Harry Potter My Arse
Went to see the new Harry Potter & the Half Blood Prince tonight. What a load of rubbish, talk about far-fetched. A ginger kid with two friends?
The Ginger One even had a girl chasing after him, how unlikely is that.
Harry appeared to lose his cherry though. There'll be Hogwarts all over his magic wand by the end of the week, you mark my words.
I won't spoil it for you though, let's just say that Sir Ian McKellen's contract has obviously come to an end.
CBOT Closing Comments
Soybeans
August soybeans closed down 3 1/2 cents at $10.20 a bushel, November soybeans closed down 17 3/4 cents, further widening the old crop/new crop spread. If there's one bullish story in town for beans it's got to be old crop tightness. Exports are running at a strong pace and accumulated exports for the 2008/09 marketing year so far are 1.168 billion bushels. USDA export estimates for the full 2008/09 marketing year are 1.260 billion bushels, and the 2008/09 marketing year doesn't end until the first week of September. Beyond that though you've got to be bearish, with record production expected in the US come the autumn, plus probable record production in South America in the spring.
Corn
Sep corn ended down 10 3/4 cents at $3.16 1/4 per bushel and Dec corn ended down 11 1/2 cents at $3.27 1/4. US weather conditions are pretty good right now, plenty of moisture and no heat stress. Some concerns are around over the low number of growing degree days with continued forecasts for unseasonably cooler than normal temperatures. This leaves a late planted, slow maturing crop vulnerable to an early freeze should one come along in the autumn.
Wheat
September CBOT Wheat at $5.16 ¼, down 15 ½ cents. Weakness from corn spilled over into wheat today, and the market still has a cautious eye on what the FCTC regulators may do to attempt to improve CBOT wheat convergence with the cash market. Limiting index fund activity in wheat is still a possibility, which may lead to wide scale liquidation of wheat longs. With the CBOT soft red winter wheat contract the benchmark for global wheat prices, despite accounting for only 2% of the world wheat crop, that is a major concern.
EU Wheat Continues To Slide
EU wheat futures continued their slide Friday with Paris November milling wheat closing down EUR1.25, or 0.9%, at EUR138.00/tonne, and London November feed wheat trading down GBP1.25 at GBP106.00/tonne.
There is very little fresh news, it's all very much a case of same old, same old. Harvest is upon us, although rain is a problem in parts of western and northern Europe.
Further east if anything it remains too dry, harvesting is well advanced in Russia and Ukraine, and quality is better than last year although yields are down.
Elsewhere in the world US prices are falling and rains have finally arrived in Argentina, although plantings there are wrapping up. After that it will be all eyes on Australia, where wheat has largely got off to a great start, although El Nino weather potential could change all that.
El Nino is also being blamed for poor monsoon rains in northern India. Poor rains now will affect soil moisture when wheat goes into the ground later in the year, and also reduce irrigation potential.
There is an old saying that the cure for high prices is high prices. That certainly seemed to prove to be the case last season, after every man & his dog planted wheat, encouraged by sky-high levels. Maybe also the cure for low prices is low prices?
eCBOT Close, Early Call
The overnight markets closed narrowly mixed, with nearby August beans 4 cents higher and the bulk of the other more active contracts around 3-4 cents lower. Wheat and corn closed mostly with just token gains of less than a cent.
Cool and wet conditions prevail across large parts of the Midwest, which may not be harming but isn't helping corn, beans or spring wheat development on late-planted crops. As we know a late harvest means potential vulnerability to an early freeze.
The USDA report 116,000 of new crop beans sold to guess who overnight. That's right the cheeky Chinese are still in the market.
It looks like they are going to auction off more corn and beans next week. Or at least attempt to. With prices likely to be set where they were this week they are unlikely to find any soybean buyers. Only around a third of this week's corn offers got taken up, so that might not go too well either.
The USDA are widely expected to reduce corn acres in their Aug 12 WASDE report, after they announced a 'recount' this week. What's the betting that they will reduce acres and increase yields by an equivalent amount to leave us with almost exactly the same number we started with?
If they do reduce corn acres then, although they won't issue a revised soybean acreage number, it surely implies that there are more new crop beans in the pipeline. As they are probably understating soybean yields too at the the moment, there are probably a lot more beans in the pipeline.
Old crop beans are still very tight though, and look set to continue that way with Chinese buyers still coming back to feed at the trough.
Some of the panic has gone out of the wheat market, as it now seems more likely according to trade talk that the CFTC will only make a few storage tweaks to the CBOT contract, rather than demand a wholesale review of index fund activities. The latter could have started an exodus from wheat futures.
Crude is holding it's own around $67/barrel and the dollar and equity markets are looking pretty flat to end the week too.
Early calls for this afternoon's CBOT session: corn called steady to 2 higher; beans called 2 to 4 lower (Nov); wheat called flat to 2 higher.
Chicago Wheat Contract - Too Big For It's Own Boots
The Chicago wheat contract is seen as the global benchmark for wheat prices around the world, and there has been much talk recently of how is has become detached from the physical market.
In 2005 the average differential between the CBOT contract at expiration and the Toldeo cash price was just 5 cents, by 2008 averaged over $1 (peaking at over $2 at it's worst). Even despite the capitulation of the market since then when the July CBOT contract expired recently this gap had only narrowed to 83 cents. Since the roll to September, however, basis has weakened again and cash is currently $1 or more under futures at most locations.
If CBOT prices don't accurately reflect real cash prices, then hedgers will shy away from the contract, hedging elsewhere or in some cases not at all.
So what's wrong with the Chicago wheat contract? In short it's got too big for it's own boots.
The CBOT contract is for soft red winter wheat, whereas the Kansas futures contract trades hard red winter wheat and the Minneapolis contract is for hard red spring wheat.
The soft red winter wheat crop traded on Chicago constitutes only around 20% of the total US national wheat production, and just 2% of global wheat production. That's right, the most actively traded wheat contract in the US (and the benchmark for the rest of the world) doesn't even trade the most widely grown wheat type there.
