CBOT Closing Comments
Corn
Grain trading this week is like a yo-yo – up, down, up, down but all the grains have made new annual highs this week with cash remaining firm. Typically, that is not bearish action. Corn export sales were 658,734 MT this morning, and on the low end of trade estimates of 650,000 to 950,000. They were also low compared to last week’s sales of 1,023,400 MT. Bookings do appear to still be on pace with USDA projections for the year. The 8 month high in crude oil boosted commodity markets in general as Fund Managers are looking for investment areas believing the economy is recovering. Funds bought back at least 5000 contracts of the 15,000 thousand they sold on Wednesday. July corn finished at $4.48 ½, up 16 cents.
Soybeans
Soybeans made new weekly and annual highs today along with the Soybean Meal. Soybean Oil made new annual highs this week influenced by Goldman Sachs’ prediction that oil prices will reach $85 a barrel by the end of the year. The USDA currently forecasts the average price of crude oil to be $60.00 for 2009. Soybean net export sales were 36,558 MT considerably lower than the trade estimates of 200,000 to 450,000 MT, however, there are three more months in the marketing year and total commitments are already at 33.736 MT, basically at USDA’s export sales projection for this marketing year. Temperatures are forecasted to remain cooler and wetter than normal through the 19th of June which is favorable to soybeans that are planted and have emerged.
July soybeans closed at $12.30, up 48 cents.
Wheat
Wheat recovered some of yesterdays down move, supported by the uptrend line on all three exchanges and the lower dollar. Weather will be open for harvest in the southern plains over the next several days. Weekly export sales for all Wheat were 265,324 MT on the lower end of the trade estimates of 200,000 to 400,000 MT and compared to last week’s sales of 332,022 MT. May 31st ends the 2008/09 marketing year for all wheat. USDA projections were 1,010 million bushels (27.488 MMT) for 2008/09 export sales. There are a few days to add to the year, actual shipments to date have been only 25.625 MMT. This will be adjusted by shipments for the remaining days of May, and in July Census will adjust it for shipments that customs data measured but was not included in the USDA report. July CBOT wheat settled at $6.35 ¼, up 17 ¾ cents.
EU Wheat Rebounds
EU wheat futures rebounded from the last couple of days losses Thursday with Paris November milling wheat closing up EUR1.50 at EUR158.75/tonne, and London November feed wheat ending up GBP1.75 at GBP130.25/tonne.
Firmer crude oil and strength in the US grains helped wheat stage a come-back from declines earlier in the week.
Yields in eastern Europe are under threat from a combination of lower plantings, drought and reduced inputs.
There is also some suggestion that, faced with a lack of credit, many farmers have planted inferior home-sourced seed in the autumn which will also undoubtedly lead to decreases in output this year.
The large premium for November futures over the nears continues to discourage farmers from spot selling.
It's All Gone Sour For Dairy Farmers Of Britain
Milk co-op Dairy Farmers of Britain, with an estimated 10% of the UK market, is in receivership after months of speculation snd rumour that all was not well.
Exactly what the implications are for it's estimated 1,800-2,000 members so far seems to be unclear.
Who, if anyone, will pick up the milk tomorrow will be a question that many are asking. And what about the milk cheque? I think we probably know the answer to the last one.
Despite various efforts to keep it's head above water, it seems that losing the contract to supply fresh milk to The Co-operative Group, was one body blow too many.
In March the beleagured DFB asked it's members and former members to swap £70 million of their investment for shares worth a fraction of that, making each pound of investment worth one share with a face value of 10p.
Needless to say that didn't go down to well with it's members causing them to resign in their droves.
Argentine Wheat Plantings In A Stunningly Bad Way
If ever you needed some news to proof that tonight's losses on CBOT were overdone then this surely has to be it.
The Buenos Aires Cereals Exchange said in it's weekly crop report Wednesday that Argentine farmers will now only plant 3.2 million hectares of wheat in 2009.
To try and attempt to put that into perspective, get a grip on this:
That is half a million hectares less than they were forecasting just a week ago, and the figure then was the lowest on record.
This number is now almost half the area planted with wheat just two years ago.
The revised acreage now amounts to a 30.4% decrease on what was planted last year.
