Chicago Close


September soybeans closed at USD10.23 1/2, down 14 1/4 cents; September soybean meal closed at USD297.20, down USD8.30; September soybean oil closed at 41.25, up 17 points. Oil gained on beans and meal after the USDA announced weekly export sales of 138,200 MT for soyoil, well above expectations of 40-50,000 MT. And that figure doesn't include 60,000 MT bought by China earlier in the week. The USDA raised 2010 soybean yields and final production, not lowered them as expected, that makes 2010/11 carryout 46 million bushels higher than anticipated at 350 million.


September corn closed at USD4.64, up 7 3/4 cents; December corn closed at USD4.78 1/4, up 7 1/2 cents. The USDA lowered their projected 2010 US corn yield a bit more than expected. US and world production was dropped around 5 MMT with world ending stocks falling by 3.64 MMT to 135.6 MMT. That's just under 60 days worth of supply, the 3rd tightest of the past 35 years. Corn also got a boost from higher crude oil and ethanol prices on ideas that the US hurricane season will be more active than normal. Weekly export sales came in lower than expected at 680,200 MT.


Sept CBOT wheat closed at USD7.04 3/4, down 2 cents; Sept KCBT wheat closed at USD7.47 1/4, down 1/4 cents; Sept MGEX wheat closed unchanged at USD7.42 3/4. Export sales came in higher than expected at 1.613 MMT, the best figure in three years. Egypt took both old (115,900 MT) and new crop (330,000 MT). The USDA report had something for both the bulls and the bears. US ending stocks were cut more than expected, and world production was also reduced. Thanks to reduced consumption though, global ending stocks were actually raised by just over 3 MMT.

EU Wheat Closing Comments

Nov London wheat ended the day GBP1.50 higher at GBP160.50/tonne, unchanged on the week. Nov Paris wheat closed up EUR2.75 at EUR230.50/tonne, down EUR1.50 on the week.

Weekly soft wheat export licences were issued by Brussels for a 2010/11 marketing year record 943,000 MT, with export pace running 23% up on last season so far. French wheat accounted for 714,000 MT of that.

FranceAgriMer say that the French will export a record 11 MMT of milling wheat outside the EU-27 this season. To facilitate the demand for quality wheat they will need to import more feed wheat than they have since the war.

That shouldn't bee too difficult, with plenty of low grade wheat in neighbouring Germany this year.

In America, the USDA confirmed weekly wheat export sales at a three year record of 1,613,400 MT.

They also dropped 2010/11 US ending stocks a bit more than expected to 902 million bushels, decreased world wheat production by 2.72 MMT and cut EU-27 wheat output from 137.51 MMT last month to 135.13 MMT.

Taking the wind out of the bulls sails however, they cut world usage too, which actually had the effect of raising global ending stocks by just over 3 MMT. Although US ending stocks were cut, the 902 million bushel figure still represents the second highest in more than a decade.

Interesting Picture Of The Day

A zoomable panorama of the trading floor at the CBOT. Scruffy buggers, it looks like the average 14 year old's bedroom, too tired to make it to the bin were we?

Where's Wally?

CBOT Revised Call

Allendale are saying: Corn 1-3 higher, Beans 5-7 lower, Wheat 2-3 lower.

It's looking like the consensus is bearish beans, slightly bearish wheat and slightly friendly for corn.

Note however that soyoil sales have been very strong of late with China booking another 60,000 MT yesterday. Today's weekly export sales from the USDA were 138,200 MT for soyoil, well above expectations of 40-50,000 MT.

That might lend some support to beans tonight, making meal the weakest leg of the three.

USDA Quick Reaction/Early Call

There's a lot of data to sift through, here's some quick reaction to the most striking numbers:

US 2010 soybean yields and final production were raised not lowered as expected, that makes 2010/11 carryout 46 million bushels higher than anticipated at 350 million.

World wheat production was dropped 2.72 MMT, not as much as the 4 MMT expected, and thanks to reduced usage at these levels global 2010/11 ending stocks were actually raised by just over 3 MMT. That's one in the eye for the wheat bulls.

EU-27 wheat output was dropped from 137.51 MMT last month to 135.13 MMT, Russian production came down 2.5 MMT to 42.5 MMT. Canadian output was raised 2 MMT to 22.5 MMT.