Despite accounting for a significantly smaller share of the production marketplace than it's KCBT or MGE counterpart, trade and open interest in CBOT wheat is many times larger. It's the volume that they trade in CBOT that makes it attractive for the index funds, and it's the size of open interest that the index funds hold (typically 50%) that is making the contract so unattractive to commercial hedgers.
In mid-2008 index funds held enough CBOT wheat contracts to cover US production of soft red winter wheat for the next three years! They are currently still long around twice the estimated 2009 production.
Clearly the CME Group, owner of the Chicago Board of Trade, does not want to see this kind of volume go away, and maintain that index funds were not responsible for volatility in the wheat market last year.
Why are the index funds still holding so much wheat? The large carry, Dec 09 wheat closed at $5.59/bushel last night, whilst Dec 10 was $6.32 1/2. That differential offers a better return than can be had on the money markets at the moment.
There doesn't seem to be an easy quick fix solution. One proposal being looked at by the Commodity Futures Trading Commission (CFTC) regulators is increasing storage charges. I don't see how that is going to help, that would widen the carry not decrease it, as we know the index funds don't intend to actually take delivery.
A better method to ensure convergence surely would be via a cash-settlement basis. If you let your contract expire you don't have the obligation or option to opt for physical delivery. A little bit like having a bet with the Tote, if you let your bet (contract) expire then you don't know at what price it will be settled at until after the event when a settlement price is announced based on cash market prices.
Rain, Rain Go Away
It tanked it down here in North Yorkshire yesterday, much more so than what was in the forecast, or even in fact than what showed up on the radar images after the event.
It certainly wasn't the predicted sunshine and showers day that the forecasters were saying, when the 'showers' did arrive, which seemed to be about every half hour, they were very heavy downpours indeed.
It would appear that there are similar problems all over the country and elsewhere. The Irish farmer who was recently quoted as saying something along the lines of "this year's harvest will be fine, I've never known three washouts in a row" may be starting to regret his misplaced blarney.
"This is the third year in a row of really dreadful grain growing conditions with no light on the horizon for better harvesting conditions as it continues to pelt it down. Winter barley crops are beginning to suffer from the onslaught of recent weeks and, everywhere now, one can see areas of fields lying over. My own crop is no different. It is with dismay that I look across the fields and view the ever-growing flat patches," is how one farmer quoted in the Irish Independent sees it.
"Floodwater carves 25m gully through barley field," is one headline from our own County Durham this morning. The trench is apparently 'hundreds of metres long and up to four metres deep.'
Rain appears to have stopped play elsewhere in Europe too with Reuters saying "Constant showers have disrupted Germany's barley harvest in the past two weeks. The pattern of showers followed by cloudy, humid weather may bring fungal growth on wheat if it continues in the next two weeks."
The compounder who emailed me a few months back saying that his main concern this year was the number of farmers carrying 'rubbishy' old crop into new, may be looking to pay a premium for that 'rubbishy' old crop before long!
Spanish Grain Production Estimates Revised Lower
The Spanish agriculture ministry has revised down this year’s wheat and barley production estimates.
Wheat output (excluding durum) is now projected 32% lower this year at 3.8 MMT, from the Ministry's previous forecast of 4.3 MMT and 5.6 MMT in 2008/09. Durum wheat output is seen at 1.2 MMT, similar to last season's 1.1 MMT.
This season's barley crop is now forecast at 7.5 MMT, compared to the previous forecast of 8.6 MMT, which is 33% down from the 11.3 MMT harvested last year. The total includes 6.4 MMT (9.6 MMT in 2008/09) of spring barley.
The corn crop should equal last season's 3.6 MMT, they say.
I'll Name That Chart In One
It's certainly not London wheat that's for sure. This little baby is sugar, which hit it's highest in three years yesterday. This is New York sugar which peaked at 18.39 cents a pound yesterday, the highest since March 2006.
In London, white sugar closed at $474.90/tonne last night, the highest finish since July 2006, this morning it's currently at $475.90/tonne.
The reason for the rally? The lack of monsoon rains in northern India, the world's biggest consumer, leading the government there to meet yesterday to discuss an extension of the existing tax-free concessions on sugar imports.
World demand is outstripping supply by over six million tonnes at the moment, and India is set to potentially become the world's largest importer this year, having been a net exporter only a couple of years ago.
The reason for the switch? You guessed it, Indian farmers decided to get out of sugarcane production and get into the much more profitable grain sector!
China To Auction Michael Jackson Concert Tickets
Following the success of their 500,000 MT soybean auction this week, the Chinese government is to auction tickets to see Michael Jackson at the O2 arena. A limited number of tickets for the Beatles reunion concert in Beijing are also up for grabs to one lucky bidder.
They also plan to auction another 500,000 MT of soybeans next week, they say. Well, when I say 'another' it's actually probably the same 500,000 MT of three-year old stuff that nobody wanted this week.
Although they haven't confirmed the price yet, traders expect it to be the same as this week's unsuccessful offer.
That'll have them queuing down the street won't it? Do you want Stalls or Upper Circle?
CBOT Closing Comments
Soybeans
August soybeans closed at $10.23 ½, up 5 cents, November at $9.32, up 24 cents. Weekly export numbers were strong at a combined total of 701,981 MT, more than half of that old crop. China's government sold nothing at their over-hyped soybean auction, with prices proving too high for local buyers. Instead they booked 157,600 MT of US old crop beans, plus some new crop for good measure. June crush data was also supportive coming in at 140.2 million bushels, compared to estimates around 2 million lower than that.
Corn
September corn finished at $3.27, up 19 cents, and December at $3.38 ¾, up 19 ½ cents. The USDA (again) surprised the market by announcing that they were going to re-appraise US plantings, indicating that they may have over estimated their June 30 acreage estimates. As you may recall they shocked the trade then with on figure a million acres higher than the highest trade estimate, and almost three million above the average trade guess. Weekly export sales were very strong yet again at 757,629 MT for 2008/09 delivery and 577,132 MT for 2009/10 delivery.
