CBOT Closing Comments
Soybeans
About to expire August soybeans closed at $11.00, down 87 ¼ cents. and November closed at $9.81 ½, down 37 ¼ cents. A sharp rise in the US dollar index and sharply lower crude oil futures weighed on the soy complex. Lower than expected monthly crush numbers added pressure to the soy complex. Weather forecasts for next week over much of the Midwest will see a continuation of beneficial crop development conditions, which also pressured soy futures.
Corn
September corn finished at $3.19 ¼, down 5 ¼ cents, and December corn finished at $3.27 ¾, down 4 ¼ cents. A $3 plus decline in crude oil futures and a sharply higher US dollar index weighed on corn. Spillover sell off in the soy complex pressured corn as well. Weather forecasts for next week look favourable, whilst large production estimates from the USDA also limit upside potential.
Wheat
September wheat settled at $4.81 ¾, up ¼ cent. Wheat started it's downwards slide much earlier than beans and corn, so should hopefully emerge out of the other side of it that much earlier too. Though weather forecasts over much of the northern Plains for the next several days are seen as unfavourable to maturing spring wheat crops and inhibiting early harvest, larger than expected USDA spring wheat production estimates weighed on Minneapolis contracts.
EU Wheat Drifts Lower
EU wheat futures drifted lower Friday with November Paris milling wheat closing down EUR1.75 at EUR129.75/tonne, and November London feed wheat trading down GBP0.35 at GBP97.75/tonne.
It was back to business as usual today, with harvest pressure weighing on the market. Winter wheat harvesting in Germany and France is just about complete, and yields are said to be generally better than expected.
In the UK, the winter barley is now 90% harvested according to ADAS, slightly behind normal progress of 95%, with yields a little below average at 5.5-6.7 MT/ha. Spring barley is around 9% harvested (35% normally), with average yields of 4.6-5.8 MT.ha. Malting quality is reasonable on this season's barley harvest, they say.
Winter wheat is late at around 12% harvested (normally 40% done), mostly in the South East and East, with yields so far ranging from 6-13MT/ha, and quality better than last year (it could hardly be worse), with hagbergs of 280-300 and proteins in the 12.7-13.5% region amongst the milling wheats cut.
The OSR rape harvest is 74% done, which is even behind last season's pace of 80% cut, with yields better than anticipated at 2.9-3.9 MT/ha, and oil contents good. The area still to be harvested contains some of the worse looking crops, which may bring final yields lower than currently, they add.
Nogstradamus: The Future For Soybeans
The overnight session saw further erosion of nearby premiums for soybeans, whilst corn and wheat traded in a fairly narrow range.
August beans go off the board today, and often that means that anything goes and wild fluctuations can occur. September beans now only offer something like a 40c premium over new crop November.
Whilst I still subscribe to the idea of a possible technical tight squeeze towards the end of the September contract life, beyond that things have got to be bearish for beans.
Record production in the US could easily be followed by record output from South America too, a quick look at the price of beans relative to corn and wheat tells you all you need to know about what farmers planting intentions are likely to be in Brazil and Argentina this autumn.
A situation not unlike that of wheat plantings two years ago. This season it will be soybeans getting planted in the backyards of Buenos Aires and São Paulo.
The fact that beans are of course also a less fertiliser-hungry crop will not have escaped the attention of cash-strapped farmers in Argentina in particular. Nor will they have forgotten the export bans on wheat and corn in the last couple of years. Buoyed by $10 beans, and optimism that maybe they are finally going to get something in the way of tax concessions from the government, it's a no-brainer.
Plantings will be record large, you can rely on that, that only leaves Mother Nature to do her unreliable bit. The balance of probability suggests that another year of extreme drought in Argentina is unlikely, especially given the continued development of El Nino in the tropical Pacific.
Every drought has a sliver lining, and this one seems set to favour plenty of rain for South America this next season.
Whilst US old crop stocks are undoubtedly tight, probably tighter than the USDA report on Wednesday shows, US new crop ending stocks have probably been significantly under-estimated. Never the fastest to react to changing market conditions, it may be some months yet before the USDA start to accurately reflect the impact of sharply higher production in South America on 2009/10 exports and ending stocks.
Diageo Under Fire For Importing Swedish Malt
"Manufactured in Scotland using the finest natural ingredients, like natural Highland spring water, oak distilled using traditional methods handed down for generations etc, etc." Or something like that.
You know where you are with a Scotch don't you? You can almost smell the fresh crisp Highland air, bagpipes wailing in the background, wee lasses in short kilts doing that funny dancing and Geoff Capes lookalikes tossing their cabers, knives tucked neatly into their socks.
"Take a wee dram with me bonny laddie, so you will, the noo." Auld Lang Syne, Robbie Burns, haggis, deep fried Mars bars and Hogmanay. Traditions that go back thousands of years. OK the Mars bars are a bit more recent than that, but you get my drift.
I've personally never seen "made using Swedish malt imported via Dundee docks" on the side of a bottle of the stuff, and if you did it would hardly put you in the mood to buy it now would it? But that's exactly what you could be drinking.