If you want any worse you can have it:
Soil moisture profiles are so poor that the final planted area could fall further the Exchange say. Well, if it can drop half a million hectares in a week then anything can happen.
Not only that, but the area planted so far amounts to just 420,000 hectares, slightly more than half of what was planted at this time last year, and little more than a third of what was seeded in 2007 at this time.
As well as the severe drought, which has now lasted almost eighteen months, lack of credit and political concerns are also behind the dramatic fall in plantings the Exchange say.
Food for thought: if Argentina only gets the same yield as last year, then they will be looking at a crop of less than 6 MMT in 2009. That's 10 MMT below their output just two years ago, and well below their domestic requirements, turning them from fifth largest exporter in the world to net importer in just two years!
CBOT Closing Comments
Wheat
CBOT July wheat closed down 52 cents at $6.17 1/2 a bushel, as funds cashed in profits selling an estimated 7,000 contracts following steep gains in May. There was no particular huge change to the fundamentals today, crude was weaker as were the global stock markets, but a sell-off got going triggering some sell-stops and next thing we end up 50+ cents lower. The weather outlook for the northern Plains and Canadian wheat belt if very cold with sub-zero temperatures for the rest of the week. News coming out of Argentina re wheat plantings is very bullish, and early yields in the US southern Plains are terrible. Hardly worthy of a 52 cent drop! Estimates for tomorrow’s weekly export sales report are 200,000 to 400,000 MT.
Soybeans
July soybeans closed at $11.82, down 27 cents. Beans got caught up in spillover weakness from wheat, crude oil and equities. Nothing new particularly happened today, but some longs decided to bank a few profits. The old crop picture is still exceptionally tight. Export sales estimates for tomorrow’s report are 200,000-450,000 MT. Even sales of that magnitude, which is low compared to the last ten week average, would leave us well ahead of the USDA projections. And we still have 13 weeks left to go before the end of the marketing year! Allendale estimated old crop ending stocks at 99 million bushels today, 31 million below the USDA's last estimate.
Corn
July corn finished at $4.32 ½, down 17 ¾ cents. Corn was weighed down by wheat, falling crude and a suddenly sharply firmer dollar. As with the other grains there was an element of profit-taking after recent gains and also some sell stops generating computer-driven selling. The weather outlook for the rest of the week isn't too conducive for corn planting with cold and wet being the main theme. Estimates for tomorrow’s export sales are 650,000 to 950,000 MT.
EU Wheat Ends Sharply Lower Wednesday
EU wheat futures closed sharply lower Wednesday in a corrective move from recent steep gains, and weaker outside markets.
London wheat had rallied around GBP15/tonne since mid-April, and it seems that it was time to bank a few profits.
Prices continued to rally late last week and into Monday, despite the pound and euro firming considerably against he dollar, which maybe got the markets a little out of sync.
Crude oil was sharply lower today, which also spilled over into the grains sector, as did falling equities.
Still, if farmers didn't want to sell today, they aren't going to want to sell tomorrow with November Paris milling wheat ending down EUR6.00 at EUR157.00/tonne, and London November feed wheat closing GBP4.25 lower at GBP128.50/tonne.
Sharply weaker US wheat futures late in the day pressured EU wheat to close at or near session lows.
US wheat had a bad day at the office, after moving up around 20% during May a bit of profit-taking was also overdue.
Still, weather problems in Canada, the northern US Plains and Argentina, to name but a few, point to potential crop losses down the road for wheat.
Very Cold Week In Store For Canada
Well below normal temperatures are persisting across the Canadian canola regions from Alberta to Manitoba, according to StormX. On Tuesday morning, frost was widespread in the Canadian Prairies. Environment Canada reported that 10 record lows were set in Alberta at that time. Near Calgary, temperatures dropped to 24ºF, about 20ºF below normal. To the east, in Saskatechewan, Regina hit 28ºF, where lows should be close to 50ºF at this time of year.
Dryness in Alberta and Saskatchewan presents a problem for canola growers, waiting for moisture to plant their crop, whilst conversely in southern Manitoba farmers are still waiting for their fields to dry out.
