Review Of The Week

Front month changes for w/e 18th Feb 2010:

CBOT Soybeans unch
CBOT Soymeal -3.60
CBOT Soyoil +0.68
CBOT Corn -1 1/4
CBOT Wheat +3 1/4
London Wheat -2.80
Paris Wheat -3.50
Paris Corn -2.00
Paris Rapeseed +4.00
WTI Crude Oil +5.69
GBP/USD -2.27
GBP/EUR -1.52

EU Wheat Closing Comments

March London wheat closes GBP0.30 lower at GBP92.45/tonne, March Paris wheat EUR1.25 lower at EUR122.25/tonne.

Another dismal week for EU wheat really, with London wheat the largest faller of all the grain/oilseed commodities so far during 2010.

French wheat did at least manage to get a look in at Egypt's tender yesterday, winning a sale of one 60,000 MT cargo, although once again the lion's share went to Russian wheat (240,000 MT).

Much as I'd like to be bullish, the market fundamentals don't offer me many reasons to get carried away, certainly not during 2010. I'm afraid that it looks like it is going to take at least another twelve months for the market mechanics to shift.

EU wheat struggled to break through support at EUR125/tonne, but now that it's done it that becomes a resistance level. March London wheat now only needs to lose another GBP2.50/tonne to have an eight in front of it. If it goes much lower than that then we are looking at ex-farm levels starting with a seven. That's dire.

Meanwhile all over Europe we've got wheat crops growing in the field that look like producing a 2010 harvest pretty close to 2008's bumper levels.

Thankfully most other northern hemisphere nations have scaled back wheat plantings for 2010.

Let's pray for a crop disaster or three. Possibly four or five would be good.

CBOT Closing Comments


March soybean futures closed at USD9.45, down 3 cents; March soymeal futures at USD276.40, up USD0.80, and March soy oil futures at 38.52, down 0.18 points. Soybean exports today were a marketing year low at 203,900 MT but the export pace has been substantial up to now and accumulated exports are at 27,847,338 MT compared to last year for this week at 20,723,872 MT. That said, China was conspicuous by it's absence from the report for the first time in many moons, cancellations of 279,000 MT of existing sales to "unknown" destinations also points to the world's largest buyer finally switching away from North America to South America.


March corn futures closed at USD3.60, and May corn futures at USD3.71 ¾, both up 2 ¾ cents. Corn futures rallied to close higher, only finishing 2 cents lower for the week. Weekly export sales were above trade estimates at 974,600 MT. A strong dollar capped gains however, on the back of yesterday's surprise announcement by the Fed that it was to raise the discount rate that US banks use to borrow money overnight from 0.5% to 0.75%. That appears to indicate the the US has begun it's "exit strategy" from the current economic crisis, and the only way from here is up as far as interest rates go.


March CBOT wheat futures ended the day at USD4.89 ¾, up 4 ¾ cents, March KCBT wheat futures at USD4.98 ¼, up 4 ¾ cents, and March MGEX wheat futures were at USD5.08 ½, up 5 ¾ cents. Wheat export sales were slightly higher than trade estimates for the weekly export report at 463,400 MT. Even so exports are consistently falling a little short of requirements to hit the USDA's current target of 22.5 MMT for the 2009/10 marketing year. US wheat missed out again in Egypt's latest tender yesterday, reportedly being priced some USD40/tonne over the winning French and Russian bids. Today's CFTC report showed commercial interests increased their net short position by 13,624 contracts at the CBOT.

eCBOT Close, Early Call

The overnight grains finished with beans down around 6-7 cents, wheat was around 3 cents easier with corn down a cent or so.

A firmer dollar, on the back of last nights surprise move by the Fed to increase the discount rate, set the tone. Crude oil is slightly easier.

This weeks USDA Outlook Forum pegged 2010 US wheat production down around 7 MMT to 53 MMT, a drop of some 12% or so. Corn acreage is seen rising 3% to 89 million acres, but a return to "normal" yields of 160.9 bu/acre (from 165.2 bu/acre in 2009) will see output remain flat at around 334 MMT. Soybean area is seen falling slightly to 77 million acres, with yields coming in at 42.9 bu/acre (44 bu/acre in 2009). That would produce a crop of around 88.7 MMT, down 3% on this season's 91.5 MMT.

Weekly export sales were strong for corn, and slightly above expectations for wheat. Soybean sales were poor at little more than 200,000 MT, with no sales at all to China. There were cancellations to "unknown" of 279,000 MT as well, which seems to confirm that China are starting to look to South America for supplies now.

US wheat missed out again in Egypt's latest tender, reportedly being priced some USD40/tonne over the winning French and Russian bids.

US wheat production might be falling in 2010, but EU output is seen almost 5 MMT higher in the coming season. That would push ending stocks up to around 23% of annual usage here in the EU. US ending stocks for 2010/11 are now seen at 25.6 MMT, down 2.1 MMT from 2009/10.

Early calls for this afternoon's CBOT session: corn called 1 to 2 lower; soybeans called 5 to 7 lower; wheat called 2 to 3 lower.

USDA Weekly Export Sales


Wheat sales came in at 408,900 MT for delivery in 2009/10, plus a further 54,500 MT for delivery in 2010/11. That makes combined sales of 463,400 MT, slightly better than expectations of sales of 350-450,000 MT. Nigeria (162,900 MT), Japan (83,200 MT) and Mexico (63,300 MT) were the main old crop buyers. Exports of 364,600 MT were down 19 percent from the previous week and 11 percent from the prior 4-week average. Exports are consistently falling a little short of requirements to hit the USDA's current target of 22.5 MMT for the 2009/10 marketing year.


Net sales of 203,600 MT for delivery in 2009/10 were a marketing-year low for the third week in a row. There was also a tiny sale of 300 MT for delivery in 2010/11, bringing total net sales to 203,900 MT, below expectations of 250-400,000 MT. For the first time in a billion years there were no sales at all to China. The net figure includes decreases reported for unknown destinations of 279,000 MT. Exports of 1,119,000 MT were down 7 percent from the previous week and 17 percent from the prior 4-week average. The primary destinations was China taking 561,200 MT.


