So Where Do We Go From Here?

Things can only get better in February, surely. Can't they? Well, that all depends, it certainly seems a nailed-on certainty that soybean production in South America will be setting new records this year. It is worth noting however that there is a well documented strong seasonal tendency for CBOT soybeans and corn to bottom in the spring, frequently in February - the so-called "John Deere low" or "February break".

You can see a wide range of seasonal charts on Spectrum Commodities website here.

Of course things are rarely quite as simple as all that, and there are numerous other factors that come into play in any one year. However, as it happens soybeans followed this classic trend astonishingly well in 2009. Here's a chart for March 10 CBOT beans, with the classic peaks and troughs highlighted:

It has to be noted how close 2009 was to fitting the archetypal "normal" year for soybeans.

Unfortunately in the case of CBOT wheat the classic trend at this time of year is still downwards as spring planting gets underway (which is expected to increase in the US this year). Here a May/June low frequently occurs as harvesting of winter wheat gets underway, before a secondary August low hits as the combines get in amongst the spring wheat.

In 2009 CBOT wheat didn't follow the classic trend as closely as soybeans, completely missing out the early summer low entirely. This can be attributed to the unseasonably cold and wet spring last year. An April freeze damaged winter wheat crops in southern States, whilst spring wheat planting was severely delayed by heavy rains in the north. It was also around this time that Egypt temporarily threw it's Russian toys out of the pram with regards "quality issues". Here's how March 10 CBOT wheat performed in 2009:

Ignore the early summer low that never happened and that mirrors a classic year for wheat quite well too.

"If history repeats itself, and the unexpected always happens, how incapable must Man be of learning from experience" - George Bernard Shaw

January Review Of The Markets

Grains prices have started the new decade off on the defensive, with dollar-based commodities leading the way with declines of around 10% during the month.

Friday's news that US growth had risen by substantially more than expected in the final quarter of 2009 sent the dollar soaring, to three week highs against the pound and it's best level against the euro since July 2009.

The grains sector is also still struggling to get over the USDA's supply and demand numbers released earlier in the month.

Ideas that commodities would get a boost early in January from fund rebalancing as they shifted into ags, ultimately appeared to have only delayed the inevitable once the USDA numbers were in the market.

CBOT corn showed the biggest decline on the month, falling more than 11%, after the USDA increased it's US crop production estimate for the 2009/10 crop, contrary to market expectations for a fall in output.

March London wheat matched the contract low of GBP96.50/tonne set in September on Friday, whilst November set a fresh lifetime low of GBP103/tonne, before eventually closing at GBP103.90/tonne for a 9% fall for the month.

The acute weakness of the euro has helped prevent Paris futures from suffering quite as badly, with wheat declining 5% on the month, and corn down around 4%.

The euro continues to lose ground on concerns over potential fiscal crises in European economies including Greece and Portugal, and the implications that an enforced financial bail-out would have on the single currency.

Commodity Month 31/12/09 31/01/10 Change Change %
London Wheat Nov10 114.20 103.90 -10.30 - 9.0%
Paris Wheat Nov10 142.50 135.00 - 7.50 - 5.3%
CBOT Wheat Dec10 603.00 541.50 -61.50 -10.2%
Paris Corn Nov10 143.00 137.50 - 5.50 - 3.8%
CBOT Corn Dec10 440.75 390.75 -50.00 -11.3%
Paris Rapeseed Nov10 295.00 288.25 - 6.75 - 2.3%
CBOT Soybeans Nov10 1014.25 911.25 -103.00 -10.2%
CBOT Soymeal Dec10 283.10 260.00 -23.10 - 8.2%
WTI Crude Oil Spot 79.36 72.89 - 6.47 - 8.2%
GBP/USD Spot 1.6184 1.5977 - 2.07 - 1.4%
GBP/EUR Spot 1.1206 1.1523 + 3.17 + 2.8%
EUR/USD Spot 1.4287 1.3961 - 3.26 - 2.3%

CBOT Closing Comments


March soybean futures settled at USD9.14, down 17 ¾ cents, March soy meal futures closed at USD273.80, down USD7.80, and March soy oil futures ended unchanged at 36.15 cents/pound. A broad-based dollar rally set a negative tone from the off, after US Q4 growth came in much better than anticipated at 5.7% compared to expectations of 4.5-4.7%. Month-end positioning may also have been a factor today, as too were reports of Chinese cancellations with record production from South America just around the corner.


March corn futures settled at USD3.56 ½, down 5 1/4 cents, May corn futures closed at USD3.67 ¾, down 5 cents. A firm dollar has prompted a recent wave of selling interest as he large specs continue to reduce their bullish exposure to corn. The net long position in futures declined by another 38,664 contracts in the week ending January 26. Weaker crude oil also contributed to corn's decline, as too did the remaining hangover from the USDA's surprise crop production increase earlier this month.


March CBOT wheat futures closed at USD4.74, down 13 cents, March KCBT wheat futures at USD4.87, down 7 3/4 cents, and March MGEX wheat futures at USD5.00 3/4, down 7 3/4 cents. Weakness from beans and crude oil, plus a sharply higher dollar pressured wheat lower. Large spec funds continue to go with the trend, shorting a further 13,272 contracts in the past week. The size of projected US ending stocks for the 2009/10 season means that, even with a significant reduction in winter wheat plantings, there will still be plenty of wheat to go around even in 2010/11.

London Wheat Matches Contract Lows

London wheat futures slid to levels not seen since last September on Friday, with March London wheat ending down GBP1.35 at GBP97.05/tonne, and Paris march wheat EUR0.50 lower at EUR125.50/tonne.