Wheat
September wheat closed at $5.31 ¾, up 9 ¾ cents, helped to higher levels by the strength in corn and soybeans. Export sales were pretty good at 342,324 MT and actual weekly shipments were strong at 436,800 MT. Japan bought 108,000 MT of mostly US wheat in a tender. South Korea announced they are seeking 55,000 MT of wheat, and Israel are looking for 18,000 MT of wheat. Wet weather in Europe is providing some quality concerns.
EU Wheat Closing Comments
EU wheat futures closed mixed Thursday with Paris November milling wheat ending EUR0.25 higher at EUR139.25/tonne, and London November feed wheat trading up GBP0.75 at GBP107.25/tonne.
Very wet weather across many parts of northern Europe is certainly a cause for concern, especially from a quality point of view.
Radar imagery shows equally, if not heavier, rains moving north east across northern France, Belgium, Holland and into northern Germany.
In the UK, the barley harvest had just about got going before the heavens opened and it hasn't stopped raining since. It's frighteningly reminiscent of last year.
They don't seem to be having this problem further east, quite the opposite in fact, with harvesting in Ukraine advancing well and recent dry weather aiding quality.
US wheat futures closed steadier, despite concerns over regulators readjusting rules concerning the size of speculators open positions.
Attn: Farmers Carrying Old Crop Wheat
Hang onto it. It might be better quality than new crop the way it's raining here in the north!
It's far from normal July weather that's for sure, unless last year was the new normal that is.
They won't be harvesting in North Yorkshire for a wee while yet.
eCBOT Close, Early Call
The overnights closed firmer, with corn for once leading the way closing around 8 cents higher on ideas that the USDA will revise down their acreage estimate next month. Beans closed around 8-9 cents firmer too, with wheat 3-4 cents higher.
The USDA will adjust it's June 30th stab in the dark with corn to reflect what it calls "variable weather conditions in key crop-growing regions". Trade talk is that half a million acres could be lopped off, but second guessing what the USDA will do next is proving to be somewhat difficult.
Even if they do decrease the acreage yields at the moment are likely underestimated anyway, so one could cancel out the other. University of Illinois' Darrel Good estimates the corn yield at an eye popping 161.9 bushels an acre, compared to 153.4 bu/acre from the USDA.
Weekly export sales were strong for beans and corn, and in line with expectations for wheat.
China failed to sell a single tonne of beans at it's domestic auction today, yet Chinese buyers took a further 157,600 MT of US old crop and a ruck of new crop today.
The CFTC possibly introducing some new trading restrictions to speculative activity in the wheat pit is being viewed as bearish.
South Korea announced they are seeking 220,000 MT corn and 55,000 wheat, Israel are seeking 18,000 MT wheat, Japan bought 108,000 MT of mostly US wheat.
Early calls for this afternoon's CBOT session: corn called 7 to 10 higher; soybeans called 7 to 10 higher; wheat called 2 to 4 higher.
USDA Weekly Export Sales - More Chinese Business
The USDA's weekly export sales report for the period ended July 16 revealed yet more soybean sales to China, for both old and new crop. Sales were also very robust for corn and pretty decent for wheat too.
Old crop soybean sales of 320,000 MT were up noticeably from the previous week and almost double the prior 4-week average, it said. The main homes were China (157,600 MT) and Mexico (115,300 MT). Sales of 382,000 MT for 2009/10 delivery were primarily for unknown destinations (197,000 MT) and China (115,000 MT). That's combined sales of 702,000 MT against pre-report estimates of 450,000 - 650,000 MT.
Corn sales were 757,600 MT of old crop, mainly for Japan (460,000 MT) and South Korea (145,400 MT). New crop sales of 577,100 MT were primarily for unknown destinations (256,100 MT) and South Korea (156,000 MT). That's combined sales of 1,334,700 MT against pre-report estimates of 800,000 - 1,200,000 MT.
Wheat sales were 342,300 MT, mainly Japan (94,600 MT), Nigeria (77,800 MT) and Mexico (57,200 MT). Pre-report estimates were 300,000 to 500,000 MT.
Actual export shipments themselves during the week were 436,800 MT for wheat, up noticeably from the previous week; 921,500 MT for corn, down 5 percent from the previous week; 283,000 MT for beans, down 27 percent from the previous week.
Bunge Q2 Results
Bunge report better than expected agribusiness returns in it's second quarter, although returns from it's fertiliser business were weak.
Second quarter results in grain origination, oilseed processing and distribution were significantly improved from levels seen in the preceding three quarters, although lower than an exceptionally strong period last year, it says.
The fertiliser operating loss in the quarter was due to the combination of high cost inventory and decreasing international fertiliser prices which negatively impacted margins, it added.
In edible oils improved results in Europe and North America were more than offset by lower volume and margins in Brazil, which suffered from aggressive competition, they stated.
In milling higher volume was more than offset by lower margins. Wheat milling margins in the same period last year benefited from lower priced raw materials purchased earlier in a period of rising prices, they concluded.
Tate and Lyle Say Q1 Ahead of Expectations
Tate & Lyle said that it performed better than anticipated during the first quarter of it's financial year, in today's interim management statement.
Profit before tax and exceptional items from continuing operations in the first quarter, after the benefit of favourable exchange translation, was in line with the comparative period and ahead of our expectations. Results have continued to benefit from cost reduction measures taken across the business, it said.
At Food & Industrial Ingredients, Americas, performance was marginally below the level of the comparative period, with lower income from co-product sales partially offset by the favourable impact of exchange translation. Co-product sales remain under pressure from lower cereal prices, reduced demand from the US livestock sector and weaker US export markets, it says.