Net sales of 974,600 MT for delivery in 2009/10 were very respectable (there were no sales reported for delivery in 2010/11), compared to analysts' estimates of 600-800,000 MT. Exports of 652,200 MT were up 8 percent from the previous week, but down 16 percent from the prior 4-week average. The primary destinations were Japan (226,500 MT), Mexico (148,300 MT) and South Korea (115,000 MT).

What's Happened So Far In 2010

It's been pretty much one way traffic downwards so far this year for world grain and oilseed prices, with only Paris rape managing to buck the trend, up a modest 0.03% or one euro since the turn of the year.

Everything else is lower, led by London wheat, down 11% since the end of 2009. That makes it officially the worst performing commodity in the sector, if you hadn't guessed that already. CBOT corn is hot on it's heels at 10% down, followed by CBOT wheat and soybeans tied in third at minus 8%:

Commodity Month Now Change % Change
London Wheat Nov10 101.50 -12.70 -11%
Paris Wheat Nov10 132.00 -10.50 - 7%
CBOT Wheat Dec10 553.25 -49.75 - 8%
Paris Corn Nov10 136.25 - 6.75 - 5%
CBOT Corn Dec10 395.25 -45.50 -10%
Paris Rape Nov10 296.00 + 1.00 -
CBOT Soybeans Nov10 931.25 -83.00 - 8%
GBP/USD Spot 1.5375 - 8.1 - 5%
GBP/EUR Spot 1.1390 + 1.8 + 2%
WTI Crude Spot 78.11 - 1.25 - 2%

Openfield Announce GBP1 Million Dividend

Formed in 2008 from the merger of Centaur Grain and Grainfarmers, Openfield have announced they will be paying a GBP1 million dividend to it's membership of more than 2,700.

Unveiling profits of GBP7.2 million on a turnover of GBP557 million for the 11 months to June 2009, the company says it handled around 4.6 MMT of product during it's first trading year, exporting more than 1.2 MMT of that.

Dollar Surges On Fed Rate Move

The dollar is up across the board again this morning after the Fed announced that it would increase the "discount rate" - the interest rate it charges US banks for emergency loans from 0.5% to 0.75%.

That might not sound like a lot, but the market is taking it as a clear sign that there is some upside potential in US interest rates, contrary to rates staying flat for some considerable time yet elsewhere in the world.

The move comes only days after the minutes of the last FOMC meeting revealed that the US was soon likely to begin it's "exit strategy" from its emergency economic support measures of the past two years.

With the EU still mired in crisis with Greece and other member states, and the UK just mired, the dollar has hit multi month highs against both the pound and euro this morning.

At least that might help provide some sort of support for London and Paris wheat, apart from that the positives are few and far between.

Sterling hit 1.5342, whilst the euro fell to 1.3442, both being levels not seen since May 2009.

CBOT Closing Comments


March soybean futures finished at USD9.48, down 3 ½ cents, November soybean futures were at USD9.31 ¼, down ½ cent, March soymeal futures at USD275.60, down USD3.80, and March soy oil futures at 38.70, down 5 points. Estimates for tomorrow's weekly export sales report range form 250,000 to 450,000 MT. Last week's sales were 266,700 MT. The USDA's annual outlook forum pegs this year's soybean area 0.5 million lower than in 2009 at 77 million acres.


March corn futures closed at USD3.57 ¼, down 2 ¾ cents, and May corn futures at USD3.69, down 2 ¾ cents. The USDA February outlook projects 2010 corn acreage at 89 million acres with the 2010 crop at 13.2 billion bushels. Export sales estimates for tomorrow's weekly export sales report range from 600,000 to 800,000 MT. The Argentine Ag Ministry say that this season's corn crop will total 19-21 MMT, up sharply from last season's production of 12.6 MMT as "excellent" crop conditions lead to high yields.


March CBOT wheat futures closed at USD4.85, down 9 ¾ cents, March KCBT wheat futures at USD4.93 ½, down 8 ½ cents, and March MGEX wheat futures at USD5.02 3/4, down 8 ¼ cents. Egypt again snubbed US wheat in favour of Russian/French grain, buying 300,000 MT in today's tender. Estimates for tomorrow's weekly export sales report range form 350,000 to 450,000 MT. Last week's sales were 577,700 MT. Strategie Grains say that the EU-27 will produce 134.7 MMT of soft wheat in 2010, that's nearly 5 MMT more than last season, and less than 4% away from 2008's all time record soft wheat output of 140 MMT. All wheat production will come in at 143.5 MMT this year they say, compared to 138 MMT in 2009.

EU Wheat Closing Comments

EU wheat closed lower with March London feed wheat ending down GBP1.40 at GBP92.75/tonne and March Paris wheat closing at EUR123.50, down EUR1.50/tonne.

London and Paris wheat hit lifetime lows on many months, it really is a doom & gloom scenario at the moment. Sadly, I would normally try and lift the mood at this point, but today I can't.

Egypt bought 300,000 MT of wheat in a tender today, of that one cargo, or 60,000 MT was French wheat. The remainder came from Russia.

Even at GBP92.75 we can't seem to pick up any export interest.

To add insult to injury, it seems that the EU-27 are going to get within a gnat's chuff of matching 2008's record wheat production, according to Strategie Grains.

It would seem that the chances of getting a major bull run going on wheat this season are highly unlikely.

eCBOT Close, Early Call

The overnight grains closed mixed with beans a tad either side of unchanged, corn down 1-2 and wheat 2-3 lower.

The dollar is up, crude is down and Wall Street is expected to open narrowly mixed.

The USDA's annual outlook forum pegs this year's corn acres at 89 million, up 3%, soybean area is seen 0.5 million lower at 77 million and the all wheat area at 53.8 million, down 9% on last season.