Earlier in the session March London wheat hit GBP96.50/tonne, matching the life of contract low set just after harvest last autumn.

The relative strength of sterling was one factor behind the move, the pound rose above 1.16 against the euro on Thursday, a level not seen in more than five months. The single currency continues to be weighed down by nervousness over a possible enforced bail-out of Greece.

French wheat fared better, aided by the euro's demise and also buoyed by talk that Algeria had bought a substantial quantity of French wheat in a tender. The news, as yet unconfirmed, suggests that the North African nation may have purchased at least 500,000 MT of wheat - probably French - taking advantage of the recent decline in value of the euro.

There has been a marked pick-up in interest in placing barley into intervention in the UK this past 10 days or so, according to my sources. This is partly due to the fact that the February intervention price will be based on today's value of the euro against the pound, as opposed to levels of around 1.12 when the January price was set.

The UK market took a further set-back this week after the much heralded start-up of the Ensus facility on Teesside proved to be a bit of a non-event due to technical difficulties.

The US market also continues to decline, with March CBOT wheat having declined by 67 1/2 cents, or 12.5%, during the month of January. As in Europe the hefty weight of stocks is largely to blame.

eCBOT Close, Early Call

The overnight grains closed modestly lower with corn and beans down 1-2 cents and wheat off 2-3 cents.

The dollar is firmer, boosted by US GDP growing by 5.7% in Q4, that's much better than the 4.5-4.7% that the market had been expecting, and substantially up on growth in Q3.

A winter storm across the US Southern Plains has brought freezing rain, snow and sleet to the winter wheat states of Colorado, Kansas, Oklahoma and Texas.

Precipitation will accumulate to 1-1.5 inches in the Texas panhandle and 1.5-2 inches in Oklahoma, where moisture is badly needed to alleviate drought. Texas wheat conditions have deteriorated to 28% good-excellent, 38% fair and 34% poor to very poor, says Gail Martell of Martell Crop Projections.

Very cold weather has resumed in the US Great Plains and Midwest after a 10-day respite. Morning temperatures are 10- 12 F below zero in the Dakotas and Minnesota. Wind chills near 0 F are being reported Kansas, Missouri and southern Illinois. Bitterly cold weather is expected to persist through the weekend. Moderating temperatures are expected next week, yet temperatures will remain below average, adds Gail.

There are the first signs of a potential weather problem brewing for Argentina, with a hot and dry weekend in store. Some forecasters are predicting rain from next Wednesday however.

Continued heavy rains in Brazil are making the early Mato Grosso harvest a stop start affair.

US wheat export sales have now had two decent weeks on the trot, that's the first time that has happened for a while, although two swallows don't make a summer (ooh Missus).

There is still some talk of China having cancelled US cargoes of soybeans recently.

Yesterday's US crush numbers for soybeans were record large, which should add some support.

Early calls for this afternoon's CBOT session: corn and beans called steady to 2 cents lower; wheat called 1 to 3 lower.

US Sees Fastest Growth In Seven Years

News just out shows that US GDP grew at 5.7% in the fourth quarter of 2009, that's the fastest growth in seven years, comfortably outstripping forecasts for growth of 4.7%, and much better than the 2.2% seen in Q3.

Makes the UK's growth of 0.1% look pretty paltry by comparison, doesn't it?

It's not all quite plain sailing though, the strong growth in the quarter was largely due to a notably slower rate of decline in inventories. Consumer spending was up 2% annually, but that is down from 2.9% in Q3.

No Bail-Out For Greece - German Economist

The former European Central Bank chief economist Otmar Issing, writing in Germany's Frankfurter Allgemeine Zeitung, says that there should be no bail-out for Greece.

"Nothing would weaken the euro more and bury the reputation of the monetary union as a community of stable money more than a blatant breach of the precept of financial policy discipline," he writes.

"If the no bail-out clause is breached, all the dams will break. The Greek disease will spread," he adds.

"Each state is itself responsible for its own public finances, member states do not guarantee the debts of others. This principle allows no compromises. If an exception is made, there will be no holding back. The fear that Greece could set off a chain reaction would become a certainty," he says.

"If the community helps Greece, which blatantly breached the community's rules and went into the crisis with heavy debt, how can you then refuse others?" he concludes.

The euro might garner a bit of strength from that, we shall have to wait and see. The pound currently stands at 1.1520 against the single currency, posting a 2.8% gain for the month of January.

Some Like It Hot

Have I mentioned before how good (and amazingly free) is? How she manages to do it for FREE, I've got no idea, poor Gail isn't even forced to carry ads from a motley selection of ne'er-do-wells or beg for beer donations, like some.

The first little signs of a slight problem for soybean production in South America are just starting to filter through. They love a good drought in Argentina, as we all know. If they aren't handling the ball into the net, or walking around the streets of Buenos Aires banging pots and pans, or setting fire to a pile of tyres in a roadblock then drought is what they do best.

Extremely hot weather began yesterday in the Argentina grain belt, increasing stress on developing corn and soybeans, says Gail. The heat wave will last for at least a week. Afternoon highs will be in the mid 90s F most days but could rise above 100 F Monday and Tuesday next week. High humidity will keep nights unseasonably warm in the 70s F, very negative for crop development, she adds.

Scattered showers, some heavy, will occur in Buenos Aires along an unstable weather front this weekend but Santa Fe and Cordoba will miss out on the best rainfall, warns Gail. Stored ground moisture will support crop growth for a while, but field moisture will decrease with intense heat and insufficient rain, she concludes.