For corn US and world production was dropped around 5 MMT with world ending stocks falling by 3.64 MMT to 135.6 MMT. That's just under 60 days worth of supply, the 3rd tightest of the past 35 years.

The numbers are being called neutral for corn and wheat and bearish beans.

We now need to wait and see if the large increase in fund longs on corn of late have the appetite to push things even higher towards USD5/bushel. The wheat numbers could have been a lot worse, and the increase in world ending stocks is certainly a bearish surprise. Whilst US 2010/11 ending stocks were reduced a bit more than anticipated, they are still almost three times those of 2007/08.

Beans look set to open lower in what could eventually turn out to be a tug of war with corn. Personally I'd say that the wheat numbers are also mildly bearish which might tip things in favour of this afternoon being a down day.

Early calls from the floor are 3-5c down on beans, wheat mixed and corn 2-4c higher.

USDA Weekly Export Sales

The USDA today reported the following weekly export sales:

Trade Guess
Wheat 1,613,400 MT 600 TMT-1.0 MMT
Corn 680,200 MT 800 TMT-1.2 MMT
Soybeans 848,200 MT 500 TMT-800 TMT

USDA Crop Numbers

10/11 Prod'n USDA Sep Avg Est Range USDA Aug 09/10
Corn 13.160 13.199 12.880-13.410 13.365 13.110
Soybeans 3.483 3.406 3.354-3.500 3.433 3.359
10/11 Yields USDA Sep Avg Est Range USDA Aug 09/10
Corn 162.5 163.1 160.0-165.9 165.0 164.7
Soybeans 44.7 43.8 43.0-44.9 44.0 44.0
09/10 End Stks USDA Sep Avg Est Range USDA Aug 08/09
Corn 1.386 1.412 1.350-1.479 1.426 1.673
Soybeans 0.150 0.151 0.125-0.171 0.160 0.138
10/11 End Stks USDA Sep Avg Est Range USDA Aug
Corn 1.116 1.125 0.929-1.312 1.312
Soybeans 0.350 0.304 0.129-0.373 0.360
Wheat 0.902 0.914 0.830-0.995 0.952

EU Wheat Opens Higher Ahead Of USDA Numbers

EU wheat futures have opened higher on follow through from last night's strong US wheat futures close, and amidst ideas that the USDA will cut world production and both US and global ending stocks sharply this afternoon.

Customs data from Brussels shows that the EU issued export licences for 943,000 MT of soft wheat last week, the highest weekly total yet this season. That brings the total amount of licences issued to 4.3 MMT already, some 23% up on the 3.5 MMT issued at the same time last season. French licences dominated this week's allocations, accounting for 714,000 MT of the 943,000 MT issued.

US corn production and ending stocks will also be cut by the USDA this afternoon, that is the almost universal belief, and some pundits think very significantly so.

How much of that has already been priced in is open to question, or will it be a case of buy the rumour, sell the fact?

Early Morning Thoughts

The 50:50 split that seems to be developing Down Under seems to be widening the range of pundits' estimates with regards to the coming season's wheat crop. Although Western Australia has had some rain lately it is still regarded as largely too dry in many areas. In the east though things currently look highly promising. Rabobank have re-affirmed their 22 MMT estimate overnight, although Profarmer Australia and ANZ are now saying 24 MMT, or even more. ABARE are out with their latest estimate on Tuesday.

CBOT wheat got a boost ahead of today's crucial USDA report from reports of possible frost in the forecasts for Canada. Spring floods delayed plantings there, which was always going to mean a late harvest and vulnerability to an early freeze. September has been cold and wet so far, which hasn't helped harvest activity for spring wheat and canola. An early freeze could take some more quality wheat off the export circuit.

The USDA are out at 13.30 UK time with a wall of data. Just about every man and his poodle are expecting lower US corn and soybeans production, ditto ending stocks for both plus wheat. In addition of course, reduced global wheat production and ending stocks numbers. On top of that little lot, we also have the one day delayed weekly export sales report too, with another week of robust activity expected. I won't bore you with all the numbers here, but they are included in various reports lower down on this blog. If we are going to get a surprise, I'm forecasting it to come in corn where US yields and production might come in higher than the trade is anticipating.

The open interest in November Paris wheat keeps creeping down. It was 127,000 lots last night from over 140,000 just over a week ago. That's still well over 6 MMT mind, and shows that there is still some considerable way to go yet. The inverse spread is also starting to erode as some longs roll into Jan or March.