These same areas are also the main spring wheat growing regions of Canada, so there are potentially harmful implications for wheat too. This cold mass of air over Canada is also seen pushing well into the northern US too, affecting crops in North Dakota, Minnesota, Montana and Wisconsin.
Get the full StormX story here.
eCBOT Close, Early Call
The overnight grains closed lower on profit-taking following recent steep rises, and weaker crude oil. Wheat finished around 10-12 cents lower, with corn off 3-4 cents and beans 7-8 cents easier.
Crude is currently down 68 cents at $67.87/barrel, with talk the much of the recent rally has been contrary to supply and demand fundamentals. The US Energy dept will be out later this afternoon with their take on US inventories for last week.
Crude stocks are expected to decline 1.4 million barrels, although the American Petroleum Institute yesterday pegged the crop at only 828,000 barrels.
Cool and wet is the theme for Missouri, Illinois and Indiana over the next two weeks, according to Allen Motew of QT Weather. In addition, freezing conditions hit W Canada, Montana and North Dakota yesterday and then spread southeastward today, he says. This cold pool of air will remain over Canada during the next 10 days, with temperatures for the remainder of the week averaging -3 to -18 degrees F below normal across the Northern Plains and Western Corn Belt.
That could be a little bullish for wheat and corn, but bearish for new crop beans.
For old crop beans the tightness of the ending stocks is the primary concern. Coming up tomorrow we have the USDA's weekly export sales report, which will be scrutinised to see if old crop bean sales are now finally about to start falling away.
Next week we have the USDA's revised S&D and stocks data, although various trade estimates peg old crop ending stocks around the 100 million bushels or less level, it seems that nobody really expects the USDA themselves to peg it quite that low.
They are frequently slow to follow a shrinking (or increasing) market it seems, and coming out with a number around 100 or lower may be simply "too scary" for them to contemplate.
Wall Street is expected to open lower on ideas that the recent bullishness over economic recovery might have been overdone.
Early calls for this afternoon's CBOT session: July corn called 3 to 5 lower; July soybeans called 8 to 10 lower; July CBOT wheat called 10 to 12 lower.
Egypt Impounds More Wheat
No sooner has the spat between Egypt and Russia over wheat quality been sorted than the Egyptians are at it again, this time impounding what Bloomberg describe as "an 11,000 metric-ton shipment of Ukrainian and Australian wheat".
Exactly what Australian wheat is doing getting mixed up with Ukraine wheat I don't know, so there could be a bit of misreporting going on here. But certainly there have been quality issues with Ukraine wheat this season.
Bloomberg story
Meanwhile, the Egyptian Minister of Trade and Industry Rashid Mohammad Rashid, has told journalists in an interview shortly before flying to Russia for "trade meetings", that there are no problems between the two countries with regards to wheat supply.
"I would like to make it clear that there are no problems connected with the deliveries of wheat between our two countries. There are problems only inside Egypt. They concern matters related to the conclusion of contracts and to monitoring," he said.
What are all those empty suitcases for?
Bunge To Build Giant New Grain Export Terminal
Bunge North America is the majority partner in an ambitious new project to build a brand new giant state-of-the-art export grain terminal at the Port of Longview, Washington.
In a joint venture with Itochu and STX Pan Ocean the terminal will be able to handle more than eight million tonnes of grain, oilseeds and protein meals annually.
The project will be the first export terminal built in the United States in more than two decades.
Construction will begin this month with the facility accepting product for the 2011 autumn harvest.
Itochu is the second largest marketer of grain and food products in Japan, and STX Pan Ocean is one of the world's leading shipping companies of agricultural products.
US Dollar Continues To Decline
The pound is up again this morning against an ever-decreasing US dollar, hitting $1.6660, it's highest since Oct 30.
In the US, news last night that pending home sales jumped their highest in seven years, added to the belief that a global recovery is underway.
That sent to dollar lower, a world economic recovery equates to a return to risk, hence a lack of enthusiasm for the dollar's safe haven status as investors look for higher yielding assets.
Also at the forefront of investors minds is that "payback time" is somewhere down the road for the US, burdened with huge deficits and loans.
