from 5.0-10.7 MT/ha, with no reports of exceptionally high yields." The quality of wheat samples harvested to date is poor, they added.
They peg the average UK yield at 7.1-7.5 MT/ha, which would suggest a final crop of around 14.2-15.0 MMT. Most in the trade are calling things closer to 14.0-14.5 MMT at best, some are suggesting output lower than 14.0 MMT.
For other crops the HGCA said that winter barley harvesting is 95% complete, with yields averaging 6.3-6.6 MT/ha, versus the 5-year average of 6.3 MT/ha. Spring barley is only 15% done, with very variable yields so far of 4.5–7.5 MT/ha.
The winter OSR harvest is 90% complete, with yields said to be holding up surprisingly well against the 5-year average of 3.4 MT/ha at 3.4-3.6 MT/ha.
Elsewhere the IGC came out with a revised world wheat production estimate of 662 MMT versus a previous estimate of 665 MMT. Consumption was seen unchanged at 679 MMT, trimming 2012/13 ending stocks 3 MMT to 180 MMT, the lowest since 2008/09.
World corn production was slashed for the second month in a row, this time by 26 MMT to 838 MMT. Consumption however was reduced by almost as much, 25 MMT, to 853 MMT. That marks the first year on year decline in world usage since 1993/94. With world trade seen declining, that actually raises ending stocks for 2012/13 by 5 MMT to 12 MMT.
The Lunchtime Byte
23/08/12 -- The overnight electronic market isn't doing a lot with beans 2 cents lower to 2 cents firmer. Corn is down 2-4 cents and wheat mostly a cent or so steadier.
SovEcon have cut their Russian grain crop estimate to 70 MMT, down 25.5% from last year. Wheat output is now estimated at just 39 MMT, some 30.6% lower than in 2011 and now less than the amount that sparked the 2010 export ban.
The Russian Ministry have capitulated somewhat and now say that the grain crop will be nearer to 75 MMT than the previously estimated 75-80 MMT.
Reuters report that the South Korean President has asked G20 leaders to "modify (their) biofuel policies to cushion supply shocks."
The Pro Farmer Crop Tour is now on day four, and in Illinois has found soybean counts of 944 pods per 3x3 foot area, down 21% from last year. That's in line with the USDA's forecast of yields down 21.3% in the state.
For corn they've found a yield potential of 121.6bpa, vs 156bpa last year although higher than the USDA's current 116bpa estimate for Illinois.
French wheat exports finished 2011/12 at 15.9 MMT, 19% down on 2010/11. Exports to non-EU destinations fell 35% to 8.4 MMT, according to customs data.
Data from DEFRA says that UK millers (including starch and ethanol producers) used 5.982 MMT of wheat in 2011/12, which is down 7.8% from the 6.491 MMT used in 2010/11.
The summer drought in Eastern Europe is causing low water in the Danube, disrupting grain movements out of Romania, Serbia and Hungary, according to the USDA attaché in Bucharest.
"Very heavy rainfall of 2-3 inches is predicted in hard red winter wheat in a new forecast from the National Weather Service Medium Range forecast team. A dose of heavy rainfall, 2-3 inches, would not cure drought in the Central Great Plains, but it would be a big help improving topsoil moisture for fall planting. Seeding in Kansas normally begins in late September, continuing to October 25. Oklahoma wheat is seeded 2-3 weeks later," say Martell Crop Projections.
Citigroup say that there's a 90% chance of a Greek eurozone exit in the next 12-18 months and it could be sooner: "conceivably even as early as September/October depending on the outcome of the September Troika report on Greece."
Chicago Posts Modest Correction
22/08/12 -- Soycomplex: Sep 12 Soybeans closed at USD17.48, down 5 1/4 cents; Nov 12 Soybeans closed at USD17.27 3/4, down 4 3/4 cents; Sep 12 Soybean Meal closed at USD535.70, down USD7.90; Sep 12 Soybean Oil closed at 56.17, up 60 points. Fund selling on beans was estimated at around 3-4,000 contracts on the day, most likely on profit-taking after recent rises. Fundamentally nothing much has changed. StatsCanada pegged rapeseed production there at 15.4 MMT, which was 1 MMT lower than the trade was expecting. Day three of the Pro Farmer Crop Tour found some better yield potential than the first two days. In Southwest Iowa they came up with a soybean pod count of 1,120.2 pods versus 1,128.1 pods a year ago and the 3-year average of 1,279.2 pods. That particular survey only took in a small number of fields though. In West central Iowa they found pod counts of only 555.2 versus 1,251.09 pods a year ago. A Reuters poll of 11 analysts estimated US soybean yields at an 8-year low of 36.6 bu/acre, half a bushel more than the USDA said earlier this month. Production was forecast at a 4-year low of 2.713 billion bushels, which is 21 million more than the USDA. Estimates for tomorrow's weekly export sales report for soybeans are 500-650 TMT.