CBOT Close


September soybeans closed at USD10.37 3/4, down 3 1/2 cents; September soybean meal closed at USD305.50, down USD1.80; September soybean oil closed at 41.08, down 8 points. The USDA announced another 60,000 MT of new crop Chinese soyoil purchase. On the 2010 production side the trade is expecting the USDA to peg US soybeans output at 3.406 billion bushels tomorrow (Aug USDA 3.433), with yields at 43.8 bu/acre. Export sales reported tomorrow morning are estimated at 600 – 800 TMT, up from 613 TMT last week.


September corn closed at USD4.56 1/4, up 8 3/4 cents; December corn closed at USD4.70 3/4, up 8 1/4 cents. On the 2010 production side the trade is expecting US corn output at 13.199 billion (Aug USDA 13.365) with yields of 163.1 bu/acre. Old crop corn end stocks are estimated at 1.412 billion bu versus the August USDA figure of 1.426 billion. New crop corn is expected at 1.125 billion compared to the August USDA number of 1.312 billion. Export sales reported tomorrow morning are estimated at 900 TMT – 1.1 MMT, down from last weeks 1.658 MMT.


Sept CBOT wheat closed at USD7.06 3/4, up 28 cents; Sept KCBT wheat closed at USD7.47 1/4, up 27 1/4 cents; Sept MGEX wheat closed at USD7.42 1/2, up 24 1/4 cents. Wheat 2010/11 end stocks are seen falling to 877 million vs August's USDA estimate of 952 million. For wheat in particular global production and ending stocks numbers will also be scrutinised. USDA Export sales reported tomorrow morning are estimated at 800 TMT – 1 MMT, down from last weeks 1.024 MMT. The USDA announced the sale of 220,000 MT of wheat today to "unknown".

EU Wheat Close

November London wheat closed GBP0.80 higher at GBP159.00/tonne, whilst November Paris wheat rose EUR1.00 lower at EUR227.75/tonne.

Futures traded on both sides today, before a firmer US market late on dragged things up to close at or near session highs for the day.

London got a boost from talk that the French would need to import 1.2 MMT of feed wheat itself this year - the most in more than 60 years - as demand for it's high quality milling wheat pushes exports to non-EU destinations to a record 11 MMT.

ADAS say that last weeks fine weather allowed the UK wheat harvest to progress to around 90% complete, with around 150,000 ha left to be cut mainly in Scotland and the North East.

The winter barley harvest is all done, with yields below average at 6.2-6.3t/ha, whilst around 85% of the spring barley area has now been cut, they added.

The trade remains cautious ahead of tomorrows USDA reports on crop production and ending stocks in the US, plus weekly US exports and world output numbers too.

In Paris November wheat, open interest continues to decline from stunningly high levels. The differential between November and March is also eroding, although the front month still remains at a premium to the deferred position.

Early Call On Chicago

The overnight markets closed with beans around 10-12c easier, corn down 1-2c and wheat mixed, mostly 2c higher to 2c lower.

Consolidation ahead of Friday's USDA report is a likely theme this afternoon. Lower production and ending stocks are what the trade is anticipating.

Export sales are a day later coming out due to Monday's holiday, so we won't get those until tomorrow either.

On the 2010 production side the trade is expecting US corn output at 13.199 billion (Aug USDA 13.365) with yields of 163.1 bu/acre. For soybeans 3.406 billion (Aug USDA 3.433) is the average guess with yields at 43.8 bu/acre.

Old crop corn end stocks are estimated at 1.412 billion bu versus the August USDA figure of 1.426 billion. New crop corn is expected at 1.125 billion compared to the August USDA number of 1.312 billion.

Old crop soybeans stocks are estimated at 151 million (Aug USDA 160), with new crop pegged at 304 million (Aug USDA 360).

Wheat 2010/11 end stocks are seen falling to 877 million vs August's USDA estimate of 952 million. For wheat in particular global production and ending stocks numbers will also be scrutinised.

Corn is expected to start lower today on profit-taking as some nervous longs exit the market in case the USDA has a surprise up their sleeves. Beans are also seen lower as the market has a few nerves over the longevity of bumper Chinese demand as the authorities clamp down on speculation in commodities and announce further possible measures to curb the real estate market.