It's a long way from being a crop pillager just yet, but a situation that certainly wants keeping an eye on.

Put Another Log On Mother

The accompanying map from the thoroughly excellent highlights just how cold things have been over the past six weeks across northern and western Europe:

EU Rapemeal Prices

Basis FOB Lower Rhine in euro/tonne:

Feb 179,00 -1,00
Mch 167,00 -1,00
Apr 154,00 -4,00
May 140,00 -2,00
May/1st h Jly 127,50 -1,50
Aug/Oct 10 119,00 -1,00
Nov/Jan 11 129,00 unch
Nov/Apr 11 131,00 unch


Personally I love it, no meal is complete without a large slab of the stuff in my humble opinion. I've tried vegetarian food and just don't like it, I'm sorry but that's just the way it is. I am very careful to make sure I get my five a day in of course. Chips, they're made from vegetables aren't they? Mushy peas, that's another box ticked, and I always have toms, beans and mushrooms with a fried breakfast. There you go five.

I usually have a bit of salad with my kebab. And I will always go for the pineapple option to top off a gammon, so that's a bit of fruit thrown in, I'm actually quite healthy when you start to think about it.

And I'm not alone in my liking for sliced up dead animals, no siree, having gone off on a bit of a tangent this morning, I've been researching meat consumption.

Now for some reason I can't explain Australia* is missing from the data I have managed to glean. Every other civilised country in the world is there, accompanied by several uncivilised ones, but Down Under is sadly lacking. Maybe they can't count, or are too busy evicting Aboriginies from their rightful homelands, who knows. Suffice to say that the data I am about to relate excludes our Ashes losing antipodean chums. New Zealand are in there, no worries, and batting well above average as it happens, there's just no Ozzies.

OK, so who are the big meat eaters around the globe? The Argies are famed for their carnivorous appetite, aren't they? When they're not diving in the penalty area, demonstrating against the government or losing wars they're always sat in front of a steak, right? But no, they don't top the table. In fact they don't even make the top ten, the ball-handling light weights. The glamorous top spot of Premier League carnivores goes to....

Denmark. That's right the Danes eat more meat per head of population than anywhere else on the planet (unless the Ozzies are so busy eating it that they haven't got round to sending their results in). Every man, woman and child munches their way through more than 145kg of the stuff every year. Hats off to them. Let's hope it's Danish bacon that they're eating, because we don't want that stuff coming over here.

Here's the world meat munching top ten:

Denmark 145.9kg/head
New Zealand 142.1
Luxemborg 141.7
Cyprus 131.3
US 124.8
Bahamas 123.6
Greenland 113.8
French Polynesia 112.2
Mongolia 108.8
Canada 108.1

Impressive performance by Mongolia there, although I suspect that we are using the word "meat" in it's loosest form. They can't wait for Christmas to come over there you know. They're more interested in who's pulling Santa's sleigh than what's in it. Ditto Greenland, where the expression "shall we go out clubbing tonight?" has an entirely different meaning. Forget about the Bahamas, that's just where rich fat Americans live.

If you are interested, the Irish just dip out on a top ten place, coming eleventh with 106.3kg, with the carrot-loving UK down in 33rd (despite my best efforts) at 79.6kg/head. The "legendary" Argies only make it to 16th with a weedy 97.6kg, a darn sight more than Bhutan mind, who bring up the rear, only managing to get 3kg of meat per year down their necks. There must be a health shop on every street corner over there.

Interestingly, India are only a few places above Bhutan in 164th place consuming just 5.2kg/head. Dark horses China are 66th, eating 52.4kg.

Now then lets have a look at growth. The figures I have go back to 1961, that's appropriate as it's my birth year, so anything that happened before that is irrelevant anyway. Which countries have seen the biggest growth in meat consumption since then?

I reckon plenty of you guessed right there, yes it's our chums in the Far East, China with a growth in meat consumption of almost 1300%!

Back in 1961, the average Chinese only ate 3.8kg of meat per year, and that has now risen to 52.4kg. South Korea has also seen spectacular growth of more than 1000%. Consumption growth in the US is still quite impressive at 40%, putting them 83rd in growth terms, one place behind India. Here in the UK it's a more modest 14%.

Fascinating stuff, the most populous country on the planet has had the largest growth in meat consumption, although lying in 66th place in terms of volume of meat consumed, it has plenty of room to show further improvement.

Hmmmm, what does that tell us about demand for feed?

* A different source pegs Australian meat consumption at 110kg per capita in 2005/06 versus 91.4kg in 1968/69. That would get them into the top ten in eighth slot.

New Zealand Wheat

Do they grow wheat in NZ? If so when do they harvest it, about now? In a month or two? The reason for asking is that I had an email in yesterday from a London production company wanting to shoot an ad in March in a field of ripe wheat. and they don't fancy India, the Middle East etc. Any ideas?

CBOT Closing Comments


March soybean futures closed at USD9.31 ¾, up 2 3/4 cents, March soymeal futures finished at USD281.60, up 30 cents, and March soy oil futures were at 36.15, down 0.17 points. Soybean sales came in at 673,500 MT for delivery in 2009/10 and a further 183,600 MT for delivery in 2010/11, making 857,100 MT in all. Trade estimates ranged from 700,000 to 900,000 MT. Last week's sales were 990,500 MT. China was the top buyer taking 280,800 MT of old crop and 175,000 MT of new crop. Exports of 1,394,100 MT mostly went to China (875,400 MT).