The firm, quite rightly, came under severe fire from the NFU Scotland for bringing in a 3,000 MT cargo of Swedish malt into Dundee this week, despite there still being plenty of old crop grain in Scottish stores from the 2008 harvest.
Buying local and improving your carbon footprint clearly goes out of the window when the world's biggest whisky producer can save a few bob.
Maybe they should advertise Johnny Walker with the two birds from Abba dancing around in short kilts whilst Benny and Bjorn toss each other's cabers?
Nogstradamus: The Future For Wheat
We're slap bang in the middle of harvest and prices are depressed. No huge surprises there then really, but what does the future hold for wheat?
It looks like there could still be some more pain before we get any gain, unfortunately. Last year's post-harvest lows weren't set until October, and the way things are at the moment, I don't think that it would be unreasonable to suggest that something similar might happen again this year.
Is there any light at the end of the tunnel for wheat? Whisper it quietly, but I think that there might be.
One thing to consider is that our Eastern European chums, who were ever so keen to jump on the wheat gravy train two years ago, are not quite so enamoured with cereal production now.
In fact, various reports I am reading suggest that farmers in Ukraine, Bulgaria, Romania, Russia etc are royally pissed off that the gravy train came to a shuddering halt so soon after they'd piled aboard.
In Bulgaria, the cost of producing wheat for this harvest was around BGN 270-280, according to their Grain Producers' Association. That's equivalent of EUR 140/tonne. With prices where they are now only farmers who can produce at least 350-400 kg of wheat per decare will be able to survive, they say. With an average yield of 295 kg/decare this year many Bulgarian farmers face bankruptcy, and plantings are likely to be sharply lower for the 2009/10 crop.
It's a similar situation in Romania where wheat production costs this year are said to be around RON 1,800 per hectare, or RON 720/tonne. That's around EUR 170/tonne. Around a third of production costs come from state subsidies, leaving farmers to fund around the remaining EUR 115/tonne themselves, with wheat on the domestic market currently only worth around EUR 95/tonne. A government-backed scheme, similar to intervention, has been swamped with offers of grain that there isn't enough space to store in the licensed silos, or enough government money to pay for.
Fast forward to Ukraine, where the cash-strapped government is also attempting to shore up prices by buying domestic grain with money it hasn't got. The law of the land says that agri-giants like Landkom can reclaim VAT paid on grain that was exported and not consumed in the country. Unfortunately for the Ukraine government (and Landkom) it simply hasn't got the money on last year's record exports, let alone this year's. The country with the lowest credit rating in Europe has, to put it bluntly, run out of cash. So there's little in the way of encouragement here to plant wheat again for next season, whether your big or small.
A contact in Russia predicted some time ago that Russian grain production would be down in 2009 and then down again for the 2010 harvest, due to a similar combination of circumstances. The situation here has been exacerbated by drought this summer, leaving farmers and agricultural companies on the brink of bankruptcy after borrowing heavily to fund this season's "sure thing" harvest.
In the current financial crisis, where is the money going to come from to pay for planting for 2010? With market prices currently below the cost of production, it's a bit like doing 125% mortgages on property in Eastern Europe. Who'd want a slice of that cake?
Meanwhile lurking in the wings we have El Nino. India's monsoon season has produced 29% less rain than normal to date (June 1st - Aug 11th), with only six weeks to go until the rainy season ends. Here, around 60% of the land is totally rain-fed, the remaining 40% relies on irrigation from reservoirs normally filled with abundant monsoon rains. This is the second largest producer and consumer of wheat in the world.
India, it could be argued, were partly responsible for getting the last big wheat rally going by virtue of their aggressive international buying in early 2008. They've already lit a fire under the sugar market, if the rains hold off for the next six weeks, and wheat prices into the autumn continue to discourage winter sowings in Eastern Europe things could look a lot different six months from now.
UK Harvest Progress
According to ADAS, the half decent weather that I brought back from holiday has enabled the domestic UK harvest to move along quite well over the last week, although progress still lags behind the six year average.
Winter barley is now 90% harvested they say, slightly behind normal progress of 95%,with yields a little below average at 5.5-6.7 MT/ha. Spring barley is around 9% harvested (35% normally), with average yields of 4.6-5.8 MT.ha. Malting quality is reasonable on this season's barley harvest, they say.
Winter wheat is late at around 12% harvested (normally 40% done), mostly in the South East and East, with yields so far ranging from 6-13MT/ha, and quality better than last year (it could hardly be worse), with hagbergs of 280-300 and proteins in the 12.7-13.5% region amongst the milling wheats cut.
The OSR rape harvest is 74% done, which is even behind last season's pace of 80% cut, with yields better than anticipated at 2.9-3.9 MT/ha, and oil contents good. The area still to be harvested contains some of the worse looking crops, which may bring final yields lower than currently, they add.
Full report here
Drought In Urals A Threat To Russian Agriculture
After a bumper harvest in 2008, things aren't looking quite so rosy in Russia this year, with drought and hail in the Urals grain basket wiping out large areas of crops.
As well as a lower grain harvest, farmers in the region face a serious shortage of fodder for the coming winter, according to the following article.