The USDA have just announced another Chinese soyoil purchase - 60,000 MT of new crop. They also announced 220,000 MT of wheat sold to "unknown".

Japan bought 129,482 MT of wheat in its regular weekly tender, split between US, Canadian and Australian origins.

Early calls for this afternoon's CBOT session: beans down 10-12c, corn flat to down 2c and wheat up 2-4c.

UK Feed Production Jumps In July

Latest figures from Defra reveal that retail production of feedstuffs in July was up 7.3% from year ago levels.

Well it would be up wouldn't it, there's no point looking a gift horse in the mouth is there? Like handing out free sandwiches at the Dairy Event, you're going to find plenty of takers aren't you?

From what I hear if you'd have been handing out hummus and marmite ryvitas you'd have had your hands snatched off yesterday, such was the average attendees' enthusiasm for some freebie nosebag.

"Come with me Betty, I bought ten ton of cake of these buggers in 1974, I think that entitles us to a bit of smoked salmon, don't you. Look, scones! Open your handbag love."

How busy will everybody be come the winter when all the prices rises are factored in? That could be an entirely different matter. Some might find that they handed out more cheap cake in July than they do in October.

EU Rapemeal Prices

Basis FOB Lower Rhine in euros/tonne:

Sep unq
Oct unq
Nov/Jan 11 208,00 +7,00
Feb/Apr 207,00 +7,00
May/1st h.July 206,00 +6,00
Aug/Oct 11 185,00 +3,00

French Kissing

The dark old days of minimum 60,000 MT one port of loading are already a distant memory, as Egypt seek to assure France that their dalliance with Russia and Kazakhstan meant nothing to them.

"I love you I do girl, those other Black Sea tarts threw themselves at me. They knew I was famous and I'd had a few beers like, and it was like erm blown up out of like all proportion like. You're the one I really love. Go on darlin' give us one more chance like will yer. I'm beggin yer, I've only ever wanted your wheat," sobbed a distraught Nomani Nomani through the French letterbox.

UK Wheat Harvest 90 Percent Done

ADAS say that last weeks fine weather allowed the UK wheat harvest to progress to around 90% complete, with around 150,000 ha left to be cut mainly in Scotland and the North East.

"The average UK yield is estimated to be about 7.5-7.7t/ha, about 3-4% below the UK 5 year average (7.9t/ha). Impacts of August harvest delays on quality appear minimal," they say.

The winter barley harvest is all done, with yields below average at 6.2-6.3t/ha, whilst around 85% of the spring barley area has now been cut. "Average UK (spring barley) yields are estimated to be about 5.0-5.2t/ha, about 6% below the UK 5 year average (5.4t/ha). Quality remains good with high specific weights and good grain nitrogen levels, although there is some variability," they say.

Winter OSR harvesting is "almost complete" with average UK yields estimated to be about 3.7t/ha, an increase on the 5 year average (3.3t/ha). Good progress was made on spring oilseed rape during the last seven days with 62% of the UK area now harvested, they add.

Put Another Log On, Mother's Getting Cold

What about this uneducated, self-publicising, extremist loonie who's going to torch copies of the Koran on 9/11?

Doesn't he realise that it's idiots like him that encourage other uneducated, self-publicising, extremist loonies to fly aeroplanes into tall buildings?

By the looks of him on the telly last night it's his hard drive that he wants to be burning, and fairly sharpish too I'd suggest.

I wouldn't be at all surprised to find that although his mother probably died 30 years ago, she's still sat upright in her favourite chair in the lounge either.

I think a visit from the police might be in order.

CBOT Close


September soybeans closed at USD10.41 1/4, down 2 1/2 cents; September soybean meal closed at USD307.30, down USD1.40; September soybean oil closed at 41.16, down 10 points. Private exporters announced the sale of 115,000 MT of soybeans to China. Trade was quiet ahead of Friday's supply and demand numbers from the USDA. The range of trade guesses for ending stocks for 2010/11 is 129 to 350 million bushels. Export sales will be out on Friday, a day later than normal following the Labor Day holiday Monday.