South Korea has already said that it will scale back the extent of it's holding of US Treasuries. China would like to cautiously and quietly do the same, but with $760 billion tied up, will be wary of starting a stampede.
Meanwhile also helping the pound was news that UK consumer confidence picked up in May to the highest level in six months, according to the Nationwide Building Society. Although the accompanying comments from the Nationwide's chief economist were suitably guarded:
"While some reports suggest tentative signs of a slowing in the pace of economic decline, it is important to remember that a number of sectors are continuing to contract and any recovery is likely to be sluggish," he said.
Australian Crops At Risk
Australian wheat and canola are struggling in spots as the “wet” season has been “not all that wet”. Rainfall deficiencies (since April 1) are severe in the West while Victoria, South Australia and New South Wales has seen 10-40% of normal rainfall, says Allen Motew of QT Weather.
So far, Wet Season rains have been lacking in all areas except NE New South Wales and SE and W Queensland. None of these areas have significant wheat or canola production.
Wheat (and canola) production is concentrated around the south west of Western Australia state, the far south of South Australia and through northern Victoria into central NSW:
Australian Wheat Production Map
Most of these areas received Less than 50% of normal precipitation during May, says Allen. As of May 31, the Australian Bureau of Meteorology has Western Australia suffering from “severe” to “lowest on record” drought, he adds, with Wet Season anomalies -200mm (-7 inches) to greater than -400 mm (-15 inches) in major growing regions.
Vegetation greenness clearly highlights the problem areas as being right in the heart of the wheatbelt, with only the very southern tip of WA and eastern coastal areas looking healthy after beneficial rains last month:
Meanwhile, the risk of El Nino weather developing this year has been put at eater than 50 percent, more than double the normal risk in any year, by Australia’s Bureau of Meteorology.
EU Wheat Ends Lower In Correction From Monday's Gains
EU wheat ended lower Tuesday, partially correcting steep gains Monday, after US markets faltered slightly.
November Paris milling wheat ended down EUR2.00 at EUR163.00/tonne, and November London feed wheat closed down GBP1.75 at GBP132.75/tonne.
The dollar was a bit firmer in the morning, but had given up any gains by late afternoon, which added a bearish tone late in the day.
US wheat futures also came in lower, on a bit of profit-taking after strong gains Monday.
In the US spring wheat plantings remain behind schedule and winter wheat crop conditions are declining. Early reports of winter wheat yields in southern states are pretty appalling.
Prospects in most of western Europe have improved in the last six weeks or so, although the east still remains too dry.
CBOT Closing Comments
Soybeans
July soybeans closed 9 1/2 cents lower at $12.09 a bushel. Wet weather will continue to plague Missouri, Illinois and Indiana over the next two weeks, says Allen Motew of QT Weather. Slow planting progress will remain an issue for farmers in these states as excessively heavy rain continues, he predicts. This may likely do more harm to corn than beans, the perception is that beans will eventually get in, and possibly 1-3 million acres more than current USDA projections. Oil World are saying 78.085m acres against the USDA's 76.024m. Old crop stocks still look likely to be much tighter than the USDA are projecting, although it's unlikely in my opinion that the USDA will accurately reflect the true picture in their revised June 10th S&D report. Caution is their watchword, some would call it lying.
Wheat
CBOT July wheat closed down 5 cents at $6.69 1/2 a bushel. Profit-taking was the name of the game after some big gains Monday. The wheat harvest is progressing but at a slow pace in the Southern Plains, and reports of early yields range from disappointing to disastrous. Spring wheat plantings in North Dakota are still well behind. Even so, wheat closed well off session lows and towards the higher end of the daily range.
Corn
July corn closed up 3 3/4 cents at $4.49 1/2 a bushel, closing higher for the 4th day in a row. Rainfall will be relentless over the next ten days to two weeks targeting the all ready anomalously wet Central, Southern and Eastern Corn Belt and Delta states of Missouri, Arkansas, Illinois, Indiana, Kentucky and Tennessee, says Allen Motew of QT Weather. Across fourteen million acres of unplanted beans and four million acres of unplanted corn, farmers will continue to struggle to get their crops started and have to fight the wet weather, he adds. With new crop soybeans at $10+ there is a real enticement for US farmers to give up on corn & switch to beans.