Meanwhile, at Food & Industrial Ingredients, Europe, profits were above the comparative period and continued to benefit from lower net corn costs.
Sugars performed ahead of expectations, but below the level of the comparative period. As anticipated, profits from molasses were below the exceptional levels achieved in the comparative period, as global cereal prices have reduced from the levels experienced during the second half of calendar year 2008, they droned on.
The strong volume growth seen at Sucralose since the start of the calendar year continued, and the business achieved operating profits ahead of the comparative period. The process of mothballing the sucralose plant in McIntosh, Alabama at a cost of £56 million is proceeding ahead of schedule, they concluded.
China's Soybean Auction Finds No Takers
China's much-lauded half a million tonne fire sale of soybeans at fifty bucks over the market found nobody daft enough to put their hands up today.
We'll have to wait and see if they drop their price next week in a serious attempt to shift some, or if they were "just mucking about" in the style of Kenneth Williams.
USDA - Words Fail Me, Well Almost
The USDA are to revise their June 30th planting estimate for corn in the states of Illinois, Indiana, Kentucky, Missouri, North Dakota, Ohio and Pennsylvania, it has been revealed.
You may recall that the anticipated planting delays that caused a shift away from corn failed to show up in the June 30th report when the USDA shocked the trade by increasing their estimate to a shade over 87 million acres. That was a million acres higher than the highest trade estimate, and almost three million above the average trade guess.
It would appear that they are now concerned that they might have overstated things. So we are now left in limbo until they issue their revised wild stab in the dark on August 12th.
And surely if the corn number is wrong, doesn't that also mean that the soybean figure is too? But no, they aren't even looking at issuing a revised bean number.
It is bizarre, is it not, that we hang on their every word, eagerly await their every missive. In reality we might as well ask our Alzheimers-riddled Grandad sat stinking of wee and Uncle Joe's Mintballs on his commode in the corner what his opinion is on this year's corn acreage.
And of course the market will react according to the projections of an, at best, misguided bunch of old loons stumbling around in the dark using forty year old technology to guide us.
I wouldn't accept a lift up the road from them, let alone base a trading strategy around what they've got to say.
CBOT Closing Comments
Soybeans
August soybeans closed at $10.18 ½, up 4 cents, whilst November soybeans finished at $9.08, up 3 cents. The market seems in limbo at the moment, unsure of where to head next. US weather is pretty good, but unusually cool temperatures mean that crop maturity is at least a couple of weeks behind schedule. This could cause a variety of problems in a month or two. China is to attempt to auction off half a million tonnes of beans tomorrow, I don't see it being over-subscribed. Export sales estimates for tomorrow’s weekly USDA report range from 450,000 to 650,000 bushels.
Corn
September corn at $3.08 closed down 3 ½ cents, December ended at $3.19 ¼, down 2 ¾ cents. As with beans US weather is not harming the crop at the moment, there is no heat stress and things are progressing just nicely. If a little slowly. It is that slowness in maturity that may cause a problem later on, but for now the outlook seems lower. Private analysts peg US yields significantly higher than the current USDA projection of 153.4 bushels/acre. Export estimates for tomorrow’s weekly USDA export sales report range between 800,000 and 1,200,000 bushels.
Wheat
September wheat closed at $5.22, down 12 ¾ cents. At least that was well off the early session low of $5.13 ¼ cents, apart from that there is very little positive news to relate. The northern hemisphere is in the midst of harvesting. Meanwhile large global old crop stocks and a lack of consumer buying are amongst the other popular rhetoric being thrown around. The US may also soon introduce stricter controls over speculators activity in the wheat market, effectively restricting the size of open positions that they may hold. That also added a negative tone. Export sales estimates for tomorrow’s weekly USDA report range from 300,000 to 500,000 MT.
EU Wheat Ends Lower On Harvest Pressure
EU wheat futures extended their prolonged decline on yet more harvest pressure Wednesday.
November Paris milling wheat closed down EUR1.50 at EUR139.00/tomme, and London November feed wheat finished down GBP3.25 at GBP106.50/tonne.
Whilst rain is delaying harvest progress across the UK, northern France, the low countries, Germany and parts of Poland, weather in the east is aiding rapid harvest progress.
Wheat harvesting in Ukraine is around 50% done, and progress in Russia is also ahead of schedule. These are the places that are usually most aggressive price wise in terms of marketing their wheat, so it should come as no great surprise that prices are taking another kicking.
Egypt and Russia appear to have kissed and made up, with the former buying Russian wheat in a tender yesterday.
US wheat was sharply lower, mostly on talk of the CFTC curtailing index funds speculative activity.
How Non-Threatening Is The US Weather?
The downside of non-threatening weather in the US is that whilst crop condition is fine, crop development lags.
July temperatures have continued to average -4 to -9 degrees F below normal across all Corn Belt states, says Allen Motew of QT Weather. By Thursday next week large parts of the CB will see temperatures -8 to -12 degrees F below normal, and the 6-10 day and 8-14 day forecast keeps 90% of the Corn Belt averaging below normal in temperature, he says.
Monday night's USDA crop condition report showed corn 31% silking compared to 54% on the five year average, beans 44% blooming compared to 62% normally and spring wheat 84% headed versus a norm of 93%.
Despite crop conditions being largely ideal, this late development will inevitably mean harvesting a couple of weeks later than normal, leaving vulnerability to end of season weather.
For soybeans in particular, there is also the matter of very tight old crop stocks needed to last longer than ideal too.
eCBOT Close, Early Call
The overnight grains closed mixed with beans around a cent higher, corn a cent lower and wheat down five.
Wheat was under pressure from ideas that the CFTC will limit speculative index activity in the wheat pit.
In addition Egypt's purchase of Russian wheat last night seems to indicate that their on-off love affair is back on, at least for the time being. Russian wheat, as usual, was the cheapest offer in town. We'll see what happens when the boat arrives!