I think that maybe something got lost in translation here, as in it they say that the Orenburg region has lost more than 80% of cereals to the drought. That seems like an astonishingly high percentage, I suspect that they mean 80% of crops in the region were affected by drought:
Ruin of Harvest in Russia Will Shake World Markets
CBOT Closing Comments
Soybeans
August soybeans closed at $11.87 ¼, down 28 ¾ cents, November soybeans finished at $10.65 ¼, down 25 ¼ cents. Soybean export sales were a combined total of 1,021,900 MT, slightly above the high end of trade estimates. Although there is cold weather in the forecast a week from now, the trade seemed ultimately more interested in concentrating on nearby beneficial conditions. Early weather concerns had seen August beans hit 25 ¼ up at one stage.
Corn
September corn closed at $3.24 ½, down 6 ¼ cents, whilst December ended at $3.32, down 4 ¼ cents. Export sales were 833,700 MT, towards to lower end of pre-report estimates ranging from 800,000 to 1.2 MMT. Nearby weather is mostly favourable, and spillover weakness from yesterday's bearish USDA report added to the weaker tone. South Korea bought 110,000 MT of US corn overnight.
Wheat
September wheat closed at $4.81 ½, down 8 ¾ cents. Production increases from Strategie Grains in Europe added to a bearish overtone from yesterday's USDA report. The spring wheat harvest is now underway across Montana and North Dakota, although rain is hampering early progress. Export sales were 479,100 MT, compared to pre-report estimates of 300,000 to 500,000 MT.
EU Wheat Ends Nervously Higher
EU wheat futures closed nervously higher with November Paris milling wheat trading up EUR0.25 at EUR131.50/tonne, and London November feed wheat closing up GBP0.50 at GBP98.10/tonne.
Buyers are generally reluctant and in no hurry to put fresh purchases on the books, with the downwards trend very much in their favour.
French analysts Strategie Grains said that this year's EU-27 cereal harvest will come in at 289 MMT, that's 6 MMT higher than their July estimate, although still 7% lower than last year's bumper harvest.
Soft wheat production will now be 130 MMT they say, that's 3.5 MMT more than their July estimate of 126.5 MMT, and is the result of better than expected yields, particularly in France and Germany.
They estimate that 70% of the EU-27 wheat crop had been cut as of Aug. 6, and predict that 69% of this season's crop will make milling standard.
Barley production was raised 1.3 MMT to 60.7 MMT, again largely due to better than expected yields from French and German producers, where output was raised 600,000 MT and 300,000 MT respectively.
eCBOT Close, Early Call
The overnight grains closed steadier, with beans around 15-17 cents firmer, corn up 6-7 cents and wheat around 5 cents firmer.
Beans benefited from the bullish aftermath to yesterday's USDA report, dragging corn and wheat with it, even though a bullish leaning for beans is exactly what the trade had been expecting.
Despite talk that China's soybean imports will start to drop off, they keep coming back for more, and the government's weekly auction at levels equivalent to almost $15/bu continue to find few takers.
Although the USDA report was bearish for corn, they didn't cut the acreage contrary to what had been expected AND increased yields towards the upper end of guesstimates, corn moved higher overnight.
South Korea bought 110,000 MT of US corn overnight.
Yesterday's wheat numbers were in line with expectations, and Strategie Grains have increased their EU production estimate by 3.5 MMT from last month citing better than expected yields out of France and Germany in particular. The EU-27 crop is around 70% cut they estimate.
Weather forecasts calling for frost potential in the Canadian Prairies as early as Aug. 20 is seen as the main threat on the horizon for all sectors of the complex.
Weekly export sales were towards the upper end of estimations for beans, corn and wheat.
Crude oil is more than $1/barrel firmer, the dollar is weak and stocks expected to follow Europe and Asia higher.
Early calls for this afternoon's CBOT session: called 5 to 10 higher; soybeans called 15 to 20 higher; wheat called 1 to 3 higher.
USDA Weekly Export Sales
For the period July 31-August 6, 2009 the USDA reported export sales as follows:
Soybeans
Net sales of 259,500 MT old crop and 762,400 MT new crop, giving combined sales of just over 1 MMT. Pre-report export sales estimates were 250,000 to 1,000,000 MT. Old crop sales were primarily for Indonesia (86,000 MT), Taiwan (74,600 MT) and China (60,900 MT). New crop sales were primarily for unknown destinations (371,000 MT) and China (290,000 MT).
Corn
Export sales were 541,200 MT old crop and 292,500 MT new crop giving combined sales of 833,700 MT. Pre-report estimates ranged from 800,000 to 1.2 MMT. the main old crop homes were Increases reported for Japan (345,600 MT) and South Korea (88,000 MT). The main new crop buyers were primarily for Egypt (60,000 MT), unknown destinations (53,800 MT), Peru (44,000 MT), and Mexico (40,000 MT).
Wheat
Export sales were 479,100 MT, compared to pre-report estimates of 300,000 to 500,000 MT. Increases were reported for Japan (83,600 MT), Nigeria (67,500 MT), Egypt (66,000 MT), Indonesia (58,000 MT), Yemen (49,000 MT), Chile (33,000 MT), and the Philippines (32,800 MT).