All these are broadly in line with Informa's ideas released late last month, both imply that US spring wheat area will increase quite significantly as the USDA last said that the winter wheat area was down 14%.

Japan bought 100,000 MT of mixed origin wheat, 60,000 MT was US material. Egypt are tendering for 120,000 MT of wheat, with Russia and Kazakhstan the favourites.

There are mixed reports coming out of Pakistan and India concerning the size of their wheat crops. Whilst official estimates remain bullish on crop production there, private reports suggest that output could be down, and maybe significantly so in Pakistan.

With food price inflation soaring, going public with lower output estimates is not in the best interests of the governments there.

Output in Europe is seen rising however, as Strategie Grains increase their wheat production estimate here to 134.7 MMT for soft wheat and 8.8 MMT for durum, giving a total crop of 143.5 MMT, 5.5 MMT up on last year.

Early calls for this afternoon's CBOT session: corn called 1 to 2 lower; soybeans called mixed; wheat called 2 to 3 lower.

USDA Outlook Forum

The USDA's February's Annual Agricultural Outlook Forum, is usually a pretty good guide to what US farmers might eventually plant each spring. 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 59.1 million acres of wheat, 86.4 million acres of corn and 77.5 million acres of beans.

This year they are pegging US all wheat acres at 53.8 million (down 9%), corn area at 89 million (up 3%) and the soybeans area at 77 million (down less than 1%).

The numbers are not dramatically different to Informa, who said in January that US farmers would plant 89.65 million acres of corn this year, 77.92 million acres of soybean and 53.79 million acres of wheat.

Is Your Bacon Buttie British?

My fondness for bacon butties is legendary, indeed it has long been an ambition of mine to travel the length and breadth of the country sampling the delights of assorted roadside cafes and mobile breakfast shacks. If there was a book on them I'd buy it, if not I'd write it - a kind of Nogger Ronay guide to all things pork.

When I worked at Beoco on the Dock Road in Liverpool I used to travel in deliberately early, partially to beat the traffic, partially to get away from Mrs N#1 who was not a pretty sight at 7.30am (she didn't look to good at 7.30pm either come to think of it). I mean I'm not saying she was ugly, but if she was a small animal you wouldn't have bothered domesticating her. Every time she used to get into the sandpit in the back garden to play with the kids the cat used to cover her up.

No, I also used to go in early to sample the delights of the breakies at the greasy spoon opposite. Next to that pub that used to do the strippers on a Friday lunchtime. Yeah, the one where the "lady" was so out of it that time that she carried on going long after the music had stopped. What was it called? The Sticky Carpet, or something like that. Anyway I digress...

Yes the breakies at this place on the Dock Road were great, even though like most of these gaffs it wasn't ever going to win too many prizes for decor. Full English, no egg - they are the food of the Devil and come out of a chickens arse, we all know that - so I'll double up on bacon please. Two toasts and a cup of tea. £2.95 Lovely jubbly, you can't go wrong. Certainly a significant improvement on the microwavable breakfasts dished up in the Beoco canteen. What was that woman's name who used to do the food there? I use the word 'food' in it's loosest possible sense. She looked like Fred Scuttle in a skirt, two sawn-off milk bottle bottoms for glasses. Thought she was funny but she wasn't, a bit like Jonathan Ross. Joyce, that was her.

Anyway, the point is much as I will always try and buy local meat, not just British meat, but meat from down the road if possible, but never once did I ask Frank in the cafe where his bacon came from. If I'm occasionally forced to buy in a supermarket I will always try and at least buy British. But generally speaking you don't have an option when you eat at Frank's Cafe, or the local pub or wherever.

Wasn't there a kerfuffle involving leading sandwich purveyor recently when it was revealed that the meat in their "fresh" chicken sarnies came from Brazil? Here's a lovely fresh chicken sarnie Missus, only kicked to death six months ago then shipped in from 6,000 miles away, just £2.99. You don't see that on the label do you? A BLT then? Bacon Lingeringly Tortured.

We don't generally even think to ask where the bacon in our roadside butties comes from either do we? I know I don't, but we should.

More than half of bacon sold in the UK, and 43% of other pork products, comes from abroad where animal welfare standards are far below our own, says this article in today's Guardian: here

It seems immoral that whilst we have laws supporting proper animal welfare in this country, there are none against importing meat kept to any old standards you like. And whilst they're thinking about that one aren't we all supposed to be saving the planet as well here?

Why not slap a tax on imported produce? And the farther away it comes from the more tax goes on the product? Food Air Miles if you like. Don't tell me that Joe Public will never wear it, if Joe wants an kumquat then he's going to have to pay for it, simple as. There's plenty of perfectly good British food to go round.

Don't tell me that this will disadvantage a Kenyan strawberry grower or a Paraguayan coffee farmer either for Christ's sake, what about our own British producers, surely we should be putting them first? The Kenyan strawberry grower is just taking money out of the country.

The supermarkets could help for a start by getting their fingers out and clearly labelling the country of origin on everything. Don't tell us that the average housewife doesn't care if the milk she is buying is British or not, if you don't give her the information she can't make an informed choice can she?

I think I might run for Prime Minister, get me Piers Morgan and Max Clifford on the other line #3....Vote Nogger.

Morning Markets

The overnight grains show surprisingly little change this morning, with corn, beans and wheat down only fractions. I'd expect them to work lower than that as the session wears on, given the firm dollar and weaker crude this morning.

The dollar is higher after the release of the minutes of the Fed's latest meeting point to asset sales in the very near future.

The pound is under pressure (nothing new there then), falling below 1.56 against the greenback, after UK public finance data for last month turned out to be much worse than expected.

South American crops seem to be just about made. The Argy Ag Ministry said that corn production there will come in at 19-21 MMT, well above the USDA's latest effort (nothing new there either).