March corn futures settled at USD3.61 3/4, up 3 1/2 cents, May corn futures settled at USD3.72 3/4, up 3 1/2 cents. Corn sales were 902,300 MT, all for delivery in 2009/10. Exports of 531,800 MT were down 36 percent from the previous week and 33 percent from the prior 4-week average. The primary destinations were Japan (215,500 MT) and Mexico (111,800 MT).


March CBOT wheat futures closed at USD4.87, up 3 1/4 cents, March KCBT wheat futures were at USD4.94 3/4, up 4 1/4 cents, and March MGEX wheat futures at USD5.08 1/2, up 3 3/4 cents. Today's USDA weekly export sales report shows net wheat sales of 660,700 MT for delivery in 2009/10, plus net sales of 28,500 MT for delivery in 2010/11. Sales were therefore a little ahead of trade expectations which were for sales of 450,000 to 650,000 MT.

EU Wheat Closing Comments

EU wheat futures closed mixed with London March wheat ending down GBP0.35 at GBP98.40/tonne and Paris March milling wheat up EUR0.25 at EUR126.00/tonne.

Sterling was stronger, which explains the continued weakness of UK wheat. Egypt bought another three cargoes of Russian wheat last night, underlying the uncompetitive nature of EU grain.

Egyptian consumption of wheat could rise by around 2.5-3.0 MMT by 2015, as the population increases, according to a government official.

That could push imports up by already the world's biggest buyer by a similar amount, no wonder everybody is fighting to be their new best mate.

Argentine farmers may well plant significantly less wheat for next season, 2010/11, than the current lowest in more than 100 years acreage, according to the Rosario Grain Exchange. That would undoubtedly push production below the current level of domestic consumption.

Even so, the burden of supply over demand doesn't look like unbalancing the stocks:usage ratio any time soon.

eCBOT Close, Early Call

The overnights closed mixed, mostly up a little, but off early session highs. Beans closed around 2-3 cents firmer, with wheat up 1-2 cents and corn narrowly mixed either side of unchanged.

Yesterday's nervousness ahead of last night's State of the Union address by Obama has petered out, along with some relief that he didn't announce any major banking reforms.

Weekly export sales from the USDA were in line with expectations with wheat at 689,200 MT, corn at 902,300 MT, and soybeans at 857,100 MT. As per usual China took the vast majority of the beans. Interestingly, they also booked 50,000 MT of US wheat.

The US Census Bureau report that the soybean crush in December was a record 173.0 million bushels. Whilst China also continues to take US soybeans at the current rate, that all adds up to a pretty impressive rate of disposal. However, there are some reports that at least one cargo of US beans is in trouble in China due to quality issues. There are also reports of a few Chinese cancellations/reschedules kicking around.

Meanwhile they continue to toughen up lending and reserve regulations for their own banks.

Record soybean production from Brazil and Argentina awaits, the only question left to be answered is how big is big? Corn output there is also seen higher than originally thought.

US wheat sales and shipments have picked up a little this past couple of weeks, and they need to to reach the USDA's projected target. Egypt remains unimpressed, buying three cargoes of all-Russian wheat again yesterday.

Early calls for this afternoon's CBOT session: corn called flat to 2 higher; beans called 2 to 4 higher; wheat called 1 to 3 higher.

USDA Weekly Export Sales

Today's USDA weekly export sales report shows net wheat sales of 660,700 MT for delivery in 2009/10, plus net sales of 28,500 MT for delivery in 2010/11. Sales were therefore a little ahead of trade expectations which were for sales of 450,000 to 650,000 MT. China popped up as a surprise buyer of 50,000 MT. Weekly shipments were 424,800 MT, still a little behind the 500,000 MT required to meet the USDA's target for the current marketing year.

Corn sales were 902,300 MT, all for delivery in 2009/10. The leading buyers were unknown (278,000 MT), South Korea (186,300 MT) and Egypt (110,300 MT). Trade estimates ranged between 800,000 and 1,050,000 MT, last week's sales were 1,610,800 MT. Exports of 531,800 MT were down 36 percent from the previous week and 33 percent from the prior 4-week average. The primary destinations were Japan (215,500 MT) and Mexico (111,800 MT).

Soybean sales came in at 673,500 MT for delivery in 2009/10 and a further 183,600 MT for delivery in 2010/11, making 857,100 MT in all. Trade estimates ranged from 700,000 to 900,000 MT. Last week's sales were 990,500 MT. China was the top buyer taking 280,800 MT of old crop and 175,000 MT of new crop. Exports of 1,394,100 MT mostly went to China (875,400 MT).

EU Rapemeal Prices

Latest guide prices basis FOB Lower Rhine in euros/tonne:

Feb 180,00 unch
Mch 168,00 -2,00
Apr 158,00 -1,00
May/1st h Jly 129,00 unch
Aug/Oct 10 120,00 -1,00
Nov/Jan 11 129,00 unch
Nov/Apr 11 131,00 unch

Morning Ramblings

The USDA are out at 13.30 GMT with their usual weekly export sales report. For wheat estimates range from 450,000 to 650,000 MT. Last week's sales at 886,300 were a marketing year high. Also being scrutinised today will be the size of actual shipments, these need to average 500,000 MT/week for the remainder of the marketing year to hit the USDA's export target of 825 million bushels, or 22.5 MMT.

For corn export sales are forecast to range between 800,000 and 1,050,000 MT, last week's sales were 1,610,800 MT. For soybeans export sales estimates range from 700,000 to 900,000 MT. Last week's sales were 990,500 MT.

The overnight markets are up a tad, in what can probably be attributed to a slight correction after recent steep declines, rather than a fundamental change of direction. Relief is also a factor, after last night's Obama State of the Union address didn't come down too heavy handedly on US banks. Soybeans are currently around 5 cents higher, with wheat and corn up around 3 cents apiece.