US weather remains favourable, certainly non-threatening is the way the market is viewing it. July temperatures continue to average -4 to -9 degrees F below normal across all Corn Belt states, according to Allen Motew of QT Weather.
Various private analysts are forecasting US yields significantly higher than the current USDA estimates for both corn and beans.
For corn Allendale have yields at 157.2 bu/acre compared to 153.4 from the USDA. University of Illinois' Darrel Good estimates the soybean yield at 44.7 bushels an acre, compared to 42.6 bu/acre from the USDA.
Crude oil is weaker ahead of this afternoon's stocks data from the US Dept of Energy.
Early calls for this afternoon's CBOT session: corn called steady to 2 lower; beans called steady to 2 higher; wheat called 4 to 6 lower.
EU Wheat Futures Continue Decline
EU wheat futures continued their decline Wednesday, with November Paris milling wheat breaking through a key support level of EUR140/tonne on harvest pressure.
Combines are rolling is the east, with the wheat harvest in Ukraine already around halfway.
Although yields are coming in significantly lower than last year across Russia, the FSU and eastern European countries harvest pressure is still evident.
Talk that the CFTC are set to clip large spec funds wings with regards to their activities in the CBOT wheat pit has got the US market on the defensive again, with US wheat futures around 5 cents lower.
Egypt and Russia are back in love again, bless, GASC buying 60,000 MT of Russian wheat yesterday.
Persistent wet weather across large parts of the UK, northern France, Germany and into Poland are frustrating many farmers' best efforts to make any advancements with their own harvest. This is also giving rise to a few quality concerns, although it is still early days, which may support milling wheat a little relative to feed wheat.
London November feed wheat is currently down GBP2.25 at GBP107.50/tonne, with Paris November milling wheat EUR1.50 lower at EUR139.00/tonne.
Russian Drought Damage Affects 3.3 Million Hectares
According to the Russian Agricultural Ministry 3.3 million hectares of the nation's spring crops have been badly damaged by drought.
A state of emergency has been declared in several regions along the Volga River and southern Urals, it says.
Hot and dry conditions over the last few months are seen cutting yields in these areas quite sharply.
Despite an increase in wheat planted area of almost 8% to 28.75 million hectares, production this year is seen lower at around 55-60 MMT from 63.7 MMT in 2008.
Ukraine Harvests 9.8 MMT Of Wheat
Ukraine's 2009 wheat harvest was around 50% complete as of July 21st, according to the Agriculture Ministry.
An estimated 3.4 million hectares of wheat had been cut producing 9.8 MMT of wheat (including durum) in bunker weight, they said.
Average yields are coming in at 2.87 MT/ha., 18% down on last year's 3.5 MT/ha.
A final yield of 2.87 MT/ha would give Ukraine a wheat crop of 19.6 MMT in bunker weight.
Although yields are well down, quality is said to be significantly better than in 2008, with most estimates saying that 35-40% of this season's crop will make milling grade, compared to 29% last year.
The barley harvest stood at 5.5 MMT from 2.2 million hectares with an average yield of 2.50 MT/ha. With an estimated planted area of 5 million hectares, that would potentially give us a barley crop of 12.5 MMT this year.
Meanwhile, Ukraine’s grain stocks amounted to 7.3 MMT as of July 1st, 35% above the 5.4 MMT recorded at the same time of last year. Of that wheat stocks comprised 3.4 MMT, barley 1.8 MMT, corn 1.1 MMT and rye 0.4 MMT.
BoE Voted 9-0 To Maintain Current Policy
BoE minutes from the July 8-9 meeting showed that MPC members voted unanimously to maintain the existing 0.5% base rate.
The minutes also reveal that members discussed if an "immediate change" to the asset purchase target of at £125bn was required.
They concluded that there had not been enough new evidence to justify this and that the August Inflation Report would "provide an opportunity to reassess the stock of asset purchases".
Tesco Opens New Type Of Supermarket
A new Tesco supermarket has just opened in Tunbridge Wells, with an automatic water mister to keep the produce fresh. Just before it goes off, you hear the sound of distant thunder and the smell of fresh rain.
When you pass the fresh milk stand, you hear cows mooing and you experience the scent of fresh cut hay.
In the meat department there is the aroma of charcoal grilled steaks and sausages.
In the alcohol department, the clean, crisp smell of hops of the freshly brewed bitter.
When you approach the egg section, you hear hens cluck and cackle, and the air is filled with the pleasing aroma of bacon and eggs frying.
The bread department features the tantalizing smell of fresh-baked bread and biscuits, and the drinks aisle has the aroma of freshly ground coffee.
Don't go down the toilet paper aisle.
And don't Google it.
Ukraine Harvest Estimates
Ukrainian farmers are expected to be halfway through harvesting by the weekend, but estimates as to the size of the final grain crop this year still differ quite widely.
Final output forecasts are like your eighty year old gran's driving, all over the shop.
The Agriculture Ministry seem to be standing by their estimate of 42-43 MMT (vs 53.5 MMT in 2008), which will include around 20 MMT of wheat, with corn output in the region of 11 MMT and barley around 10 MMT, they say.
Dmitri Berezovski, the President of Agrarian Chamber of Ukraine, says that the harvest will only produce 35 MMT of grain this season.
According to his forecast, although the harvest will be substantially less than last year, quality will be 25-30% higher. About 40-45% of the wheat harvest (7-8 MMT) will make milling wheat standard this year, he says. Last year only 29% of the wheat crop was up to milling standard.
Sergei Stoyanov, Director General of the Ukrainian Agrarian Confederation, says that this season's wheat crop will total around 20 MMT, but has the barley crop 4 MMT higher than the Ministry at 14 MMT.
Australian Wheat Crop Could Hit 23.2 MMT - Bank
The Australian wheat crop could reach 23.2 MMT in the coming season, according to the National Australia Bank.
Early season rains appear to have got the newly planted crop off to a great start, although final output will depend heavily on weather conditions between now and harvest.