US Could Run Out Of Sugar
London white sugar futures surged to new all-time highs Thursday as it was revealed that US food giants including Kraft Foods, Hershey's and Mars had written to US Agriculture Secretary Tom Vilsack saying that the US could "virtually run out of sugar". They urged Vislack to increase the amount of tariff-free sugar they can import.
Meanwhile, monsoon rains continue to elude northern India's sugar cane producing regions, cutting production there by an estimated 44%, according to the Indian Sugar Mills Association. The rainy season, which ends next month, has so far produced 29% lower than normal rainfall June 1 to Aug. 11.
Output in Maharashtra, India's largest producing state, is forecast to halve to 4.6 MMT this season, from 9.1 MMT last year.
Meanwhile global demand is seen outstripping production by 5-7 MMT in the coming season.
London white sugar surged $19.90 to an all-time high of $589.90/tonne.
Strategie Grains Increase EU Grain Output
French analysts Strategie Grains say that this year's EU-27 cereal harvest will come in at 289 MMT, that's 6 MMT higher than their July estimate, although still 7% lower than last year's bumper harvest.
Soft wheat production will now be 130 MMT they say, that's 3.5 MMT more than their July estimate of 126.5 MMT, and is the result of better than expected yields, particularly in France and Germany. Again this is 7% lower than last season.
They estimate that 70% of the EU-27 wheat crop had been cut as of Aug. 6, and predict that 69% of this season's crop will make milling standard.
Barley production was raised 1.3 MMT to 60.7 MMT, again largely due to better than expected yields from French and German producers, where output was raised 600,000 MT and 300,000 MT respectively. That is also 7% down on last year's EU-27 output of 65.5 MMT. They say that 32% of this year's spring barley will be suitable for malting.
EU-27 corn production is seen at 56.5 MMT, 9% down on last year.
Ukraine Harvest Nearing Completion
The 2009 harvest is nearing completion in the Ukraine, with 95% of the wheat crop cut as of Aug 10, producing 20.6 MMT in bunker weight, according to UkrAgroConsult. Average yields are 3.17 MT/ha this season they say, almost 10% down on last year's 3.5 MT/ha.
Barley harvesting was 94% done, producing 12.1 MMT at an average yield of 2.51 MT/ha, they add. The rapeseed crop is also 94% harvested, with output at 1.8 MMT, with an average yield of 1.79 MT/ha.
A final clean weight wheat harvest of around 20 MMT would represent a 23% reduction on 2008's record wheat harvest of 25.9 MMT. Barley output in 2008 was 12.3 MMT and OSR production 2.9 MMT.
CBOT Closing Comments
Soybeans
August soybeans closed at $12.16, down ½ cent, November beans finished at $10.44, up 5 ½ cents. The USDA lowered the yield estimates from 42.6 bushels per acre on the July report to 41.7 bushels per acre on this report. Ending stocks for 2008/09 are estimated at 110 million bushels same as the July report and above the trade estimate of 104 million bushels. USDA estimated ending stocks for 2009/10 at 210 million bushels, 2 million bushels less than the average trade guess. China was a confirmed buyer of more new crop soybeans today, booking 113,000 MT. Export sales estimates for tomorrow are 250,000 to 1,000,000 MT.
Corn
September corn closed at $3.30 ¾, up 4 ¼ cents, and December at $3.36 ¼, up 5 ¼ cents. USDA pegs 2009/10 beginning stocks at 1.72 billion bushels with ending stocks at 1.621 billion bushels, with trade guesses at 1.748 and 1.697 respectively. The USDA yield estimate of 159.5 bu/acre was also towards the high end of trade estimates. The Climate Prediction Center is looking for a return to cooler than normal temperatures after the swing to above normal temperatures from August 18 through the 22nd for states north of the Texas panhandle and east of the Rockies to the Ohio River Valley. Estimates for corn export sales range from 800 to 1.2 MMT for tomorrow’s weekly report.
Wheat
September wheat finished at $4.90 ¼, up 5 cents. The USDA estimates wheat production at 2.184 billion bushels, higher than the average trade guess of 2.151 billion bushels for all wheat. Export sales estimates are 300,000 to 500,000 MT for tomorrow’s report. The potential for an early frost in Canada is a concern for US wheat. This morning the northern fringes of the Canadian canola crop in the Prairie saw temperatures in the low 40’s with one reporting station seeing 33 degrees F for their morning low, according to QT Weather. Saturday and Sunday maximum temperatures will be -08 to -16 degrees below normal from Alberta through Saskatchewan and southward over the Wyoming and Colorado Rockies, they added.
EU Wheat Ends With Little Change
EU wheat futures closed with little change Wednesday. Paris November milling wheat ended up EUR0.50 at EUR131.25/tonne, and London November feed wheat closed unchanged at GBP97.60/tonne.
The long-awaited USDA report did little other than muddy the waters. The soybean numbers were a little bullish, corn bearish and wheat neutral.