Japan has bought 127,000 MT of wheat in a routine tender, of that 86,000 MT will be US origin. Nobody is fooling themselves however that the recent price decline is throwing up all sorts of buying interest for US wheat. Egypt passed again in favour of Russian grain last night.

Egyptian consumption of wheat could rise by around 2.5-3.0 MMT by 2015, as the population increases, according to a government official. That could push imports up by already the world's biggest buyer by a similar amount, no wonder everybody is fighting to be their new best mate.

Argentine farmers may well plant significantly less wheat for next season, 2010/11, than the current lowest in more than 100 years acreage, according to the Rosario Grain Exchange. That would undoubtedly push production below the current level of domestic consumption. The move would effectively be a protest vote from the nation's farmers, against government restrictions on exports.

In addition that could potentially turn Brazil to look to the rest of the world for more of it's needs next year, or plant significantly more wheat themselves.

Has anyone pressed the big green button at Ensus yet? Nobody seems to know, or if they do they aren't telling me. It doesn't look like it judging by front month London wheat down another GBP1.25/tonne this morning.

Another thing that nobody seems to know is what is the latest on the similar-sized Abengoa wheat refinery in Rotterdam? When is that going to be up and running? And have they got their own button, or are they sharing one with Ensus?

Answers on a postcard please.

Ukraine Lowers Grain Export Forecast

Ukraine's Ag Ministry have lowered their forecast for 2009/10 grain exports from 20 MMT to 16-17 MMT, which is interesting on a couple of fronts.

Of that they've already exported 14.9 MMT this season, of which 7.3 MMT was wheat, 4.1 MMT barley and 3.4 MMT corn. That puts exports ahead of year ago levels by almost 10% when 7.1 MMT of wheat, 4.8 MMT of barley and 1.6 MMT of corn had been exported.

With the 2009/10 grain harvest 14% down on the bumper crop of 2008/09, it was always on the cards that cash-strapped Ukraine was going to have to slow up on exports sometime early in 2010.

With almost 15 MMT already exported this July/June marketing year, that leaves just a million or two to go over the next five months.

Early talk already suggests that Ukraine will struggle to match last season's clean weight grain harvest of 46 MMT this summer, due to early season drought followed by a subsequent deep freeze. More impact on production than that however is likely to come from a lack of fertiliser and pesticide usage due to cash shortages. So despite plantings being up for the 2010 harvest, final yields could be significantly lower.

That's the gossip doing the rounds at least, although it's far too early to quantify and it certainly isn't going to turn me into a raging bull overnight.

Meanwhile, whilst a rapid slow down in exports for the remainder of this season can't do any harm, it's likely to be of more benefit to Russia than it is to EU wheat looking for a home.

CBOT Closing Comments


March soybeans closed 18 1/2 cents lower at USD9.29 a bushel, March soymeal closed down USD6.10 at USD281.30, and March soyoil tumbled 45 points to close at 36.32 cents per pound. The market was nervous ahead of President Obama's State of the Union address tonight. Record production is just around the corner from South America, which combined with a tightening of fiscal policy by China, that could spell trouble for demand for US soybeans.


March corn ended down 4 cents at USD3.58 1/4 a bushel, and May corn ended down 4 cents at USD3.69 1/4. Both the Rosario and Buenos Aires Grain Exchanges see the 2010 Argentine corn crop around 18 MMT, 3 MMT higher than the USDA's last estimate, and 5.4 MMT above last year. Beneficial rains, increased fertiliser usage and a pick up in biotech plantings are responsible for increased corn production in South America this season.


CBOT March wheat closed down 10 1/4 cents at USD4.83 3/4 a bushel, KCBT March wheat fell 9 cents to USD4.90 1/2, and MGE March wheat ended down 5 1/2 cents at USD5.04 3/4. Prices fell to three-month lows ahead of Obama's speech tonight, which traders fear will rein in speculative activity on the grains market. Egypt passed on US and EU wheat yet again today, buying 180,000 MT of Russian milling wheat at USD178.50/tonne FOB.

EU Wheat Extends Recent Losses

EU wheat extended recent losses Wednesday, closing with London March feed wheat down GBP1.80 at GBP98.75/tonne and Paris March milling wheat ending EUR1.00 lower at EUR125.75/tonne.

US wheat futures also continue to decline, with the market nervous ahead of President Obama's State of the Union address tonight, and what he might have in mind for US banks.

Egypt passed on US and EU wheat yet again today, buying 180,000 MT of Russian milling wheat at USD178.50/tonne FOB (circa GBP110/tonne).

Kazakhstan might have missed out on the Egypt tender today, but they are flexing their muscles on the wheat export front. They've recently announced a deal to supply Egypt with up to 1.5 MMT of it's requirements in 2010. Georgia has offered the Kazakhs a facility to transport grain by rail to the world's largest buyer, which will make them more competitive they say.

All of that, combined with the new minimum 60,000 MT one port of loading rules, leaves France pretty high and dry in terms of getting a look in with Egypt for the time being.

eCBOT Close, Early Call

The overnight market closed mostly lower with beans down 6-7 cents, corn down 1-2 cents and wheat a cent or so either side of unchanged.

Crude is a little higher after yesterday's API report said that US stocks unexpectedly fell 2.2 million barrels last week, against an anticipated rise of 1.4 million barrels. The US Energy Dept will give their estimate on stocks later today.

The market will be nervous, with Obama set to deliver his State of the Union address tonight, and what he might have in mind for US banks. If they can't put their own house in order, then they need somebody to do it for them. That might mean negative implications for the grains complex in the short-term.