Ocean conditions in the Pacific Basin remain at El Niño levels, say the Australian Bureau of Meteorology. Should they persist at such levels through the remainder of the southern winter and into spring, as predicted by the world's leading climate models, 2009 will be considered an El Niño year, they warn.
You can read the Bureau's full report here: El Niño
EU Wheat Ends Lower After Egypt Buys Russian Wheat
The recent problems of the last few weeks that saw Egypt buy EU and US wheat in preference to cheaper Russian supplies over a quality dispute seem to be over, with GASC confirming the purchase of 60,000 MT of Russian wheat from Glencore today at $178.05 FOB.
Paris November milling wheat closed down EUR0.50 at EUR140.50/tonne, and London November feed wheat ending down GBP1.50 at GBP109.75/tonne.
Despite the disappointment of Egypt returning to Russia for it's requirements, recent heavy rains across the UK, France and Germany are a concern for the quality of EU wheat this coming season, if not the quantity.
Elsewhere in the world wheat production looks mixed at best, with Argentina expected to seed their lowest crop in over 100 years, and output in Russia and Ukraine seen sharply lower in 2009.
CBOT Closing Comments
Corn
Sep corn closed down 11 3/4 cents at $3.11 1/2 per bushel and Dec corn ended down 11 3/4 cents to $3.22. Last night's crop progress report threw up very few concerns on the surface, however if you look a little bit beyond that silking in Illinois was at 26% compared to 80% for the five year average, and in Indiana at 28% compared to 64% for the five year average. The signs of a very late crop are there for all to see, and the risks from an early freeze obvious.
Soybeans
August soybeans closed down 18 1/4 cents at $10.14 3/4 a bushel, and new-crop November soybeans closed down 17 1/4 cents at $9.05 3/4. In line with the theme of the US crop doing well, but being behind in terms of development Illinois had 24% of the soybean crop blooming compared to the five year average of 69%. Some weather forecasters suggest that the so far benign US weather will turn hot and dry in Aug/Sep.
Wheat
Sep wheat closed down 7 1/2 cents at $5.34 3/4. Egypt bought 60,000 MT of Russian wheat in a tender, seemingly indicating that the recent spat over quality has now been resolved. For the record GASC paid Glencore $178.05 FOB for the Russian wheat. The weather in Europe is less than ideal for harvesting, with large areas of rain affecting crops in France, the UK and Germany.
eCBOT Close, Early Call
The overnight grains closed slightly lower with beans down 4-5 cents nearby and 7-9 cents lower further forward. Wheat finished 3-4 cents lower and corn 2-3 cents easier.
Near ideal growing conditions in the US Midwest at the moment seem to be the main driving force today.
Crude oil is steadier though, pushing above $65/barrel, and global stock markets are also firmer, adding some support.
Whilst US crop conditions are favourable, some reports are circulating in the media that hot and dry could be the order of the day for much of August and September.
China's auction of corn reserves started today, and has met with a mooted response. According to Reuters only 13% of the offered quantity in Heilongjiang province was taken up, and only 22% in neighbouring Jilin.
The soybean auction starts Thursday and is largely expected to meet with a similar level of interest.
Bangladesh is looking for 100,000 tonnes of wheat, and Egypt is back in the market for one or two cargoes having passed on Russian wheat in the last few tenders in favour of US and French product instead.
Early calls for this afternoon's CBOT session: corn called flat to 3 lower; beans called 5 to 10 lower; wheat called 3 to 5 lower.
What Are The Chinese Up To?
The markets took a hit last Thursday, and are lower again today, on the back of the news that China was to sell assorted quantities of corn, wheat and soybeans out of it's strategic reserve.
Does that mean that China has more than enough stocks and is looking to offload a few million tonnes, or could there be another explanation?
You know I love a good conspiracy theory.
They certainly seem to keep coming back for more US soybeans. Last week on the very day China announced the sale of 500,000 MT of soybeans sending the market tumbling, Chinese buyers actually were reported to have booked 636,200 MT themselves in the USDA's weekly export sales report.
This Thursday we will doubtless find out that they've bought more, taking advantage of last Thursday's 44 1/2 cent drop in August beans.
They are unlikely to find a huge queue of buyers at asking prices $40-50 higher than current US levels, and if they do find some takers then why not let them have some beans that have probably been sat in store for a couple of years and replace them with some nice shiny new crop ones?
Selling off a ruck of old crop beans has other advantages too. It makes China look better in the eyes of the WTO, rather than just being a buyer and hoarder of grains they become a world 'player', supplying their needy Asian neighbours.
Meanwhile they keep smiling whilst exchanging their devaluing dollar-based foreign exchange reserves for something more desirable - fresher, better quality US beans.
Russian Harvest Latest
Russia has so far harvested 7.6 million hectares of grains, or 16% of the planted area, producing 23.2 MMT of grains according to APK-Inform.
That's 2.2 million hectares up on the area harvested this time in 2008.
Average yields to date are 3.05 MT/hectare, down 6.9% on the same time last year.
Harvesting of winter rapeseed is about halfway through, they say, of a total planted area of 130,000 hectares.
Sunseed Supply And Demand In 2009/10
According to Oil World global sunseed production in 2009/10 is seen at 32.4 MMT, that's up from their previous forecast of 32.1 MMT but below the 33.7 MMT produced in 2008/09.
Production in the EU is forecast at 6.5 MMT (6.7 MMT in 2008/09), Russia at 6.4 MMT (7.0 MMT), Ukraine at 6.0 MMT (6.7 MMT) and Argentina at 3.8 MMT (3.0 MMT).
Global crush is forecast at 29.1 MMT, down 1 MMT on 2008/09.
Canadian Crop Development Lags
Late planted crops in Saskatchewan continue to lag, leaving them vulnerable to an early freeze later in the season.
According to the Agriculture Ministry there 60% of winter grains are behind normal development, that's a two point increase from their last report a fortnight ago.