The USDA did however lower it's production estimate for Russian wheat by 4.5 MMT this coming season, which was a bit of a surprise, and towards the lower range of analysts estimates.
Canadian output was also lowered by 1 MMT, and there are reports of temperatures dipping sub-zero as early as 20th Aug on the Canadian Prairies. With a late-planted crop this could be potentially harmful to final output.
This morning the northern fringes of the Canadian canola crop in the Prairie saw temperatures in the low 40’s with one reporting station seeing 33 degrees F for their morning low, according to QT Weather.
Saturday and Sunday maximum temperatures will be -08 to -16 degrees below normal from Alberta through Saskatchewan and southward over the Wyoming and Colorado Rockies, they add.
Early Call, USDA Report Reaction
The USDA report is being called bearish corn, bullish beans and neutral for wheat. The bean production and yield numbers came in a little lower than anticipated, and the USDA have subsequently confirmed a sale of 113,000 MT of new-crop beans to China. That adds to a sale of 110,000 MT yesterday, and seems to confirm that they haven't gone away just yet.
The corn production and yield numbers were higher than expected, and towards the upper range of trade estimates.
Wheat was always going to take a back seat today, and so it proved. Perhaps the biggest surprise was the USDA lopping 4.5 MMT off Russian production this season.
Early calls for this afternoon's CBOT session: Corn called 3-5 cents lower; beans called 5-10 cents higher; wheat called steady to 2 cents lower.
Today's USDA Faux Pas
Have you spotted it yet? You might have heard that there's a drought on in India. Maybe you are aware that they had their worst monsoon rains in 83 years during June? Perhaps it may have come to your attention that India's monsoon season has produced 28% less rain than normal to date (June 1st - Aug 9th), with only six weeks to go until the rainy season ends? Here around 60% of the agricultural land is exclusively rain-fed, the remaining 40% relies on irrigation from reservoirs normally filled with abundant monsoon rains.
The sugar market has been hitting regular daily highs on the back of this drought, so what does this mean for wheat production potential in the world's second largest producer for the season ahead?
That's right it's increased by 3 MMT from last month to an all-time high of 80.58 MMT!
USDA WASDE Estimates, Russian Wheat Production Cut 4.5 MMT
There were only a few tweaks in today's USDA WASDE report as regards global production numbers. South African corn output was lowered 1 MMT to 10.5 MMT, whilst Chinese and Argy corn production estimates were left unchanged at 162.5 MMT and 15.0 MMT respectively.
For wheat, EU-27 output was raised from 134.65 MMT to 136.29 MMT, Chinese and Ukraine production was also increased by 1 MMT each to 114.5 MMT and 19.5 MMT. Elsewhere in the world Canadian output was lowered by 1 MMT to 22.5 MMT, Argy production lowered by a similar amount to 8.5 MMT, and perhaps the biggest surprise package was Russian output dropped 4.5 MMT to 55.5 MMT.
There were no early changes to 2009/10 soybean production in South America with Brazilian production still seen at 60.0 MMT and Argy output 51.0 MMT.
USDA Yield Estimates
The USDA today estimated 2009 US crop yields as follows:
Aug 12 Avg Guess Range USDA July
----------------------------------------------------------
Corn 159.5 157.1 153.0-160.3 153.4
Soybeans 41.7 42.1 40.9-43.5 42.6
USDA Crop Production/Stocks Numbers
Here's a quick summary of today's magic numbers from the USDA:
Aug 12 Avg Guess Range Last USDA
US corn
----------------------------------------------------------
Production 12.761 12.472 11.792-12.814 12.290
08/09 Stks 1.720 1.746 1.600-1.820 1.770
09/10 Stks 1.621 1.701 1.517-1.892 1.550
----------------------------------------------------------
US beans
----------------------------------------------------------
Production 3.199 3.213 3.000-3.275 3.260
08/09 Stks 0.110 0.106 0.090-0.115 0.110
09/10 Stks 0.210 0.221 0.145-0.305 0.250
----------------------------------------------------------
All wheat
----------------------------------------------------------
Production 2.184 2.150 2.086-2.238 2.112
09/10 Stks 0.743 0.737 0.638-0.812 0.706
Grain Market Snippets
The Chinese government auctions this week have found takers for 725,900 MT of corn and just 15,000 MT of soybeans.
Private Chinese importers booked 110,000 MT of new crop US soybeans yesterday. Clearly, US prices will need to move up further or the government drop their minimum price ideas if they really want to shift some volume.
China's National Grain and Oils Information Centre, or CNGOIC, say that this season's wheat harvest will now total 115.5 MMT, corn output will reach 166.5 MMT and soybean production 15.0 MMT.
The French Ministry upped their soft wheat production estimate to 36.1 MMT on Friday. FranceAgriMer say that the winter barley harvest there is now finished and spring barley is around 75% done in the south, and 65% complete in the north.
Wheat harvesting in France is said to be pretty much complete in the south.
OSR production in France will now amount to 5.3 MMT, say the Ministry, up from 4.7 MMT last season. Corn production will come in at 15.6 MMT they say, slightly down on 16.0 MMT last year.