Meanwhile China is also trying to reform it's own banking sector by tightening credit constraints. That too might lead to a drop in buying interest in US soybeans, although one report circulating this week suggested that China would increase it's soybean crushing capacity by 6 MMT during 2010.

The Fed are expected to leave US interest rates where they are today, but the wording of their accompanying statement for clues on a tightening fiscal policy will be heavily scrutinised.

Both the Rosario and Buenos Aires Grain Exchanges see the 2010 Argentine corn crop around 18 MMT, 3 MMT higher than the USDA's last estimate, and 5.4 MMT above last year.

Taiwan purchased 60,000 MT of Argentine/Brazil corn for March shipment overnight.

Egypt and Algeria are tendering for wheat this week, with few expecting US origin to get a look in.

Georgia has said it will allow Kazakhstan to use it's rail network to transport wheat to Egypt, which it says will make it much cheaper for landlocked Kazakh grain to get to the world's largest wheat buyer.

Early calls for this afternoon's CBOT session: corn called 1 to 2 lower; beans called 4 to 6 lower; wheat called steady to 2 lower.

EU Rapeseed Prices

Basis Lower Rhine in euros/tonne;

Feb 180,00 +3,00
Mch 170,00 +3,00
Apr 159,00 +2,00
May/1st h Jly 129,00 -1,00
Aug/Oct 10 121,00 -1,00
Nov/Jan 11 129,00 -1,00
Nov/Apr 11 131,00 -1,00

South American Corn Crop Increasing

Beneficial rains, increased fertiliser usage and a pick up in biotech plantings will see increased corn production in South America this season. With Brazil and Argentina lying second and third behind the US in world corn export rankings, current USDA export forecasts from the duo might have to be raised.

In Brazil, biotech plantings are up more than fivefold from last season, this year accounting for 27% of the crop say the Brazilian Association of Seeds and Saplings.

CONAB forecast a 7.6% increase in Brazil’s average corn yield over last year, saying that the state of Parana could see yields rise to a record of more than 7 MT/hectare this year.

An increase in plantings of early fast maturing soybeans may lead to an increase in sowings of second crop corn, which goes into the ground in January and February.

Before that comes along, Brazil's main summer corn crop, which will start to get harvested next month, will total 32.3 MMT, say CONAB. That's around 4% down on last season, but comes despite a near 11% drop in planted area.

With the a record soybean harvest now already underway in Mato Grosso, there is talk of lack of storage being a big problem this year, with some grain elevators reportedly still 60-80% full of last year's so-called "safrinha" or second crop corn.

In Argentina, the Buenos Aires Grain Exchange say that farmers there will produce 18 MMT of corn this year, with the government pegging the crop even higher at 18-20 MMT.

Both estimates are significantly higher than last season's drought-damaged crop of 12.6 MMT, and the current USDA figure of 15 MMT.

Rotten Swines

Major pharmaceutical companies pressured the World Health Organisation (denied by the WHO) into lowering it's definition of a pandemic in the wake of last year's H1N1 "swine flu" outbreak, says today's papers.

In doing so, the profiteering buggers were thereby able to encourage mass hysteria it seems, with the primary aim of lining their own pockets. Shock, horror, surely not! Governments the world over were railroaded into buying lorry loads of vaccines they subsequently didn't need, to combat what turned out to be no more than a bit of a cold with ideas above it's station, they cry.

These are the same papers that were themselves responsible for whipping up the average gullible Joe on the street into a state of blind panic mind. And all that money that could have been put to better use, now lines the pockets of execs at major drugs companies around the world.

I wonder how many editors picked up a "brown envelope" for running such hype too?

Early Thoughts On Russian Grain Output For 2010

Nogger's favourite website is carrying an interesting story relating to early thoughts on the size of Russia's grain harvest this coming season (here).

Already it seems that early estimates of a crop of 90 MMT might be "conservative" they say.

You may recall that for much of the past two season's official estimates have subsequently proven to be significantly understated when the crops are finally all in.

Indeed, for large parts of 2008, the Russian Ag Ministry took "conservatism" to new levels. As late as August 2008, and with 42 MMT already cut, they were still predicting a total grain crop of 85 MMT, for what subsequently turned out to be a harvest in excess of 108 MMT!

Of course their are a variety of reasons why government have a vested interest in not being too accurate with their crop numbers.

SovEcon on the other hand have a proven track record of being far more consistently accurate.

CBOT Closing Comments


CBOT March soybeans ended 7 cents higher at USD9.47 1/2 a bushel, and May soybeans settled 7 1/2 cents higher at USD9.57. Oversold conditions prompted profit taking by shorts and the market reversed the recent downward trend. Reports emanating from China suggest that they may increase their soybean processing capacity by up to 6 MMT in 2010.


March corn ended down 5 1/2 cents at USD3.62 1/4 per bushel, and May corn ended down 5 1/2 cents at USD3.73 1/4. The Argentine corn crop is now estimated at 18 MMT, some 3 MMT higher than was thought a few months ago. A tightening of fiscal policy in China remains a concern, as too does potential meddling with speculation by President Obama.


CBOT March wheat ended down 4 1/4 cents at USD4.94 a bushel, KCBT March wheat lost 1 1/2 cents to USD4.99 1/2, and MGE March wheat fell 2 cents to USD5.10 1/4. Although US acreage is down this year, global wheat stocks are sharply higher than the past couple of years. US stocks are higher than for many years. US exports need to pick up to meet USDA targets for 2009/10.