September corn closed at USD4.47 1/2, down 4 cents; December corn closed at USD4.62 1/2, down 3 3/4 cents. The USDA monthly supply demand report will be out Friday. Trade estimates for corn ending stocks for 2010/11 range from 950 million to 1.275 billion bushels. This season's production estimates average around 13.203 billion bushels, with yields at just under 163 bu/acre. Export sales are also out on Friday. Harvesting is ahead of schedule, with the crop running around nine days ahead of normal development.


Sept CBOT wheat closed at USD6.78 3/4, down 23 3/4 cents; Sept KCBT wheat closed at USD7.20 1/4, down 18 1/2 cents; Sept MGEX wheat closed at UISD7.18 1/2, down 20 1/2 cents. Traders are squaring up ahead of Friday’s USDA crop report. The report will focus on the world wheat output, and trade estimates are predicting a drop of 4 MMT in world production from last months report. Private exporters announced the sale of 109,000 MT of HRW wheat to "unknown" today. Stats Canada estimated Canadian all wheat stocks at 7.8 MMT, a million up on trade estimates.

EU Wheat Closing Comments

November London wheat slumped GBP4.60 to close at GBP158.20/tonne, whilst November Paris wheat closed EUR3.00 lower at EUR226.75/tonne.

A strong performance by the pound, which rose close to 1.22 against the euro and above 1.55 versus the dollar pressured London wheat.

French wheat managed to garner some support from news of a 240,000 MT clean sweep in today's Egyptian soft wheat tender. The market however remains nervous ahead of Friday's USDA world supply and demand numbers.

Adding further pressure was news of higher than anticipated Canadian wheat and rapeseed stocks from Stats Canada. They pegged all wheat stocks some 19% higher than anticipated at 7.82 MMT, the most in four years. Canola stocks were more than 40% higher than anticipated at 2.123 MMT, a near record for this time of year.

Weather conditions in Ukraine have improved considerably, coupled with the recent spike, farmers there are now expected to increase winter wheat plantings.

In Southern and Eastern Australia crop conditions look like being the best in years, and despite a lack of rainfall in many parts of Western Australia, wheat production nationally might top 24 MMT this season, according to ANZ.

Things are also bucking up in Argentina, with widespread rains in the past 7-10 days and the prospect of more to come.

In the US, winter wheat planting in Oklahoma got a needed boost from Tropical Storm Hermine after Central Texas got heavy, soaking rainfall from this storm yesterday, according to Martell Crop Projections.

The Headline Writers Are At It Again

You could easily include the word "hike" in your list of emotive words in popular use by the media at the moment. Along with crisis, shortage and slashed.

Hike means raise pretty substantially surely?

Today this one makes me smile: "Bank of Canada hikes interest rates"

Yes folks, the Bank of Canada have caused uproar and mayhem by hiking interest rates by the minimum 0.25% to the lofty heights of one whole percent.

I don't know how they, or indeed the good people of Canada, will get to sleep tonight on the back of that horror show.

I'm surprised I haven't stumbled across "USDA slashes corn crop condition ratings from 70% to 69%" yet during my travels today.

I did think "Rooney scores away from home" was a good one this morning though.

CBOT Early Call

The overnights closed mostly a little lower with beans down a cent or so, corn narrowly mixed and wheat mostly 2-3 cents easier.

Crude oil is barely changed, and support comes from a weaker US dollar.

Traders will remain cautious ahead of Friday's USDA report and some consolidation and profit-taking can be expected ahead of that.

Stats Canada have today surprised the market by pegging all wheat and canola stocks considerably higher than trade expectations. Wheat stocks came in at 7.82 MMT, a little over 1 MMT more than had been anticipated. Canola stocks were more than 40% higher than anticipated at 2.123 MMT, a near record for this time of year.

Last night's USDA crop ratings saw corn good/excellent fall one point to 69%, whilst soybeans held steady at 64%.

The USDA have today announced the sale of 115,000 MT new crop beans to China and 109,000 MT HRW to "unknown".

The trade is also waiting on news of Egypt's latest wheat tender due today.

The Bank of Canada has increased interest rates by a quarter to 1%.

Early calls for this afternoon's CBOT session: Beans are called flat/down 2c; corn mixed and wheat down 2 to 4 c.