The German wheat crop is said to be around 85% cut in the south and 65% harvested in the north. OSR yields look set to be a record high.
Around 60% of the wheat crop has been harvested in southern Poland, but in the north things are much slower at only around 15% done, according to Sparks Polska.
Bulgarian wheat production will come to around 3.1 MMT this season, according to the local Grain Producers' Association.
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Sterling Gets The Wobbles
The pound suffered another case of the jitters this morning, falling below $1.64 before rebounding slightly to hover around the $1.6440-1.6450 range.
Last week's surprise decision to increase QE spending by GBP50 billion to GBP175 billion has weighed on the pound ever since.
This morning's jobs data said that the unemployment rate rose to 7.8 percent in June from 7.6 percent in May. The claimant count for July was up 24,900 from 23,800 in June.
Last week's highs above $1.70 already seem a million miles away. Bearish momentum has been building up since last week's QE announcement. There is concern that the BoE are dithering, not sure what to do for the best.
The market now awaits the BoE's quarterly Inflation Report due at 10.30 BST. A downwards revision in it's forecasts for inflation would put sterling under further pressure.
EU Wheat Has Quiet Day Ahead Of USDA Report
EU wheat had a quiet day Tuesday ahead of tomorrow's important USDA crop reports. Paris November milling wheat closed EUR0.25 higher at EUR130.75/tonne, and London November feed wheat closed down GBP0.65 at GBP97.60/tonne.
Tomorrow's USDA report is expected to be bearish for wheat and corn, which may provide some further downwards impetus in the midst of the European harvest.
Everywhere you look, the "experts" are all bearish on wheat. Stocks are too high, demand is too low, harvest pressure blah, blah, blah.
Lets dig out a few words like "burdensome" and "plentiful" and throw those into the mix as well.
Even our old chums at Goldman Sachs appear to have got off the wheat gravy train, saying that "the optimal Northern Hemisphere growing season reinforces our expectations of a global wheat surplus next year on top of already high inventories resulting from last year's robust harvests. We continue to believe that wheat price upside remains limited."
But then again, they did also predict that crude oil would average $150/barrel in 2009.
CBOT Closing Comments
Soybeans
August soybeans closed 46 cents higher at $12.16 1/2 a bushel, September settled 30 cents higher at $10.97, and November soybeans ended 28 1/2 cents higher at $10.38 1/2. The trade appears to be expecting lower production numbers from the USDA tomorrow. Analysts’ average trade estimate is for output of 3.219 billion bushels with a 104 million bushel carryout for 2008/09 and a 212 million bushel carryout for 2009/10 marketing year.
Corn
September corn closed at $3.26 1/2, up 2 ¼ cents, and December corn at $3.31, up ½ cent. Unlike beans, the trade is expecting increased corn production numbers in tomorrow's USDA report. Analysts are expecting the report to show a 12.49 billion bushel corn crop, with ending stocks for 2008/09 at 1.748 billion bushels and 1.697 billion bushels for 2009/10.
Wheat
September wheat closed at $4.85 ¼, down 9 cents. As with corn, tomorrow's USDA report is expected to be bearish wheat. Average estimates for all wheat production is at 2.15 billion bushels, up from the July estimate of 2.112 billion bushels. Wheat carryout is expected to increase by 31 million bushels from the July report. Cooler weather is coming into Canada at the end of this week and there are rumours of a possible frost around August 20th in the Canadian prairies.
Czech Wheat Harvest Seen 10 Pct Lower
The Czech wheat harvest for 2009/10 is seen at 4.2 MMT, down 10% from 4.7 MMT last season, according to the Czech Statistical Office.
Winter wheat yields are seen at 5.07 MT/ha, 14% down on last year's 5.88 MT/ha.
The total grain harvest this year will be 6.7 MMT, down 10.4% on last year's 7.5 MMT, they say.
Rapeseed production is seen at 1 MMT, 4.6% down on last year.
Despite lower production than last year, this season's output is in line with the average for the last five years, they add.
Czech out the full report for yourself here
Canadian Wheat Crop Seen 21 Pct Lower
Canadian what production in 2009/10 is seen 21.3% lower at 22.5 MMT, according to Agriculture and Agri-Food Canada (AAFC). All wheat output was 28.6 MMT in 2008/09.
Barley production will be 8.7 MMT (down 26.3% from 11.8 MMT), corn output 10.2 MMT ( 10.6 MMT), and canola output 10.3 MMT (down 18.3% from 12.6 MMT).
Soybean production will be 3.6 MMT, up from 3.3 MMT in 2008/09, they add.
The wheat figure is a million tonnes below the latest USDA estimate. Production may come in lower than that according to some estimates, who suggest that the current production forecasts are based on a planted area survey conducted in early June.
Then farmers said that they intended to sow 10.3 million acres of wheat this year. Some of that wheat maybe didn't get planted due to extreme dryness in parts of Alberta and western Saskatchewan.
Sugar Hits New Highs
London white sugar has surged to fresh all-time highs this morning, reaching $566.50/tonne, the highest since trading began is US dollars in 1983.