There is a bit of a question mark over soybean production in Brazil, certainly the crop is going to be record large, for now it's a case of exactly how large? With most official estimates in the 66-68 MMT region, I would tend to side with one or two of the other private reports suggesting that 64 MMT might be nearer the mark.

Either way it's an enormous crop, which makes the logistics of physically transporting it to where it needs to be a major headache. There are also problems for corn, with storage in very short supply. So despite the size of the crops down there, there has to be a fairly major question mark over quality.

With beans and corn getting harvested in the midst of heavy rains, coupled with the lack of proper storage facilities, there could be some significant quality issues down the line.

Strategie Grains say that the EU-27 will produce 134.7 MMT of soft wheat in 2010, that's nearly 5 MMT more than last season, and less than 4% away from 2008's all time record soft wheat output of 140 MMT. All wheat production will come in at 143.5 MMT this year they say, compared to 138 MMT in 2009.

"Severe drought in China’s leading corn producing areas may jeopardize the new crop, due to be planted in the spring. A 6-7 inch moisture deficit built up in Jilin, Hebei, Liaoning and Inner Mongolia late in the summer and fall," says Gail Martell of Martell Crop Projections.

That could impact on corn production later this year, and that could be interesting if it subsequently transpires that official Chinese corn crop estimates for 2009 were in fact wildly overestimated, which many believe was the case.

Kazakhstan is wasting no time forging relationships with potential grain customers in the Far East. The country recently agreed a deal with China to construct a grain terminal on the border of the two countries, and transship grain to SE Asia via the Chinese rail network. The Kazakhs are said to be in talks to supply South Korea, and even Japan with wheat later in the year.

Bring it on, the more Kazah wheat that travels east rather than west the better I'd say.

Crude oil is a little weaker this morning, down 66c at USD76.67/barrel ahead of the US Energy Information Administration's release of it's weekly stocks data later this afternoon. inventories are seen rising 1.5-2.2 million barrels.

Argentine Corn Crop 19-21 MMT - Ministry

The Argentine Ag Ministry say that this season's corn crop will total 19-21 MMT, up sharply from last season's production of 12.6 MMT as "excellent" crop conditions lead to high yields.

That is their first estimate of the season, and comfortably outstrips the USDA's 17.2 MMT, and compares favourably with the Buenos Aires Grain Exchange's latest estimate of 19.3 MMT.

Also of interest is their wheat production estimate of 7.5 MMT, very similar to the Buenos Aires Grain Exchange's 7.44 MMT, although the USDA surprisingly raised their production number to 9 MMT last week.

Sunseed production will total 2.2-2.7 MMT say the Ministry, a little higher than the Buenos Aires Grain Exchange's estimate of 2 MMT.

The Ministry didn't estimate soybean production, but said that the planted area for beans was a record 18.2 million hectares.

Strategie Grains Up EU-27 2010/11 Soft Wheat Crop

Strategie Grains have increased their estimate for EU-27 2010/11 soft wheat production to 134.7 MMT, up 1 MMT from last month. That's an increase of almost 5 MMT, or 4 percent, on last year.

Durum wheat output is forecast at 8.8 MMT, up 9% on a year ago. That gives us an EU-27 all wheat crop of 143.5 MMT, 5.5 MMT higher than last year's 138 MMT.

Barley production is seen falling 7% to 57.2 MMT, and 1 MMT down on last month. Corn output is pegged at 57.7 MMT, almost 1 MMT higher than last year. That will be the first time that EU corn production has been higher than barley ouput since 2005/06.

CBOT Closing Comments


March soybean futures closed at USD9.51 ½, down 14 cents, November soybean futures at USD9.31 ¾, down 9 ¼ cents, March soymeal futures at US279.40, down USD4.50, and March soy oil futures at 38.75, down 20 points. There is very little fresh news to report today, apart from a correction from Tuesday's gains. NOPA showed a reduction in the crush from the December report for January. Total crushings were 162.39 million bushels compared to last months 164.37 million bushels and 139.1 million bushels from a year ago January.


March corn futures closed at USD3.60, down 7 ¼ cents, with May corn futures at USD3.71 ¾, also down 7 ¼ cents. Thursday's normal weekly export sales report will be delayed until Friday due to the President's Day holiday. Weaker outside markets weighed on corn today as too did yesterday's export inspections report, which indicates that US exports will fail to reach USDA targets for the current marketing year.


March CBOT wheat futures closed at USD4.94 ¾, down 10 ¼ cents, March KCBT wheat futures at USD5.02, down 10 ½ cents, and March MGEX wheat futures at USD5.11, down 9 ½ cents. A strong dollar and weaker crude oil depressed what values from the off, as did a correction from yesterday's strong gains. There is some ongoing discussion between the Argentine government and producers over the lack of wheat milling purchases. Some reports suggest that farmers there will plant even less wheat than their 2009 acreage, which was the lowest in 100 years.

EU Wheat Renews Downwards Tack

EU wheat futures renewed their downwards tack Wednesday with London Mar wheat ending down GBP0.40 at GBP94.15/tonne, and Paris Mar wheat closing EUR0.50 lower at EUR125.00/tonne.

A weaker dollar and lower US prices set the tone, with Paris wheat closing right on the psychologically important EUR125/tonne mark. A break through that tomorrow could be very significant.

All the grain market optimism that was around yesterday seemed to quickly evaporate today.

The pound was firmer early on after it was revealed that the BOE's MPC voted unanimously not to extend QE expenditure earlier this month. Unfortunately, or not as the case may be, the latest job claim numbers took some of the shine off sterling's strength later in the day.

Farmer selling remains light at these levels, although consumers are hardly falling over themselves to buy volume at the moment either.

There are a few bits of export business going on, but nothing significant, and very little coming the was of UK wheat that is for sure.

Latest customs data shows that whilst we have only exported 44% of Defra's projected volume for the current marketing year, halfway through the programme, we have actually imported 76% of our supposed requirements for the entire year.

That's hardly bullish information.