China Offer USD760 Billion For Obama Mug And Inflatable Pillow
China, who reportedly hold $760 billion in US Treasury bonds, plus billions more in currency reserves and other dollar-denominated assets, are probably feeling a little perturbed right now.
Treasury Secretary Timothy Geithner has reassured China that it's money is in safe hands and that it had expressed "justifiable confidence in the strength, resilience and dynamism of the American economy". What's that expression: Methinks thou doth protesteth too much?
I have this mental image of China now running round Duluth airport fifteen minutes before it's plane is about to leave, buying anything that's on the shelves, just to get rid of this bloody foreign currency it doesn't want. "I'll give you $760 billion dollars for the Barack Obama Mug and that inflatable pillow."
It can't be of any great surprise that China would rather like to swap what has suddenly become the largest collection of Monopoly money in the world for grains, metals, or just about anything else.
You want your $760 billion back China? Here you go mate, but mind the print it's still a bit wet.
The world could just about be ready to enter a new phase of mega-inflation.
eCBOT Close, Early Call, Go Do The Math
The overnight grains closed lower, in a modest correction from last night's strong gains. Beans ended mostly 3-5 cents easier, with corn off around 4-5 cents and wheat down around 9-10 cents.
Still, the trend remains higher, with old-crop beans now established above $12/bushel, against a backdrop of a weak dollar and tight stocks. It now seems pretty much accepted that the USDA's projected 2008/09 carryout of 130 million bushels is way too high (Informa say 77 million).
Now it is interesting to note here that the USDA's figure gives us the tightest stocks to usage since 1968 at 4.3%. Just get your head around the concept that things are in reality likely to be a lot tighter than the tightest since 1968!
The current USDA number is around 16 days worth of supply, the reality of it could be more like a week. And at 66% complete as of Sunday, US soybean plantings are running around a week behind schedule. As they say across the pond, go do the math.
Corn planting in the US has almost caught up with normal at 93% completed, and 70% is looking good/excellent according to the USDA. That's an improvement on last year's first crop condition report.
Spring wheat was 89% planted as of Sunday, down from 100% last year and the average of 98%. North Dakota still lags at 82% done compared with 100% last year and the average of 97%. Meanwhile, winter wheat conditions are slipping a little, down one point in the good/excellent category in the top producing state of Kansas.
Wall Street is expected to open little changed, as the market takes a breather from yesterday's rally. Crude oil is a little easier at $68.02/barrel.
Early calls for this afternoon's CBOT session: Corn 4 to 6 lower, Soybeans 3 to 5 lower, Wheat 8 to 10 lower.
Pound Falls As Abu Dhabi Sheikh Offloads Barclays
The pound is around a cent below yesterday's $1.6445 close against the dollar this morning as the FTSE declined on news that Abu Dhabi's Sheikh Mansour bin Zayed al-Nahyan said he planned to offload his his 1.3bn-share holding in Barclays Bank.
Barclays shares fell over 14% to 270.50 pence on the news, and the FSTE 100 was down 58.86 points at 4447.33 on the news.
News from the Bank of England that home loan approvals rose to 43,201 in April from 40,038 in March was better than analysts had expected.
The dollar has bounced back a little from yesterday's heavy losses after GM filed for the largest manufacturing bankruptcy in US history. Still, throwing another $30 billion of taxpayers money at GM, on top of the $20 billion they've already had, could drag the dollar lower in the long run.
At 11am the pound was $1.6388 and one euro was worth 86.47 pence.
Russia To Discuss Establishing A World Grain Cartel
Representatives of over 40 countries will attend the World Grain Forum on June 6-7 in St. Petersburg.
On the agenda of topics for discussion, apparently, is forming a global grain cartel.
"The possibility of establishing a so-called grain OPEC, if you wish, will be discussed at the forum. I think the prospects for establishing a grain OPEC are quite good, since the time has come to regulate grain exports, pricing policies and grain quality," Valentina Matviyenko the governor of Russia's second-largest city said on Monday.
An interesting proposition from the world's fourth largest grain exporter, who have been busy aggressively marketing 20 MMT of their own grain in 2008/09.