In New York prices hit 22.44 cents/pound last night, a level not seen since 1981. Amazingly, we are still some way off New York's record all-time highs. Prices surged above 50 cents per pound in 1974-75 and 1980-81.
Sugar-broker Czarnikow said that global stocks at the end of the current 2008-09 will fall to 20 MMT, well below the current range of analysts estimates of 30-70 MMT.
Poor monsoon rains in India continues to hamper production there, with stocks dwindling ahead of the Diwali festival in mid-October. Meanwhile Egypt has lifted import duties to alleviate shortage fears in the run-up to Ramadan.
USDA Crop Condition Report
After the close the USDA reported on the latest crop conditions for beans corn & wheat, here's what they had to say:
Corn
Condition ratings this afternoon, show 89% of the corn crop in the silking stage, improving over last week’s 76% with good growing weather. Corn in the dough stage is at 24% compared to 14% last week and 46% for the five year average. Corn is 5% dented compared to 6% last year and 14% for the five year average. Condition ratings were 10 poor/very poor and 68% good/excellent, unchanged from a week ago.
Beans
The weekly crop report showed good progress in crop maturity listing 86% of the soybeans blooming compared to 76% last week and 55% of the crop setting pods compared to 36% last week. Condition ratings are at 9% poor/very poor and 66% good/excellent; one point deterioration from the previous week in those categories.
Wheat
Crop condition ratings showed MGEX wheat (HRS) 8% harvested compared to 15% last year and 31% for the five year average. Condition ratings for HRS improved and declined one point. Poor/very poor is at 7% compared to 6% last week and good/excellent is 72% compared to 71% last week. Winter wheat is 91% harvested; the same as last year at this time and compared to 94% for the five year average.
CBOT Closing Comments
Soybeans
August soybeans at $11.70 ½, down 14 cents, November beans finished at $10.10, down 28 ½ cents. Beans fell foul of profit-taking ahead of Wednesday's USDA report. If you look at the charts they have gained the most over the last few weeks, so were vulnerable to a correction. Old crop supplies stay very, very tight, but new crop is a totally different story.
Corn
September corn closed at $3.34 ¼, up 2 ¼ cents, December corn ended at $3.30 ½, down 4 cents. Private exporters reported corn sales to Egypt of 60,000 MT for 2008/09 marketing year and 60,000 for 2009/10 marketing year. Analysts are expecting the USDA crop production report to show a 12.49 billion bushel corn crop on the August 12th USDA report with ending stocks for 2008/09 at 1.748 billion bushels and 1.697 billion bushels for 2009/10. Crude oil closed mixed and Ethanol was slightly lower.
Wheat
September wheat finished at $4.94 ¼, up 4 ¾ cents. Prices did pop very briefly above $5, but quickly fell back again, suggesting that a break and hold above this level will be needed to confirm a harvest low is in. Analysts believe the August crop production report will peg US wheat production at 2.151 billion bushels on Wednesday’s report. Weather conditions should be favourable for continued harvest and crop maturity over the next week.
EU Wheat Futures End Flat Monday
EU wheat futures started the week lower, but clawed back those losses at the end to close at or around unchanged levels, helped by a firmer dollar.
Paris November milling wheat futures closed flat at EUR130.50/tonne, and London November feed wheat also closed unchanged at GBP98.25/tonne.
The market remains hopelessly lacklustre, crop production in western Europe is pretty good to better than expected, output in the Black Sea however is largely worse than anticipated.
There is certainly harvest pressure, of that there is no doubt, but why wouldn't there be in the middle of August?
Media reports suggest that, yet again, there have been worker disputes at the work in progress Ensus refinery in Middlesbrough in the past week. These appear to have been resolved, at least for now, but will inevitably push production back another week or two.
UK weather, although not as bad as last year, remains stubbornly uncooperative. In the south east things seem fine, but elsewhere harvesting is late with only around 60% of winter barley cut, compared to 90% normally.
eCBOT Close, Early Call
The overnight grains all closed narrowly mixed, with few changes more than a couple of cents either way.
A firmer dollar and weaker crude are a little bearish. There is a pick up in "we're turning/have turned the corner" talk in the US after last week's better-than-anticipated jobs data.
Book-squaring ahead of Wednesday's USDA report is likely to be a feature, and it seems unlikely at this stage that we will see any major movements one way or the other before then, unless something major comes out of the blue.
US weather looks generally favourable, some increased heat later in the week shouldn't be too threatening at this stage.
After the close tonight we will also get crop progress & condition ratings from the USDA.
The Black Sea harvest is well advanced, although yields are said to be disappointing. Not so in western Europe where yields seem to be coming in better than expected.
US wheat has got a small boost from talk that Japan will need more of the grain in the season ahead, after it's own crop has suffered due to rain. Japan, as we know, usually buys mostly US wheat in it's regular weekly tenders.
Early calls for this afternoon's CBOT session: corn called 1 to 3 higher; soybeans called 2 lower to 3 higher; wheat called 1 to 2 lower.
USDA Report: What Nogger Says
Only the USDA could decide that a review of their June corn acreage numbers, didn't also warrant a review of their soybean planting figures as well.