UK Wheat Export/Import Imbalance

The UK exported 164,492 MT of wheat in December, according to the latest customs data. That brings total exports for the 2009/10 marketing year to date to 953,594 MT, or 44% of Defra's UK target for the entire MY with six months remaining. Clearly the pace is going to have to increase somewhat to hit this season's full target of 2.161 MMT.

Conversely, the UK has already imported 734,191 MT of wheat in the first half of the marketing year, that is 76% of Defra's projected imports for the entire period of 968,000 MT.

Oh dear, it looks like we are going to import more than planned and export less.

Barley exports for the MY to date are at 491,956 MT, with a further 66,914 MT going into intervention as of Feb 11th.

eCBOT Close, Early Call

The overnight grains closed with beans around 4 cents lower, wheat down 2-3 cents and corn a cent or so easier.

Crude is flat at 9c/barrel firmer after rising more than USD3/barrel yesterday. The Energy Dept's stocks report is delayed until tomorrow due to Monday's President's Day holiday. Inventories are expected 1.5-2.0 million barrels higher.

Grains have dipped after yesterday's strong rises, as the dollar arrests Tuesday's declines.

Morocco bought 100,000 MT of US wheat, Japan is tendering for 100,000 MT of mixed origin wheat tomorrow. Iraq are also in the market for "at least" 100,000 MT, and Turkey is tendering to sell 300,000 MT of wheat next week.

Some reports suggest that Indian wheat production will not be in the region of 80-82 MMT this spring and that 78 MMT is nearer the mark.

Significant winterkill may have taken place to Ukraine crops uncovered by snow this year. We won't know the full story until winter grains emerge from dormancy. Alternate frosts and thaws in January and the early part of February has caused "ice crusting" which may mean that a significant acreage needs to be resown.

A few reports coming out of Brazil suggest that this season's soybean crop, whilst still a record, will not be as high as official estimates from Conab, Celeres and the like.

Has the strong seasonal tendency for a February bottom already occurred? March beans closed last night 65 1/2 cents higher than the recent Feb 4th low.

European equities are modestly firmer, and Wall Street is expected to follow suit.

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

Get Me Miss Marple, Quick

Indian Agriculture Minister Sharad Pawar says that this season's wheat crop will beat last years output of 80.7 MMT after all, with crop conditions "extremely good".

Indian food price inflation rose to 8.56% in January, the fastest rise in 15 months.

But don't worry, as soon as this season's bumper harvest arrives food inflation will start to fall again, says the minister.

The country already has huge government-owned stocks, and will still have 15 MMT of those left on April 1st (nice choice of date), it says when the new crop harvest gets going.

"The vegetation index in Northwest India (where the bulk of the nation's wheat is grown) has been persistently bad, reflecting stress throughout December and January. Sub-par wheat yields seem likely in the normally productive irrigated wheat states, Punjab and Haryana," says Gail Martell of Martell Crop Projections.

"The whole of Rajasthan, Madhya Pradesh, Bihar, Punjab and Eastern Uttar Pradesh have had scanty rainfall. Rising temperature is sure to hurt yields of late planted wheat. So, at this point of time, any euphoria over the wheat crop may be premature," says the Hindu Buiness Line.

Who do you believe?

EU Soymeal Prices

Guide prices basis CIF Rotterdam/Amsterdam in USD/tonne unless stated:

Brazil pellets 48%

Spot Fob 419.00
Afloat 413.00
March 399.00
Apr 341.00
May/Sep 327.00
Oct/Dec 328.00

Argentine pellets 44/45%

Spot Fob 405.00

Dutch Hipro 49% profat

Feb 421.00
March 430.00
Apr 406.00
May 373.00
Jun/Jul 345.00
Aug/Oct 349.00
Nov/Jan 349.00

Argentine Hipro 49% profat

Afloat 425.00-421.00
Feb 419.00
March 391.00
Apr 349.00
May/Sep 333.00
Oct/Dec 335.00

EU Rapemeal Prices

Basis FOB Lower Rhine in euros/tonne:

Feb 175,00
Mch 166,00
Apr 152,00
May 136,00
May/1st h Jly 128,00
Aug/Oct 10 117,00
Nov/Jan 11 127,00
Nov/Apr 11 129,00

BoE Minutes Show 9-0 Vote To Leave Rates/QE On Hold

The minutes of the MPC's February 3-4 meeting showed a unanimous 9-0 vote in favour of leaving interest rates and QE on hold this month.

Some analysts had been expecting one or two committee members to vote in favour of increasing the bank's GBP200 billion asset purchase programme.

A 9-0 vote saw the pound rise further against the dollar, as it would appear to allay fears that more government debt might have to be incurred to attempt to drag us out of recession.

As ever it's not all good news for the pound though, jobless claims rose by 23,500 last month, confounding pundits' predictions of a 10,000 fall. The total number of UK claimants now stands at its highest levels since 1997.

Mato Grosso Soybean Crop Shrinking

This is a very interesting post straight from the horses mouth so to speak, fresh from a twelve day tour of Mato Grosso.

It would appear to suggest that early and medium maturing varieties in Brazil's top producing state are not yielding as well as had been anticipated.

Heavy rain may also be taking the top off yields a little, as well as delaying harvest progress.

That would appear to concur with some estimates filtering through that recent calls for a crop of 68 MMT are indeed "pie in the sky".

Check it out: here

Nogger's Rapemeal Strategy

There's a huge spread opened up between nearby and summer & beyond rapemeal at the moment. With everybody talking the soya market down on the back of huge South American crops on the way, and the notion that the UK will soon be awash with DDGS that Ensus (followed by Vivergo) can't give away, prices are surely going lower than Kerry Katona's IQ, right?

Certainly the feed compounders in the north are milking "Ensus fear" for all it’s worth and both Cargill & ADM seem to believe that there is some truth in it, and are pricing summer onwards accordingly.