EU Wheat Closing Comments

EU wheat continues to slide gently lower, after much of the quick-fire damage was done in the aftermath of the USDA report a fortnight ago. London March feed wheat ended down GBP0.05 at GBP100.55/tonne, and Paris March Milling wheat finished EUR0.50 lower at EUR126.75/tonne.

Prices are still a little way off post harvest September lows, but not by much. US wheat continues to slide and EU futures are going with it.

Despite sharply reduced US winter wheat plantings for the upcoming 2010 crop, carryover supplies of old crop are so burdensome that the market seemingly cannot shake them off.

Monday's export inspections for US wheat looked pretty promising, so this week's shipment should be quite good. They need to be to meet the USDA's target of 22.5 MMT exported during 2009/10.

Egypt are tendering again this week for 120,000 MT of wheat from the usual suspects. The last time they bought, Russian and Kazakh wheat got the nod. French grain continues to miss out due to the recently introduced one port of loading clause. The trade is quickly becoming resigned to the fact that US and EU wheat will dip out again, regularly.

The psychotic element in me says, hey if you don't want our wheat then sod you. What are you going to do when Russia has a bad crop? What are you going to do when the Black Sea is frozen over Mr Egypt?

We'll have so much interest from our new mates the bioethanol industry by then that you will have to pay miles over the odds to buy wheat on the global market. Ha, you will come begging at our door when the sold out sign is up. So stick that in your stupid funny pipe and smoke it.

But the realist in me says that this is unlikely to happen anytime soon.

UK Recession Over

Hurrah! Get the bunting out & order the cakes in from Sayers, I've got some jelly in the cupboard and there's some chocolate fingers left over from Christmas. News just out confirms that the UK is officially out of the longest recession in UK history after the economy grew by a whopping 0.1% in Q4 2009.

Before we get too carried away and order some Marks & Spencer vol au vents to go with that, analysts had been expecting growth of 0.4%, so we're out of recession in a disappointing manner. The last major economy to drag itself out of the mire, gasping for breath at the side of the pool. Alistair Darling has managed to burst us out of the paper bag that was the recession with one lucky punch. We kind of tripped over the bottom step and fell out of the recession into a heap on the floor. Covered in vomit with a kebab stuck to the side of our head. And when we get home, from the recession, we'll find that we've lost our keys and will have to shin up the drainpipe of economic growth to get in. Except that it's been raining, and the drainpipe of economic growth is all slippy, but we're so happy that the recession is over that we'll sing a little the Beatles...."Oh Darlin..."

CBOT Closing Comments


March soybeans ended 11 cents lower at USD9.40 1/2 a bushel, March soymeal settled at USD3.40 lower at USD283.00, and March soyoil fell 21 points to 36.50 cents per pound. Selling came in right on the opening and beans dropped sharply cents in the first 15 minutes. Soybean export inspections were good at 42 million bushels. Informa say that US farmers will plant 77.92 million acres of soybeans in 2010, Allendale say 79.25 million acres, both would be an increase in this season.


March corn ended up 3 cents at USD3.67 3/4 per bushel, and May corn ended up 3 1/4 cents at USD3.78 3/4. Corn inspected for export was about 30% less than last week at 20 million bushels. Nevertheless corn took a breather from recent sharp declines. On Friday Informa said that US farmers would plant 89.65 million acres of corn this year. Allendale say 90.83 million acres, both are a significant increase on last year and the second highest area on record.


CBOT wheat ended down 1/4 cent at USD4.98 1/4, KCBT March wheat fell 1 cent to USD5.01, and MGE March wheat tumbled 1/4 cent to USD5.12 1/4. Wheat export inspections were 1almost 17 million bushels, coming in just over what was needed to stay on pace with the USDA's projections for the current marketing year. Exports are still behind schedule to hit the USDA's relatively modest target this season of 22.5 MMT with only 19 weeks of the marketing year left to go.

EU Wheat Ends Flat

EU wheat futures closed flat around unchanged levels in a quiet start to the trading week Monday. March London feed wheat ended down GBP0.25 at GBP100.60/tonne, and Paris March milling wheat up EUR0.75 at EUR127.25/tonne.

Prices have fallen substantially in the past fortnight, with UK levels approaching GBP100/tonne and French prices not far off EUR125/tonne. Both of those are psychologically important, and the market seems unwilling to break lower just at the moment.

Bears still have things largely their own way however, and export interest remains scant. Russia announced that it had struck a deal with Bangladesh to supply it with 300,000 MT of wheat today, adding another tick to it's ever increasing list of willing buyers if the price is right.

US stocks continue to climb, and will end 2010/11 higher again despite a drop in winter wheat planted area this season to the lowest since before the First World War.

eCBOT Close, Early Call

The overnight grains closed mixed withe beans ending around 1-2 cents lower, and corn and wheat a cent or two higher.

Crude oil is down a tad, and the dollar barely changed in a quiet start to the week.

The market still seems nervous over last week's tough talking from Obama re tightening regulations on speculation in commodities.

Informa and Allendale are both forecasting increased US corn and soybean area for spring 2010.

Almost everybody is now talking a Brazilian soybean crop of 65 MMT, easily a record. One report I read last week suggested that Bunge are privately pegging it at 66 MMT. Argentine farmers are finally set to get an overdue break with a record 52 MMT bean crop there too.

Whilst recent rains may have slowed the Mato Grosso harvest a little they is surely only delaying the inevitable, although China was once again another featured big buyer of US beans last week. They've been accounting for 75% of all the weekly soybean sales for month now, when they finally switch their attention to South America it's going to leave one hell of a void.