It already seems to me that, before the numbers are even out, they may well end up being consigned to the "unreliable and outdated information" folder.
The trade is now saying that corn acres were probably in reality anywhere between a half and two million lower than the USDA's June number of 87.035 million. Back in June you may recall that the USDA stunned the trade with an estimate 1 million higher than the highest trade guess and a whopping 3 million above the average trade guess.
Yield potential has undoubtedly improved since then, so at least some if not all of the anticipated reduction in corn acres should be offset by that.
The USDA's June soybean acreage estimate was 77.483 million acres, and it looks like we are stuck with that for the time being.
Until we get the USDA figures it is impossible to guess how far out from reality they will be. Recent reports have sprung regular "completely off the radar" surprises, this one promises to be no exception.
USDA Report: What The Experts Say
The USDA are out Wednesday with their latest musings on WASDE and a revised version of the June corn acreage report, after saying that planting delays in some states made it's June figures "uncertain".
Farm Futures magazine reckon that corn acres could be as much as two million lower than the USDA's June figure, coming in at 85.04 million acres. That lower acreage will however be partially offset by higher yields, they say. They are not alone in projecting that final yields this season could come in a little above 160 bu/acre, as opposed to the 153.4 bu/acre in the USDA June report.
The average trade estimates ahead of Wednesday’s USDA crop production report for 2009 corn acreage, production and yield are 86.333 million acres, 12.49 billion bushels and 157.295 bu/acre.
For soybeans, the average trade estimates ahead of Wednesday’s report are production of 3.219 billion bushels and a yield of 42.13 bushels per acre.
The average trade estimates ahead of Wednesday’s USDA crop production report for 2009 all wheat and winter wheat production are 2.151 billion bushels and 1.5315 billion bushels respectively.
Ukraine Harvest Wrapping Up
The grain harvest in the Ukraine is already winding down, with an estimated 89% of planted area already cut, according to the Ag Ministry.
As of Aug 7th this season's harvest had produced 33 MMT of grain, including 20 MMT of wheat in bunker weight off 92% of the planted area. Wheat yields have so far averaged 3.16 MT/hectare, compared to 3.5 MT/ha a year ago.
The barley harvest is 91% complete at 11.6 MMT, they add.
With 89% of the harvest already in, they are going to have their work cut out to meet the official estimate of a total grain crop of 42-43 MMT this year, even if much of it is higher yielding corn.
In 2008 the Ukraine harvested a bumper grain crop of 53.3 MMT.
Pound Hits 10-Day Low vs Dollar
The pound is down to a 10-day low against the US dollar, falling to $1.6613 after getting as high as $1.7041 last week.
Last week's sanctioning of throwing an extra £25 billion pounds into the £150 billion QE kitty, £125 billion of which has already been spent, is obviously going to come at a cost.
It must be great to have your own little magic money machine like Alistair Darling mustn't it?
The more we print and the faster we print it, the quicker we'll drag ourselves out of all this, he might as well have said. What could possibly go wrong?
I'm Back! Early Thoughts....
I'm back in Blighty and it's business as usual ie it's raining. OK, to be fair it's been a decent couple of days here in North Yorkshire since I stepped off the plane. It would seem that the harvest is maybe a little further advanced than I'd expected from my ivory tower on the Costa.
Certainly, if you farm in the south east you seem to have done rather well for yourself. Some reports I read over the weekend talked of farmers "wrapping up their wheat harvest" and "quality much better than last year... I don't know anyone who's disappointed" etc.
Draw a very broad line from say Devon up to North Yorks and things don't appear to be quite so rosy. One report even said "worse than last year" - now that has to be bad! Generally though it would seem that things aren't quite that bad.
ADAS reckon that winter barley is about 60% cut nationally, with OSR harvesting at a similar level. Frontier say that "milling quality is good, with proteins looking better than a year ago. At this stage there is little damage to hagberg."
On the Continent Agritel, say that the French wheat crop could now come in at 38.4 MMT, and the association of German farm cooperatives (DRV), now estimating the 2009 German wheat crop at 26.6 MMT. Both these figures are higher than early season estimates due to better than anticipated yields.
So we don't appear to have a shortage of wheat again this season, lets hope that demand holds up. At least French wheat has started making inroads into the Egyptian market again, after months in the wilderness to cheaper Russian wheat.
It will be interesting to see what the quality of Black Sea grain is like this season after drought in Ukraine and Russia.
Looking at the week ahead, the news will likely be dominated by the USDA's latest stab at the global supply and demand numbers, plus an unscheduled reappraisal of US corn acres for 2009. As we have learnt recently from them, expect the unexpected. We can anticpate some profit-taking ahead of that, which may support corn as shorts unwind their positions.
The dollar seems to be back on a firmer footing after good jobs numbers last week, prompting some analysts to talk of the US being on the brink of economic recovery.
I see that sugar is continuing to go through the stratosphere, London white is currently $19.20/tonne higher at $556.40/tonne to another new all-time high. I did pick up a few extra sachets at Malaga airport, first come, first served!