Spring grains development is even further behind, with 75% of crops affected, also two points higher than their last report two weeks ago.
In addition 78% of oilseeds and 66% of pulses are behind normal development, the Ministry added.
Brazil Could Have Record Soy Crop In 2010
Brazil could have a record soybean crop in 2010 if weather conditions are favourable. Plantings are expected to increase 3-5% from last season, principally at the expense of corn and cotton, analysts say.
That could bring in a crop in excess of 60 million tonnes, and might reach around 62 million with decent growing conditions.
The 2008/09 crop finally came in at 57.1 million tonnes, according to CONAB, after early season hopes of matching 2007/08's 60 million tonne crop faded due to drought in the south.
Plantings this season are expected to reach around 22 million hectares, not quite a record but final production could beat 2007/08's record output of 61 million tonnes, according to some.
Many Brazilian farmers sold their crop early this year, cashing in on high prices and are financially well-placed to fund the inputs required to maximise yields for 2010.
Brazil Turns To US For Wheat
Brazil, the world's third largest wheat importer, bought 51,000 MT of US wheat last week, that's more US wheat than it bought in the entire first six months of the year, despite a 10% import tax imposed by the government on purchases from outside the Mercosul bloc.
Brazil's normal favoured wheat supplier is Argentina, but they of course have had a disastrous 2008 crop and are about to conclude the planting of another one.
With the Brazilian real strengthening against the dollar, millers that are being forced to look outside Mercosul for supplies are finding US wheat fitting the bill quite nicely.
The government would rather like Brazilian flour millers to take Russian wheat, and there has been some talk of them maybe even relaxing the import tariff specifically on Russian wheat in exchange for them buying Brazilian meat.
The millers on the other hand are wary of the quality of Russian grain, and would prefer to stick with US, Canadian or Australian wheat.
With an import requirement of around 6 MMT per annum, and Argentina unlikely to be a seller at all during the 2009/10 marketing year, that leaves Brazil looking like a significant new home for the major wheat exporting nations to fight over.
Argentine Wheat Plantings Revised Lower Again
Argentine farmers will plant just 2.6 million hectares of winter wheat for the 2009/10 season, according to Oil World. That's 200,000 hectares down on their last estimate and a stunning 2.1 million less than was planted in 2008/09.
Last season's drought-ravaged crop only managed to yield 2 MT/hectare, and subsoil moisture levels have been depleted even further since then.
Of course it's not all about drought, part of the reason behind lower plantings is a two fingered salute to the government and their export restrictions.
Argy President Cristina Fernandez has indicated a willingness to talk to farmers following her defeat in last months mid-term elections, prompting some to believe that her resolve to leave taxes and export restrictions where they are may be weakening.
Regardless of whether she lowers the 35% export tax on soybeans or not, Argy farmers are still expected to plant a record acreage for 2009/10. Oil World are predicting 19 million hectares, up 3 million, or almost 19% from last year. The USDA currently say 18 million hectares, although some private analysts say the figure could be closer to 20 million given the sharply lower wheat plantings.
Corn plantings will be 3.3 million acres say Oil World, that's 200,000 million lower than 2008/09.
Argy farmers might not like the soybean tax, but they dislike export bans on corn and wheat even more.
UK Grain Exports
Customs data reveals that the UK exported 233,000 MT of wheat and 39,900 MT of barley during May 2009.
For the first eleven months of the 2008/09 marketing year the UK has now exported 3.27 MMT of wheat, with the vast majority (3 MMT) going to fellow EU countries. That is well ahead of the same point in the previous 2007/08 season when exports totalled 1.41 MMT.
Barley exports in the same July08/May09 period came to 776,000 MT, more than double the amount exported at the same time in 07/08.
Rapeseed exports during July08/May09 came to 227,000 MT.
USDA Crop Progress Report
Corn
The Crop Progress report showed the 18 reporting states that plant 92% of the corn at 31% silking same as last year, compared to 16% last week and 54% for the five year average. The crop condition is 7% poor to very poor and 71% good to excellent, losing 1% from the excellent falling into the good.
Soybeans
The report said that 44% of the crop is blooming, 1% above last year and compared to 62% for the five year average. 8% of the crop was rated poor to very poor, same as last week and 67% good to excellent, gaining 1% in the good category from last week.
Wheat
Winter wheat is 100% harvested in Arkansas, Kansas, Missouri, North Carolina, and Oklahoma. Nebraska and Colorado are behind the five year average but about the same as a year ago. Total wheat harvest is 72% complete nationally, same as a year ago and compared to 77% for the five year average. Spring wheat is 84% headed compared to 93% for last year and the five year average. Spring wheat was rated 73% good to excellent from 71% a week ago.
Perhaps the most striking thing here is that all three crops are lagging in development: corn 31% silking compared to 54% on the five year average, beans 44% blooming compared to 62% normally and spring wheat 84% headed versus a norm of 93%.
Despite crop conditions being largely ideal, this late development will inevitably mean harvesting a couple of weeks later than normal, leaving vulnerability to end of season weather.
In the case of soybeans, it also means eeking out tight old crop stocks for a couple of weeks longer than they'd like. Hence last night's price action reinforcing nearby premiums.
Morrison's Shares Jump On Profits Statement
Shares in UK supermarket chain Wm Morrison jumped 9% to 276p Tuesday after the company said that it's annual profits would exceed previous forecasts and were "well ahead of the market".
The Q1 Interim Management Statement reported that despite strong prior year comparative figures, the Group had achieved sales growth well ahead of the market.
The strong start to the year has been maintained through the second quarter. An increasing number of customers are shopping with Morrisons attracted by the Group’s fresh offering, keen positioning on price and promotions and its industry leading service and availability. This provides a solid base for the remainder of the year, they said.
The resultant volume growth is helping to deliver operating leverage through supply chain benefits. Together with better than projected improvements from our Optimisation Plan margin initiatives, our ex-fuel gross margin for the full year is now expected to exceed our original plan by approximately 40 bps, they added.