I’d be inclined to think that Ensus’s DDGS aren’t going to have as large an effect on rapemeal demand as many seem to think. Particularly in the summer positions. Firstly, the plant appears to have been "going to start up on Monday" every week since last May. Secondly, despite buying in some DDGS that they already had contracted to supply Oct09/Apr10, they will likely still have a fairly sizable carryover of sales from the winter. These they will be still be obliged to supply (presumably with a discount) when the plant finally does get into operation. So effectively, some of the Ensus summer DDGS production is probably already “sold”. Thirdly, there will surely be production hiccups even when the thing does start to roll.

The pressure of a UK oversupply of DDGS this summer might not be as great as many appear to think, so it may be an idea to take advantage of summer rapemeal whilst that is still the case.

In addition the Vivergo plant in Hull is officially also supposed to begin production this summer, although if it produces anything of any significance in 2010 I for one will be surprised. These things rarely run according to schedule, as Ensus would testify, but the threat of more DDGS on the market from this quarter is currently out there.

CBOT soya frequently puts in a first-half yearly low in Feb sometime (often early Feb), maybe it has already done that again? March beans hit USD9.00/bushel on Feb 4th, coincidentally the day before the Locust Dinner, is this starting to sound familiar yet? Last night they closed USD65 1/2 cents higher than that.

Despite the fact that you would think that a low would surely come in say April when the South American harvest is in full swing, historically it seems to be the impending threat of South America, rather than the reality of it that puts a bottom in place this month. Maybe that is because by April the logistics of getting large crops to the ports in South America has already started to create front-end premiums? Certainly those logistical problems are going to be even more in evidence this year. Maybe they should plant roads and rail terminals instead of soybeans and corn next season?

I’ve written about this on the blog several times before including here: Where do we go from here? and also here: Have soybeans peaked?.

Even though the latter post was written in June 2009, the historical charts then pointed towards a seasonal decline from mid-June through to October, which subsequently proved to be the case although prices didn’t fall quite as low as during the “February break”.

As it happens therefore, both history and the current market fundamentals would suggest that a prudent strategy currently would be to definitely cover-in a decent proportion of May/Jul rapemeal requirements now, if you haven’t done so already. There are currently massive price differentials between spot and May, which to me would appear to suggest front-end premiums when we get there.

Some degree of cover now for heavily discounted Aug/Oct could also also worth consideration. A second bite of the cherry for Aug/Oct nearer the time, when a clearer idea of the real impact of Ensus DDGS on the market is more apparent, seems sensible. There may well of course be some harvest pressure by then too, with some decent front-end savings to be had.

A strategy to come back in again around October time to look at the winter, when US soybeans traditionally post harvest lows and when we will also have a better handle on Vivergo's timeframe, would seem like a sensible option. It certainly sees like rapemeal prices have been heavily under pressure around October in recent years, before shooting higher in the Dec/Apr period.

CBOT Closing Comments


March soybean futures closed at USD9.65 ½, up 20 ½ cents, November soybean futures at USD9.41, up 19 cents; March soymeal futures at USD283.90, up USD3.90; March soy oil futures at 38.95, up 111 points. Spec funds have been selling beans lately as the harvest in Brazil gathers pace, and are heavily short. A fourth steadier session in a row seems to have got a few nervous, prompting some short-covering. Some marketeers also point to a very strong seasonal trend towards the market bottoming in February, the so-called John Deere low, which may also be promoting some buying despite record production in the pipeline from South America.


March corn futures finished at USD3.67 ¼, up 5 ¾ cents, and May corn futures at USD3.79, up 5 ¾ cents. Spillover strength from beans and wheat helped corn, as did a weak dollar and strong crude oil. Weekly export inspections were up about 5 million bushels from last year, and accumulated exports are about 7 million bushels ahead of last year at this time. A lack of farmer selling and some lingering uncertainty that the USDA's January crop production report may have been overstated for corn also provided some underlying support.


March CBOT wheat futures closed at USD5.05, up 18 ½ cents; March KCBT wheat futures at USD5.12 ½, up 18 cents; March MGEX wheat futures at USD5.20 ½, up 16 cents. These were the biggest daily gains of the year so far for wheat as a weak dollar and firmer outside markets boosted prices from the off, as too did a more optimistic mood in equities. ABARE lowered their forecast for the 2009/10 Australian wheat crop to 21.7 MMT down from 22 MMT in December. Wheat inspections for export were at 15.982 million bushels, that implies that US exports this marketing year will reach around 816 million bushels, some 9 million short of the existing export target.

EU Wheat Closing Comments

March London wheat ended GBP0.80 higher at GBP94.55/tonne, and March Paris wheat closes EUR0.25 higher at EUR125.50/tonne. Hardly what you might call a key reversal, but any higher close has been a rarity of late, particularly for London wheat, which posted only it's eighth higher close for the year out of thirty six trading sessions.

A sharply firmer US market following their long weekend, helped get wheat off onto a positive footing from the outset. Firmer crude oil, equities and other outside market strength also spilled over a little into grains today.

There seemed to be a little bit more optimism around today in general, aided by recession busting results from Barclays. UK inflation came in above 3%, but that was what was expected, that will require another letter of explanation from Mervyn King to Alistair Darling to explain why.

All eyes are now on the details of EU finance ministers' aid package for Greece.

Whilst European winter wheat plantings are seen slightly higher, along with those in Russia and many of the FSU countries, plantings elsewhere are seen lower. US farmers have already cut winter wheat seedings by 14% (although they may partially compensate for that by planting a bit more spring wheat), Canadian farmers too are expected to cut sowings significantly on the Prairies. In the southern hemisphere where the harvest has only just finished Argentine and Australian farmers are also expected to throw in the towel on wheat and look for alternatives.

That can't do any harm in the long run, but any significant recovery in prices will be hindered by the weight of existing northern hemisphere stocks.

Ukraine Rapeseed Crop Suffering

The Ternopil region of Ukraine is slap bang in the heart of the nation's rapeseed producing area, and winter rapeseed there has reportedly suffered badly at the hands of Jack Frost, according to media reports.

