The Morning Vibe
It looks like it's turnaround Friday, after wheat and corn both crashed below psychological support at USD7/bu and USD5/bu last night, they both trade back above those levels this morning. Soybeans have also managed to break through resistance at USD11/bu.
Despite looming record US production, soybeans look to be the one with the most limited downside as things stand. Strong demand from China, dryness in Brazil and Informa last night pegging 2011 US acreage 1.5 million down at 77.4 million acres all look like underpinning beans.
The market is already trading US corn yields of around 160bpa, 2.5bpa lower than the USDA's current estimate, although there are now plenty of forecasts 2-3bpa lower than that. Export sales yesterday though were poor, suggesting that maybe USD5/bu is rationing demand. The IGC yesterday trimmed 5 MMT from last month world production estimate to 824 MMT, whilst ending stocks fell 4 MMT to 131 MMT. However five dollar corn means Informa see US farmers planting 2.5 million acres more in 2011 at 90.4 million acres.
Wheat is still the poor relation in my eyes, although if corn can manage to hold above five bucks then that will help provide support. World stocks are not as acutely tight as market prices reflect. Simply put, there's plenty of stock, but it's mostly in America. High wheat prices also mean increased 2011 plantings. Informa estimate plantings for next season at 57 million acres, compared to 54.3 million for the 2010/11 crop.
Of course, as I said earlier, this is all based on as things stand at the moment. Politics can potentially move the goalposts at any time. US lawmakers are expected to vote next week on legislation aimed at penalising China for keeping its currency artificially low. China took 75% of yesterdays US soybean export sales in what is becoming a pretty regular occurrence. Maybe the US should give Egypt a call for a quick chat about the wisdom of putting all your soybeans in one basket?
Meanwhile the ethanol blenders credit is due to expire on December 31st this year. The biodiesel blenders credit expired on December 31st 2009, and politicians are still deliberating on whether that should be reinstated despite several attempts to push it through.
Despite looming record US production, soybeans look to be the one with the most limited downside as things stand. Strong demand from China, dryness in Brazil and Informa last night pegging 2011 US acreage 1.5 million down at 77.4 million acres all look like underpinning beans.
The market is already trading US corn yields of around 160bpa, 2.5bpa lower than the USDA's current estimate, although there are now plenty of forecasts 2-3bpa lower than that. Export sales yesterday though were poor, suggesting that maybe USD5/bu is rationing demand. The IGC yesterday trimmed 5 MMT from last month world production estimate to 824 MMT, whilst ending stocks fell 4 MMT to 131 MMT. However five dollar corn means Informa see US farmers planting 2.5 million acres more in 2011 at 90.4 million acres.
Wheat is still the poor relation in my eyes, although if corn can manage to hold above five bucks then that will help provide support. World stocks are not as acutely tight as market prices reflect. Simply put, there's plenty of stock, but it's mostly in America. High wheat prices also mean increased 2011 plantings. Informa estimate plantings for next season at 57 million acres, compared to 54.3 million for the 2010/11 crop.
Of course, as I said earlier, this is all based on as things stand at the moment. Politics can potentially move the goalposts at any time. US lawmakers are expected to vote next week on legislation aimed at penalising China for keeping its currency artificially low. China took 75% of yesterdays US soybean export sales in what is becoming a pretty regular occurrence. Maybe the US should give Egypt a call for a quick chat about the wisdom of putting all your soybeans in one basket?
Meanwhile the ethanol blenders credit is due to expire on December 31st this year. The biodiesel blenders credit expired on December 31st 2009, and politicians are still deliberating on whether that should be reinstated despite several attempts to push it through.