China: Crossing The Finishing Line Before We Even Realised There Was A Race On
November soybeans on the Chicago Board of trade closed at $10.86/bu last night, that's equivalent to $399/tonne. November Chinese futures on the Dalian closed at 3816 yuan, roughly $557/tonne. At a differential like that it's not hard to see why Chinese crushers keep coming back for more US beans.
There's a story going around that the Chinese government are looking to build up massive state reserves of some 50 million tonnes of soybeans. It's not quite such a crazy idea as it might sound.
The Chinese hold massive foreign currency reserves, much of it in dollars, and these reserves are being devalued by the day as the quantitative easing printing presses roll. In fact China is the biggest foreign owner of US Treasury bonds, with holdings worth $760 billion in March. "Your money is safe with us" Timothy Geithner, the US Treasury Secretary, has assured an uneasy China.
They don't want dollars, and they don't want US Treasuries, so why not swap those devaluing bits of paper for something useful like US soybeans? Especially at a time when your major soybean growing area has just had the lowest recorded May rainfall in almost 60 years. Especially when one of your major suppliers has just seen their crop decimated to the tune of 40%.
Printing money leads to inflation, that is a given, and the world has never printed money on this sort of scale ever before. So why not hyperinflation? The prudent thing to do would be turn those dollars into something tangible. So why not step in early and buy up just about every commodity going?
Copper, zinc, aluminum, tin, rubber, palm oil and sugar were all higher on Chinese interest yesterday besides the grains.
USDA Planting Progress/Crop Condition Reports
There was a raft of data issued by the USDA Monday night concerning crop conditions and planting progress. Here's a quick summary of what they had to say:
Winter wheat: good/excellent unchanged from last week at 45%, poor/very poor up one point to 28%.
Spring wheat: 89% planted versus 98% normally and 79% a week ago. North Dakota 82% done compared to 97% normally.
Corn: 93% planted versus 97% normally and 82% a week ago, 73% emerged against 86% normally. Good/excellent rated 70% for the first assessment of the season, compared to 63% a year ago.
Soybeans: 66% planted versus 79% normally and 48% a week ago, 36% emerged against 17% last week and 51% normally.
The corn numbers mean that there are still almost 6 million acres of corn unplanted as of Sunday, 2.2 million of those are in Illinois.
In North Dakota 18% of spring wheat remains unseeded as of Sunday. With June plantings only qualifying for a reduced payout on crop insurance, surely many of these intended acres will now get switched into beans.
The numbers would appear to indicate that anywhere from 1-3 million acres more beans will get planted than the USDA are currently saying, as a result of lower corn and wheat acres.
CBOT Closing Comments
Soybeans
July soybeans closed at $12.18 1/2, up 34 1/2 cents, comfortably breaking through the key $12/bushel mark and staying there throughout the session. Fund buying appeared to be a feature today, with "new money" coming in on the long side as we start the new month. China have apparently cancelled "two or three" cargoes, according to the rumour mill. Why would they want to do that with prices at their highest since Sept. 26? Other rumours suggest that China will continue to aggressively build strategic reserves of soybeans. This week's export sales report will be interesting to confirm or deny these reports.
Wheat
July CBOT wheat closed at $6.74 1/2, up 37 1/4 cents, closing just short of an eight month high of $6.76 set earlier in the session. Stunningly bad yields are being reported on early cut wheat in Texas with some fields producing just 10 bushels/acre, according to media reports. In addition to that a weekend freeze in Canada that spread into northern Minnesota and northern North Dakota won't have done any help either. Firmer crude oil and a sharply higher Wall Street also added some support to wheat today.
Corn
July corn ended up 9 1/2 cents at $4.45 3/4 per bushel. Corn got propelled higher by firmer crude and equities, spillover strength from wheat and beans and continued delays to US plantings. Spec money is also coming back in for corn, pushing prices higher, with funds buying an estimated 8,000 contracts as the market surged into the close. Continued wet weather in the Midwest is estimated to push anywhere from 1-3 million acres out of corn and into beans this year.
EU Wheat Follows US Markets Higher
EU wheat posted strong gains Monday, following the lead set by US markets despite a weak dollar and firmer sterling and euro.