An estimated 28% of the crop has been "frozen out" according to the regional Agricultural Department. Whilst the average winter rape seedings density is 60-90 per square metre, seedings in frost-affected areas are down to just 20-30 per square metre, they say.

A very dry August and September meant that OSR didn't germinate until October, leaving the crop immature and vulnerable to withstand frost, say the Department.

Further east in the Zhytomyr region, 23% of the winter rapeseed crop is also said to be in poor condition due to frost damage on fields unprotected by winter snow cover.

Russian Grain Stocks/Exports

The Russian Institute for Agricultural Market Studies (IKAR) says that the country has exported 13.3 MMT of grain so far during the current marketing year, a fall of 500,000 MT on this time a year ago.

The Russian Agricultural Ministry says that the country will export 21.5 MMT of grains in the current 2009/10 season, 1 MMT less than was exported in 2008/09.

Meanwhile, the official state news agency ITAR-TASS say that Russia's grain intervention stocks currently stand at 9.5 MMT.

The Russian Agricultural Ministry recently said that it would change it's intervention system in 2010 to provide a "more sustainable price policy" - without detailing exactly what changes it would be making.

US Exports Record Volume Of DDGS

As the US ethanol sector continues to expand, the industry is producing record volumes of DDGS which need to find a home.

The industry exported a record 5.64 MMT of DDGS in 2009, up 24% on the previous (and also then a record) year of 2008.

That quantity is a more than fivefold increase on what was being exported just five years ago.

Mexico was the number one destination last year taking 1.5 MMT, with Canada in second slot importing just over 800,000 MT of US distillers grains.

Reasons To Be Cheerful: Here's 3

If you look hard enough you can find some reasons to be optimistic about the outlook cereal prices for the second half of 2010.

Go on then Nogger, this will be worth a laugh at the very least, my psychic powers tell me you are thinking.

The thing is that's what I am also thinking when I read this story: Get planting

It looks like it's going to be all kind of doom & gloom but switches to proffer some rays of hope. A bit like a Jeremy Clarkson review of a car in reverse really.

What do you make of there being "little malting quality grain in store" or the removal of intervention next season being a positive thing for the market? Chuck in the oft quoted "massive intake" of wheat from Ensus changing the dynamics of feed demand and you'd better get that spring seed ordered after all.

Just make sure that you email your barley offers to this guy, not me!

Tuesday Morning Markets

The overnight grains are higher with beans up around 8-10 cents, wheat 8 cents higher and corn up 2-3 cents as America emerges from yesterday's president's Day holiday.

The dollar is a little easier today, and crude oil a bit firmer, adding some support to the grains sector.

A two day meeting of euro zone finance ministers yesterday and today will attempt to "flesh out" plans to aid Greece's debt crisis. That's helping the euro firm a little from recent losses, although a failure to sufficiently assure the markets could easily see the single currency back under the cosh.

The Greek finance minister told the Telegraph that turning this ship around was no easy feat, it would be like trying to "change the course of the Titanic, it cannot be done in a day," he is quoted as saying.

EU markets have opened a little higher, encouraged by the lead from eCBOT. London wheat has come in 30-40 pence higher, with Paris wheat up 25-50 euro cents and rapeseed EUR2.50-2.75 firmer.

Kazakhstan says that it's grain stocks on Feb 1st were 15.1 MMT, of that 13.3 MMT was wheat, and of that 11 MMT was milling wheat.

Iran is tendering this week for at least 100,000 MT of wheat, certainly the Kazakhs will be one of the front-runners.

Japan is also tendering for 100,000 MT of wheat, of that 60,000 MT will be US origin, with the rest split equally between Canadian and Australian wheat.

Talking of Australia, ABARE cut it's estimate of the final size of the recently harvested wheat crop there to 21.7 MMT from 22 MMT yesterday. Barley output was also downgraded by 300,000 MT to 8 MMT.

Summer grain plantings there are seen sharply lower, down 27%, due to unfavourable hot and dry conditions around Christmas time.

As of Feb 3rd Ukraine had exported 16 MMT of grain during the current marketing year. The local Farmers' Confederation says that the country will export 6 MMT in the Jan/June portion of the MY, that gives us likely exports of 20.3 MMT in the 2009/10 MY, 4.9 MMT down from 2008/09. The Ag Ministry recently raised their forecast for exports this season from 20 MMT to 22 MMT, that's almost half of this year's production of 46 MMT.

Terra Yara Boom Today

It took me ages to come up with that headline, not quite "ta ra ra boom di ay" but pretty respectable nevertheless.

Love is in the air with Terra and Yara set to get married in a glitzy showbiz wedding it has been revealed, appropriately enough over Valentine's Day weekend.

The couple already have one illegitimate love child, GrowHow aged 3, but look set to spawn again before too long.

Terra is a "perfect fit" for Yara, according to Yara chief executive Jorgen Ole Haslestad.

It's likely to be a June wedding, said the lovebirds, who have already opened discussions with OK magazine for the photography rights.

Blushing Terra plans to move in with Yara, saving USD60 million in "cost synergies", I think she means soft furnishings but I'm not really sure.

The couple's publicist said that the merger was good news for British farmers, although strangely the British farmers who are emailing me remain surprisingly sceptical, saying that this will give them an even bigger monopoly than the one they already enjoy.

"It's a bit like getting into bed with your sister," said one Devon farmer, "you know you shouldn't do it but you just can't help yourself."


My Dad Is Six Foot Five

"You're not very big are you Dave?" said Mrs N#3's son to me at the weekend. Before I could reply he came out with "My Dad is six foot five. He's massive."

What do you say to that?

"Well I wish I'd had the forethought when I was younger to think myself tall. What an achievement that must have been? I was only two foot six when I started big school, but I worked really hard at it and when I left I was six foot five."

I came out with the first thing in my head (usually a bad sign): "Really? That must come in handy (thinks: when the circus are in town)."