Corn: Sep 12 Corn closed at USD8.30 1/4, down 1 cent; Dec 12 Corn closed at USD8.34 3/4, down 4 cents. Funds were estimated as net sellers of around 3-5,000 contracts on the day breaking a five day winning streak. The same Reuters poll as mentioned above estimated corn yields at 121.5 bpa, a 16-year low and 4.7 bpa beneath the USDA's latest forecast. Final US production this year was pegged at 10.5 billion bushels, an 8-year low and 279 million below the USDA. The Pro Farmer Crop Tour found an average corn yield of 145.5 bpa in Southwest Iowa versus 143.2 bpa a year ago and the 3-year average of 167.2 bpa. In West central Iowa though they came up with a shockingly low corn yield of just 89.39 bpa versus 172.64 bpa a year ago. The weekly ethanol grind showed an increase to 823,000 barrels per day from 819,000 bpd last week. StatsCanada pegged corn production there at 11.7 MMT, which is 1 MMT up on last year. Trade estimates for tomorrow's weekly export sales report are 200-350 TMT.
Wheat: Sep 12 CBOT Wheat closed at USD8.96 1/2, down 4 cents; Sep 12 KCBT Wheat closed at USD9.05 1/4, down 3 cents; Sep 12 MGEX Wheat closed at $9.41 3/4, down 3 cents. Funds were estimated to have been light sellers of 1-2,000 Chicago wheat contracts on the day. StatsCanada estimated wheat production there at 27.0 MMT, exactly what the trade was expecting and up almost 7% on last year. Tender activity has been fairly light so far this week. South Korea bought 18,700 MT of Canadian milling wheat for Nov/Dec shipment. Japan isn't issuing it's normal weekly tender. There are dryness concerns now developing in Western Australia. ANZ Banking Group said that if this dry weather persists into September then Western Australia’s 2012/13 wheat output could fall to 6.0 MMT compared to 11.6 MMT in 2011/12. Argentina's newly planted wheat crop has had plenty of moisture to get it going, with Buenos Aires already having had 8.7 inches of rain so far this month. Weekly export sales for tomorrow are estimated at 400-550 TMT.
EU Grains Closing Comments - Wednesday
22/08/12 -- EU grains ended mixed, Nov 12 London wheat was up GBP0.35/tonne to close at GBP206.85/tonne and Nov 12 Paris wheat EUR1.00/tonne lower at EUR266.75/tonne.
Nov 12 London wheat was higher for the seventh successive day on continued reports of serious yield and quality issues with this season's crop as the harvest progresses. There's talk of feed manufacturers having to lower their standards, albeit at a price, as far as minimum bushel weights are concerned this year.
There's also some debate as to where enough wheat of sufficient quality is going to come from to make delivery against futures sales, should that be what shorts were intending to do. There's also the inevitable discussion about grower defaults amongst those with a large percentage of their anticipated 2012 crop already sold should their yields fall well short of expectations.
May 12 London feed wheat is now more expensive than May 12 Paris milling wheat.
The German Farmers' Association (DBV) pegged the grain crop there at 43.8 MMT this year, up almost 5% on last year's harvest, largely thanks to increased barley production. Winter wheat production is seen at 21.0 MMT, with spring wheat output responsible for a further 0.9 MMT to give an all wheat crop of 21.9 MMT. That's 4% down on last year, 600 TMT lower than the USDA currently say and 1.5 MMT below last week's Strategie Grains estimate.
They said that "massive winterkill" reduced the winter wheat acreage by almost 9 percent, leading to a sharp increase in spring barley plantings, up 40 percent this year to 590,000 hectares. That helps bring the German 2012 barley crop in at an estimated 9.8 MMT, some 12% up on last year and 580 TMT more than the USDA currently suggest.
German rapeseed production this year will come in at 4.4 MMT, according to DBV. That marks an increase of 15% on an "extremely difficult" 2011 output, but is fully half a million tonnes less than the USDA forecast. Wet conditions in the autumn of 2011 hindered plantings, keeping the area sown down to around 1.3 million hectares. The quality of this year's crop is "good, sometimes very good" with oil contents of 40 to 46 percent, they add.
StatsCanada estimated the all wheat crop there at 27.0 MMT, exactly in line with the average trade idea, and the USDA, and up almost 7% on last year. Barley production is forecast higher than trade estimates at 9.5 MMT, which is up also 1 MMT more than the USDA predict and almost 22% higher than in 2011. This year's rapeseed crop was estimated 1 MMT below trade forecasts at 15.4 MMT, although still nearly 9% up on year ago levels.