Paris November milling wheat closed up EUR3.50 at EUR165.00/tonne, whilst London November feed wheat ended up GBP3.50 at GBP134.50/tonne.
There are crop concerns and lower production estimates for 2009 from just about all the major exporting nations besides Australia, and they have only just begun to plant and have a long way to go to harvest just yet.
Fund money appears to be re-entering commodities, as a bit of risk appetite re-emerges and traders look for higher yielding investments.
Outside markets were also firmer which lent some support, with crude oil breaching $68/barrel and US stocks hitting a seven month high despite the demise of General Motors.
A sharply weaker dollar will do little to aid EU wheat sales abroad, but this seemed to be easily shrugged off by the market.
The London July/Nov spread widened to GBP10.50/tonne, an enormous differential, which will only serve to discourage old-crop sales even further.
It's highly unusual for new crop to offer any premium over old crop at all, let alone more than a tenner. Unfortunately I don't have the data on this to hand, but I wouldn't be surprised if this isn't the largest four month old crop/new crop carry in history.
Canadian Rapeseed Production Under Threat
Canadian rapeseed production for 2009/10 is under threat from drought in Saskatchewan and western Manitoba, say StormX with some regions seeing less than 20% of normal precipitation during the month of May:
While the Canadian Press reports 80-90% of canola in Saskatchewan has been planted, most of the seeds are simply laying in ground as fears build that they will not germinate. Compounding the drought issues are the recent below normal temperatures, which have further prevented canola seeds from germinating. Unfortunately, cool, dry conditions look to continue over the next 7 to 10 days, possibly forcing some producers to let their fields lie fallow this summer, StormX say.
Click the link to get the story in full.
Oil World forecast Canadian rapeseed production at 11 MMT this year, down 12% from 12.5 MMT in 2008.
Russian Grain Harvest Seen Down 16.7 Percent
Russia will harvest 90 MMT of grain in 2009, according to the Minister of Agriculture of Russia, Elena Skrynnik.
That's a reduction of 16.7% on last year's 108.1 MMT.
Russian exports of grains in the current 2008/09 MY will total a record of about 20 MMT, including 1 MMT of maize, she added.
Russia's previous grain exports record was reached in the 2002-2003 agricultural year when the country exported 15.8 MMT of grain. Last year, Russia exported 13.6 MMT of grain.
Spring grains have so far been planted on 27.5 million hectares, or 88% of the planned area, said the Ministry. That's 2 million hectares lower than in 2008.
Rain Returns To Illinois And Indiana Corn Fields
Rain continues to frustrate US farmers' attempts to get their corn crop planted in the Midwest states of Illinois and Indiana, say StormX.
Crucially, most farmers in these states only have until June 5th to plant corn or cash in on their insurance policies, they add.
It will be very interesting to see how much corn remains unplanted in tonight's USDA report, ditto spring wheat. Most trade guesses seem to be indicating growers switching a further 2-3 million acres into soybeans, and with $10+ beans now available for new crop, who can blame them?
eCBOT Close, Early Call
The overnight grains closed sharply higher, with July soybeans pushing through the magical $12 mark, setting an eight month high of $12.04 3/4 before closing just shy of that at $12.01 1/4 for a gain of 17 1/4 cents. July wheat closed near a four month high at $6.50, 12 3/4 cents higher, with corn also near four-month highs at $4.41 3/4, up 5 1/2 cents.
A sharply weaker dollar, firmer crude oil and optimism that the global economy might be turning round added strength to the grains. Fund money also appears to be returning to commodities, with the promise of better financial returns than other sectors.
Crude oil broke through $68/barrel, despite the supply and demand fundamentals.
For soybeans tight old crop stocks and a potentially harmful drought in China's Heilongjiang province, which has just recorded its lowest May rainfall in almost 60 years, supported the nears.
Chinese soybean futures on the Dalian Commodity Exchange closed 2% higher overnight, supported by evidence that the economy there is continuing to grow.
Meanwhile, rain continues to delay US corn, soybean and spring wheat plantings.