EU Rapemeal Prices

Basis FOB Lower Rhine in euros/tonne:

Sep 212,00 unq
Oct 207,00 +1,00
Nov 204,00 unq
Nov/Jan 11 201,00 unch
Feb/Apr 200,00 unch
May/1st h.July 200,00 +1,00
Aug/Oct 11 182,00 +2,00

Love Me Tender

Everybody's bezzie mate Nomani Nomani is back in the market again today, with GASC tendering for at least one cargo of soft wheat for October delivery. The fact that it's soft wheat they are looking for opens up the door for French origin to win again this time round, having been excluded from last week's Egyptian hard wheat tender.

Algeria are also in the market looking for "at least" 50,000 MT of optional origin milling wheat, with Jordan tendering for 100,000 MT each of wheat and barley. Not wanting to be left behind reports suggest that Morocco too could also be in the market for 1.2 MMT of soft wheat for shipment by the end of the year. Algeria and Morocco have both had poor harvests this year.

As you can see there's no shortage of interest at current levels, which is making it increasingly difficult to envisage prices falling back too much until we are much closer to next season's harvest.

Curve Ball Friday?

With US markets closed Monday are we in for a turnaround Tuesday a day later than normal on a Wednesday, as the USDA report looms? It looks like we are maybe in for a modest one at the moment with beans, corn and wheat mostly modestly lower in early overnight trade.

The USDA have been no stranger to throwing the odd curve ball in recently, and I somehow suspect that we'll get another one on Friday with production and ending stocks not coming in as low as many are predicting.

The enormous corn longs might just be starting to get a little twitchy and starting to question what has been, up until now, an almost unwavering total conviction that the USDA are wrong on yields and they are right.

As the corn harvest progresses northwards, into the heart of the Midwest there are a few signs emerging that the disappointing yields feared (or is it hoped for?) may not be as bad as in the less productive south.

Some long weekend harvest reports coming out of Iowa are talking of better than expected 225 bu/acre yields for corn. The USDA have stubbornly dug their heels in of crop condition ratings too, at 69% good/excellent they are exactly the same as at the beginning of August despite a lot of hot air over, well, hot air damaging yield potential.

Informa's "it might be good, but it might be really bad" report last week was seized upon by the bulls, at least the really bad bit was, as another excuse to increase their longs.

What they appear to have overlooked at the same time though, was the same firm's increase in harvested area of 1 million acres.

I suspect that for all the USDA's diligence, there will also be a strong desire to reassure the market that there is no world shortage of grain whatever has happened in Russia.

Almost everybody is expecting a reduction in corn yields and production Friday. I always find it disconcerting when the market has an almost blind conviction like this.

Could the USDA leave yields virtually unchanged and increase harvested area, or even go the whole hog and increase both?

CBOT Closing Comments


CBOT September soybeans ended 14 cents higher at USD10.43 3/4; December soymeal ended USD3.40 higher at USD306.70; December soyoil settled up 93 points higher at 41.79. Soybean inspections for export were 13.92 million bushels compared to 8-12 million bushels estimated by the trade. Soybean oil was supported by the announcement of the sale of 40,000 MT to China, 29,500 MT to unknown and 21,000 MT to Peru for 2010/11 delivery. That helped beans rally to 9-month highs, with soymeal reaching 21-month highs.


September corn ended 1 3/4 cents higher at USD4.51 1/2; December corn finished 1 3/4 cents higher at USD4.66 1/4. Weekly export inspections were 38.052 million bushels compared to estimates of 37-41 million bushels. Traders remain cautious ahead of Friday's USDA crop reports. That is expected to show yields declining from 165 bu/acre last month to around 162-163 bu/acre now, although many in the trade anticipate that yields will finally end up around 160 bu/acre or even lower.


CBOT Dec wheat declined 6 cents to USD7.35 1/4; KCBT Dec wheat fell 4 3/4 cents to USD7.53; MGEX Dec wheat slipped 4 1/2 cents to USD7.53 3/4. Wheat export inspections were 22.07 million bushels compared to trade guesses of 18-23 million bushels. Profit-taking ahead of Friday's USDA report was a feature, with funds estimated to have sold 3,000 contracts in Chicago. Recent rains in many parts of Australia and India appear to have given wheat production prospects there a boost.

EU Wheat Closing Comments

November London wheat closed GBP2.20 lower at GBP162.80/tonne, and November Paris wheat closed EUR2.00 lower at EUR229.75/tonne.

Long-holders booked profits ahead of Friday's UDSA crop reports. Although US wheat ending stocks are certain to be reduced, they are far from being depleted down to the levels of 2007/08.