The remaining Optimisation Plan initiatives are progressing well and are also expected to exceed our expectations, by £20m.
The business’ performance to date, the successful implementation of the Optimisation Plan and its continuing customer growth now give the Board confidence that the company’s full year results will be ahead of its earlier expectations, they concluded.
CBOT - A Game Of Two Halves
Soybeans
August soybeans closed at $10.33, up 23 ½ cents, whilst November soybeans finished at $9.23, down ½ cent. August Soybeans gained substantial ground over the new crop months with inspections showing continued Chinese demand for US soybeans on tight US supplies. About half of the soybeans inspected today were for China. Old crop US supplies look set to stay tight, despite the widely publicised sale of beans this week by China to domestic consumers.
Corn
September corn closed at $3.23 ¼, up 1 cent, whilst December finished at $3.33 ¾, up 2 ¼ cents. Weather forecasts call for widespread moisture through out the central and eastern United States. Amounts are predicted to range from ½ inch to an inch, with many isolated locations receiving 1 ½ to 2 inches over the next five days. Heat in the southwest, moving into the Rockies will be above normal but temperatures Nebraska east are forecast to be below normal over the next five days. Mexico and Egypt bought corn overnight.
Wheat
September wheat closed at $5.42 ¼, up ½ cent. The US winter wheat harvest is well advanced, and the combines are now rolling in Europe and the FSU. Production problems still exist however in Canada, Argentina and elsewhere. Whilst US weather is fine for corn an beans, wet conditions are less than ideal for winter wheat harvesting, and may also lead to quality problems.
EU Wheat Drifts Lower
EU wheat futures continue to drift lower despite lack of farmer selling on mounting harvest activity in eastern Europe.
November Paris milling wheat closed down EUR3.00 at EUR140.75.tonne, and London November feed wheat ended down GBP0.75 at GBP111.25/tonne.
European weather is less than ideal with rain in the forecast for many parts of the UK, France, Germany and Poland as low pressure rolls in from the west.
A weak dollar also did little to help European futures today.
Trading remains quiet, with dealers largely confined to book-squaring activities as we enter the holiday season.
eCBOT Close, Early Call
The overnight eCBOT grains closed higher, but off session highs backed by a weak dollar and firmer crude oil.
Beans closed with gains of 14 cents, having earlier been 18-22 cents higher, with wheat up around 6 cents and corn flat to 2 cents steadier.
Firmer equities also added some support to the complex, along with a generally slightly more optimistic mood.
Crude appears to have an eye on attempting to break through $65 on increased refinery activity in China.
US weather conditions remain beneficial for crop development with corn at the key pollination stage and soybeans about to start setting pods.
The Chinese government's sale this week of 500,000 MT soybeans is not expected to attract too much buying interest, as the minimum bid price is too high. With China estimated to be holding as many, if not more, soybean stocks than the US themselves and it's own bean harvest expected in October there will probably be more sales to come.
Imports are seen slackening off, albeit from a record pace, over the next few months.
After the close of CBOT tonight we'll have the latest USDA crop conditions report.
Early calls for this afternoon's CBOT session: corn called steady to 2 higher; beans called 8 to 12 higher; wheat called 4 to 6 higher.
Ukraine Harvest Latest
Harvesting in Ukraine is progressing well with 34% of the planted area cut as of July 17, according to the Agriculture ministry.
To date 11.5 MMT of grains have been harvested on 4.4 M hectares, it says.
The wheat harvest has so far amounted to 6.4 MMT off 2.3 million hectares, which is 35% of the planted area, with an average yield of 2.74 MT/hectare.
That's a slight improvement on last week, and now implies a finial wheat crop of around 18.25 MMT, that would still be almost 30% down on last year's production of 25.9 MMT.
An estimated 38% of the nation's barley crop has been cut, producing 4.7 MMT off 1.8 million hectares.
Agriculture In the News
Assorted agri-related news stories of interest from around tinterweb:
El Nino Threat Blows Commodity Prices Higher
Argentine Farmers See Record Harvests From Tax Cuts
Financial Crisis Slashes Ag Commodity Prices
Shortage of Home-Grown Organic Crops
Waitrose Practise Farming Beneficial To Wildlife
Crude Climbs Close To USD65
Crude oil is over a dollar higher this morning at USD64.67/barrel on news that Chinese refiners increased their operating rates to the highest levels in sixteen months.
A weak dollar also added to crude's gains along with bullish housing data from the US. Construction of new homes in the US rose more than expected in June, according to government data, boosting hopes of signs of an economic revival.
Large spec funds increased their length last week, according to the CFTC, indicating a little risk appetite might also be returning.
In addition a fire at a Texas refinery over the weekend might trim US supplies a tad over the next few weeks.
Wiseman Ups Milk Price
In a smart attention-grabbing move, Robert Wiseman Dairies have increased it's milk price effective from 1st August, guaranteed for two months.
OK, it's only 0.3 ppl to 24.32 ppl, but every little helps.
Stronger returns from bulk cream in the last quarter are actually being passed on, at least in part, to milk producers. What a novel idea!
KFC In Trouble
Everybody's favourite well-balanced nutritional snack, a bargain bucket with Vienetta and 2 litres of coke, KFC are under fire following their recent UK TV advertising campaign that claims "KFC. Fresh, on the bone chicken, every store, every day."
In fact the Advertising Standards Authority have discovered that the meat was delivered to branches only three times a week.
I'm surprised it's as often as that.
Hands up who's heard the urban myth about the guy who orders a chicken burger from KFC stipulating 'no mayo' only to get home to find that the stupid eastern European monkey behind the counter has given him mayo after all. So he takes it back to complain only to find that it's not mayo, it's a chicken with a huge abscess.
Or the one about the girl who tucked into Kentucky Fried Mouse.
Would you like to go large with that?