Early calls for this afternoon's CBOT session: corn and wheat called 1 to 2 higher; soybeans called steady to 2 lower.

The Acreage Game

It's that time of year again, when market analysts start releasing their estimates of what US farmers will plant this spring.

The USDA have already told us that winter wheat plantings are down to 37.1 million acres, but they won't tentatively pontificate on corn or soybean area until February's Annual Agricultural Outlook Forum, before we get their first official estimates at the end of March.

On Friday Informa said that US farmers would plant 89.65 million acres of corn this year, 77.92 million acres of soybean, 53.79 million acres of wheat and 10.16 million acres of cotton.

That's a 3.7% increase in corn plantings, with the soybean area 0.6% higher. Offsetting the reduced winter wheat area (which is down 14.5%), we also have a significant shift into spring wheat (up 7.4%) and cotton (11% higher).

Allendale are more bullish on corn and soybean area, pegging corn at 90.83 million acres and soybeans at 79.25 million acres.

Incidentally, I just did a quick check back to what the USDA came out with last February, to see how close to the final numbers they got. Back then they pegged the all wheat area at 58 million acres, corn at 86 million and beans at 77 million.

Not too bad a guess compared to the final area of 86.4 million acres of corn, 77.5 million acres of beans and 59.1 million acres of wheat.

Indeed, overall it has to be said that the USDA were more accurate with their take on things last spring than either Informa or Allendale. Last March Informa had corn acres at 81.4 million and the bean area at 81.5 million, whilst Allendale were estimating things at 85.4 million for corn and 80.4 million for beans.

Profits Up At Frontier

Despite the downturn in the grain markets and a return to more normal trading conditions in 2009 from the boom year of 2008, Frontier have bucked the trend reporting a small increase in profits and turnover.

For the financial year ended 30th June 2009 the ABF/Cargill-owned company reports turnover up 12% to GBP1.15 billion and profits up from GBP21.1 million to GBP21.4 million.


It's behind schedule, but the big green button is supposed to be getting pressed at Ensus today.

Is this the reason why things are so far behind, as another worker puts in a arduous shift at the world's largest wheat to bioethanol refinery. Simon Carves will be asking for their GBP5 million back....

She's getting paid £12.80/hour for this!

Barley Intervention

Almost 6,000 MT of UK barley was offered up to intervention last week, say the RPA. That brings the total offered to date to nearly 42,000 MT, with a handful of offers being withdrawn or rejected, cumulative net offers now amount to a little over 40,000 MT.

Not exactly a deluge is it, compared to what is being offered on the continent? The recent decline in the value of euro might have something to do with that.

EU Rapemeal Prices

Guide prices basis FOB Lower Rhine in euros/tonne:

Feb 173,00 +4,00
Mch 165,00 +5,00
Apr 160,00 +3,00
May/1st h Jly 130,00 +2,00
Aug/Oct 10 123,00 +1,00
Nov/Jan 11 132,00 +2,00
Nov/Apr 11 134,00 +2,00

US Wheat Exports/Stocks

The US only consume around half the wheat it produces, the rest is destined for the export market. If it can find a home, that is, and that is becoming increasingly difficult.

Friday's weekly export sales report for wheat from the USDA threw up a marketing year high figure of 825,800 MT, bringing outstanding sales not shipped yet to 4 MMT, coincidentally exactly the same as a year ago.

What isn't the same as a year ago however is the volume exported so far. At 13 MMT this season's export pace currently lags last season by 5.4 MMT, that's 29%, although the target for the entire year is only 17.5% down on last season.

MMT Exported YTD Year Ago O/s Sales Year Ago Target Year Ago
Wheat 13.0 18.4 4.0 4.0 22.5 27.3
Change -29% unch -17.5%

Thirty three weeks into the marketing year the US has exported just 58% of the USDA's target 22.5 MMT for 2009/10. A year ago the US had already shipped 67% of it's eventual exports of 27.3 MMT.

It seems that the US is going to have to improve some to meet this year's export target. Despite better sales, last week's actual shipments were 316,604 MT, less than the average of around 400,000 MT so far this season. Indeed, to hit the USDA's 22.5 MMT target, the US now has to average half a million tonnes of exports every week for the remaining 19 weeks of the season.

Even if they can manage to do that, this will mean that the US will only have exported 34% of it's wheat crop in 2009/10, just two years ago that figure stood at 61%.

As the US has been finding it progressively harder to sell wheat, stocks have been building. US ending stocks in 2007/08 were 8.3 MMT, or around 15% of total production that season. By the end of 2009/10 those stocks will have climbed to 26.6 MMT, which is equivalent to 44% of production, IF shipments for the remainder of the season match the USDA's target. If they continue to average 400,000 MT/week then ending stocks will reach 28.5 MMT, or 47% of production. That figure is almost exactly equal to the quantity of wheat the US consumed in the whole of 2007/08!

It's not surprising that winter wheat acres are down for next season's harvest when you look at it like that. If consumption was to fall to the levels of two years ago, the US would almost have enough wheat reserves to feed itself for an entire year without producing a single tonne in 2010/11!

MMT 2007/08 2008/09 2009/10* 2009/10**
Production 55.8 68.0 60.3 60.3
Exports 34.3 27.3 22.5 20.6
Exports % of Prod'n 61% 40% 37% 34%
Domestic Usage 28.6 34.3 32.2 32.2
Usage % of Prod'n 51% 50% 53% 53%
End Stocks 8.3 17.9 26.6 28.5
End Stocks % of Prod'n 15% 26% 44% 47%
* basis USDA export target
** basis current export pace