The USDA will report after the close tonight on planting progress, with corn expected to be around 93% done, compared to 98% normally and soybeans around 70% complete, around ten points behind normal. The market will be keen to see how much progress has been made this week in finalising spring wheat plantings too, as well as the condition of winter wheat.
Tonight will also see the USDA's first crop condition report of the season for corn.
Wall Street looks set to open higher despite the news from General Motors.
Early calls for this afternoon's CBOT session: Corn 4 to 6 higher, Soybeans 14 to 16 higher, Wheat 10 to 12 higher.
Australia Wheat Planting Latest
After a record warm May, Perth residents have just experienced their warmest June day in 25 years, report Elders. The temperature peaked at 26.2 degrees today, within two degrees of the June record and the warmest June day since 1984.
The warmth has not been restricted to the capital. Sunshine and easterly winds allowed all western districts to reach the low-to-mid 20s, five-to-eight above average and within about a degree of record June warmth, they say.
Western Australia’s wheat growing area’s, especially in the southeast third of the state’s wheat belt remained dry despite welcome rains last week, say StormX.
Dry April-May weather has prevented wheat planting from occurring on a wide-scale basis. Wheat potential looks lower than 2008 in Western Australia, according to Mike Musgrave, operations manager of Cooperative Bulk Handling LTD, though he qualifies that statement by saying it is still a long way from the November-December harvest.
Conditions are dry also in Victoria and northern New South Wales, key wheat growing areas in Southeastern Australia. Typically growers begin planting winter wheat in May but significant rainfall is needed before widespread planting can occur.
Growers in Southeastern Australia are hoping that El Niño will not develop, since there is a strong correlation between El Niño and drought in this region. Presently the central equatorial Pacific Ocean is in a neutral phase, meaning that neither El Niño nor La Niña are in effect. However, strong warming has been underway for several months in the tropical Pacific Ocean suggesting a possible trend toward El Niño.
The Storm Exchange science team rates the chances for a developing El Niño at 60% by late summer or early autumn.
Argy Drought Rages On
The drought in Argentina continues unabated with the Agricultural Secretariat saying that "soil moisture levels continue to be low or totally dry".
Argy farmers are expected to only plant 3.7 million hectares of wheat this season, down sharply from 4.6 million in 2008 and the lowest since records began in 1910.
But even that figure now looks in jeopardy, with the Buenos Aires Grain Exchange warning that wheat plantings were "dangerously delayed across much of the farm belt".
"The 3.7 million hectares seems to be a maximum ceiling for wheat area, and a greater reduction can't be ruled out if there aren't quick changes to the current weather and economic conditions," the exchange added.
Oil World see wheat plantings this year lower still at 3.6 million hectares.
Besides the weather punitive export taxes and other political disincentives, combined with a lack of credit are also responsible for the anticipated sharply lower planted area in 2009.
It's all gone Pete Tong for what was the world's fifth largest wheat exporter just a couple of years ago. Another wheat crop disaster this year would see Argentina faced with having to import wheat to meet it's own domestic requirements in 2009/10.
Further reading: Parched earth, empty barns
Pound Soars Along With Crude, Grains
The pound is at it's highest levels against the dollar since October this morning, reaching $1.6430 in early trade.
Crude oil is sharply higher too, up $1.29 to $67.60/barrel after news that China’s manufacturing expanded for a third month in a row.
Crude is starting June where it left off in May, it had its biggest monthly gain in a decade in last month, surging 30 percent, on hopes that the global economy is recovering and fuel demand will therefore increase.
A recovery in China, the world’s third-largest economy, is prompting a dollar exodus as a bit of risk appetite returns and investors look for higher yielding assets.
The impending demise of GM, who are widely expected to file for bankruptcy later today, the largest corporate failure in US history, is also weighing on the dollar.
Soybeans are sharply higher on the back of the weak dollar. July currently stands at $12 exactly, within spitting distance of the recent eight-month high of $12.00 3/4.
Heilongjiang province, China’s biggest soybean-growing region, had the lowest recorded May rainfall in almost 60 years it was revealed today, sparking ideas that the nation will continue to buy soybeans aggressively on the international market.
Meanwhile, rain continues to delay US corn, soybean and spring wheat plantings. July wheat & corn hit their highest levels since early October in overnight trade.