Of course after the event I think of better replies such as "Crikey, all that money I wasted on those ladders." or "ask him to bend down and clear that guttering for me will you."

This happens periodically. Several weeks ago we had "You're feet are quite small aren't they Dave, what size are they?"

"Erm, I guess so, I'm size eight, maybe a nine sometimes."

"Really? My Dad is size thirteen."

"Great, I'll remember that if ever we want to go white water rafting."

A few weeks later we were in a large shopping centre near Leeds. We went past a sports shop that had a huge promotion going on in the window, which included a GIGANTIC training shoe, the biggest that you have ever seen, maybe four foot across this thing.

"Wow, look at that shoe, that's massive that is," says George.

"Yes," I helpfully agree. "What sort of GIANT CIRCUS BOY wears a shoe like that?" I verbally ponder.

"Whoever wears shoes that big must be one ENORMOUS SIDESHOW FREAK," I conclude guffawing in the style of Blackadder.

"What size is it Dave?" George helpfully asks.

"Erm, I'm not sure, let's have a look, rubbing the window furiously, looks like a twelve and a half I think...."

Australian Crops Revised Mostly Lower

Australian crop production for 2009/10 has been revised slightly lower for wheat and barley, although a tad higher for canola by ABARE.

"Total winter crop production in 2009-10 is estimated at 35.2 million tonnes. This is a downward revision from ABARE’s December estimate, largely reflecting a fall in crop yields and production estimates for both South Australia and Victoria. This is as a result of the heatwave conditions experienced in late 2009 which was immediately followed by heavy rainfall," they say.

"Of the major winter grains, wheat production is estimated at 21.7 million tonnes in 2009-10, a slight downward revision from ABARE’s December estimate. Barley production is estimated at 8 million tonnes in 2009-10, slightly down from the 8.3 million tonnes estimated in December. Canola production is estimated at around 1.9 million tonnes, higher than the 1.8 million tonnes estimated in December," they add.

The summer grain cropping area is also seen lower in the coming year. "Total summer crop area in 2009-10 is estimated to be around 845 000 hectares, a reduction of 27 per cent from 2008-09 and a downward revision from ABARE’s December 2009 forecast. The area planted to grain sorghum is estimated to have declined as a result of the
hot and dry conditions in the main planting window prior to Christmas 2009 that restricted plantings, particularly in southern Queensland and northern New South Wales," say ABARE.

"The total area planted to grain sorghum is estimated at 429 000 hectares in 2009-10, which is 43 per cent below the area planted last year," they conclude.

London Wheat Closes At Contract Lows

London wheat closed with March GBP1.50 lower at GBP93.75, the lowest ever level in the life of the contract and fully GBP15.45 down on the year to date.

Paris wheat fared marginally better, ending with March EUR0.50 lower at EUR125.25/tonne. That was close to the September all-time low of EUR123.20/tonne, the contract has now lost EUR10.00/tonne since the turn of the year.

Those two statistics clearly highlight what a torrid time London wheat has had so far this year. The EUR10.00/tonne fall in Paris wheat equates to GBP8.70 at today's exchange rates, meaning that London wheat has fallen at almost twice the rate of French wheat so far during 2010.

Clearly there are more than just currency fluctuations at work here. French wheat futures are of course milling wheat, whilst London trades feed-grade wheat, and nobody much wants feed wheat at the moment. Is there more to it than that?

Here's an arbitrary thought for you that has just entered my head, it is relatively common knowledge that Glencore, the feed wheat suppliers and by-product sales agents for Ensus, have been in the market recently buying some fairly hefty quantities of wheat distillers grains. And paying some pretty handsome prices too, GBP175/tonne in December up to GBP185/tonne more recently I hear.

The reason that they've had to do this is of course the severely delayed "button-pressing" at Ensus, which has been off and on more frequently than Mrs Nogger#1's scanties at the Rugby Club Christmas Night Out. They've had DDGS sold which they can't supply, ultimately they've had to buy-in some product to help fulfil old outstanding contracts.

Now, my befuddled thought is this, the lack of a timely start-up by Ensus has caused a dramatic tightening in availability, and therefore price, of DDGS in the UK. As they've had DDGS sold that they can't supply from their own production, then surely the flip side is that also they've had wheat bought, to potentially take it off the market, that ultimately they haven't been able to take delivery of either?

So as the distillers market has tightened up due to a sudden unexpected surge in demand, the wheat market has crashed due to a sudden and unexpected lack of off-take of existing contracts. Might that at least partially explain why London wheat has fallen by twice as much as it's Parisian counterpart since the turn of the year?

New Contract Lows For London Wheat

It might be a public holiday in America, but it's business as usual in London, with the front four contracts all setting new lifetime lows this morning.

Front three months March, May and July now all trade below GBP100/tonne and new crop November10 is in danger of joining the sub one hundred club, currently standing at just GBP101/tonne.

Paris wheat is managing to just about hold above lifetime lows, with EUR125/tonne once again proving a difficult nut to crack. The low for the March contract was EUR123.20/tonne set back in mid-September.

The current weakness of the euro is helping French wheat hold reasonably steady, relative to UK wheat.

For what it's worth last year's March London wheat's peak of GBP138.80/tonne was set in the first week of June 2009, although the contract actually traded as much as GBP23/tonne higher than that, when it first began trading in June 2008.

Back in June 2009, the pound was trading at similar levels to today against the euro, and only marginally higher (around 1.62) against the dollar.

Incidentally, back in June 2008, when the lifetime highs were set, the pound was around 1.95 against the dollar and 1.26 against the euro. So much for the theory that a strong currency is bad for prices!

I think that we can safely say that the current slump in prices has more to do with the mechanics of wheat supply and demand than currency levels.

Attracted by current low prices, Iraq is tendering for "at least" 100,000 MT of wheat it's Grain Board says. It frequently buys more than it tenders for, and is unlikely to find itself short of willing suitors from the usual quarters.