Some are voicing concern over the health of wheat crops in the southern hemisphere, as world focus switches there. Although Western Australia is too dry, elsewhere on that massive continent rainfall has been abundant and growers in Southern Australia and eastern states like NSW and Victoria are very optimistic of very good output this year.

In Argentina there have also been some production concerns, however Martell Crop Projections report that the country has "received beneficial, heavy rainfall in the past week that has improved growing conditions and replenished field moisture ready for corn planting."

"The rainfall varied from 0.5 inch in La Pampa to more than 2 inches in central Buenos Aires, Cordoba and Santa Fe. Showers are not finished yet. The forecast calls for 1-2 inch rains in the drier areas of the western grain belt. Santa Fe may get more than 2 inches of rain," they say.

Planting conditions have also improved in Western Ukraine and the Central Volga District of Russia in the past 7-10 days, although Southern Volga areas are still very dry, they add.

Early Call On CBOT

The overnight markets closed lower with wheat down around 12c, corn 5-6c lower and soybeans mostly around 2 easier.

Crude is sharply lower and the dollar a bit firmer. European stocks markets are all easier with the Dow expected to follow suit this afternoon with a lower opening.

Profit-taking after the recent rally is likely to be a feature this week ahead of Friday's USDA reports.

Funds increased their corn longs by around 24,000 lots to almost 300,000 last week. It remains to be seen if they are willing to push things even higher ahead of Friday, although early overnight trade did indeed see front month corn set a fresh 15 month high before profit-taking kicked in.

Reports of disappointing corn yields in the south may not be reflective of crop conditions further north, a few analysts are warning. Most however seem wildly bullish about corn's prospects of breaking through USD5/bu., in the wake of what they are convinced will be yields of 160 bu/acre at best this season.

Rains have reached many parts of Ukraine, and some parts of Russia, but recent comments that the latter may still plant a similar 18 million hectares of winter grains to last season seem wildly optimistic.

Crops in Southern and Eastern Australia look in great shape and should produce a bumper harvest, although things don't look anywhere near as promising in Western Australia, which usually accounts for 38-40% of the nation's wheat output, and most of it's exports too.

Brazil is very hot and dry and needs rains to arrive before soybean planting can begin once the September 16th planting window is opened. Dryness in Argentina is also a concern.

The USDA have announced the sale of 40,000 MT of soyoil to China, 21,000 MT to Peru and 29,500 MT to "unknown", all for new crop 2010/11.

Early calls for this afternoon's CBOT session: beans down 1-2c, corn down 5-6c, wheat down 10-12c.

Oh No, It's La Niña

It seems like we've only just said goodbye to El Nino and already his evil twin sister La Niña has arrived on the scene.

El Nino dissipated in May, and hot on his heels La Niña became officially established in July and may persist at least into early 2011, according to Australia’s Bureau of Meteorology.

What the hell is this goddam thing?

La Niña conditions are typically caused by cooler than normal sea-surface temperatures in the central and eastern tropical Pacific Ocean. Temperatures along the equator during La Niña can fall as much as 7 degrees below normal in the eastern Pacific, as the easterly trade winds strengthen.

"The changeover from El Nino to La Niña is no small happening, usually taking several months to evolve. The global wind circulation doesn't just shift course overnight," explains Gail Martell of Martell Crop Projections.

"The summer of 1998 is the best analog for a very strong El Nino evolving into a La Niña. Extremely heavy rainfall drenched the Midwest in May and June, causing widespread flooding. Warm temperatures in 1998 mirrored the persistent heat that has dominated this summer in the Midwest. Yet a damaging drought never developed with a very slow transition to La Niña. September weather turned extremely hot and dry but it was too late to damage Midwest corn and soybeans," says Gail.

This years La Niña event appears to becoming established slightly later in the year than that of 1998, meaning that this winter could be warmer and drier than normal in the southern US, and it doesn't stop there.

"The odds favour an abnormally dry and warm period ahead for the southern Plains, intensifying drought in the SE US, wet weather for Australia and Indonesia and dry and cold weather in Argentina. It may be a dry fall and winter too in Central and NE China," says Allen Motew of QT Weather.

Dryness in Argentina over the next six months obviously has the potential to reduce production of wheat, corn and soybeans there. Meanwhile a warmer and drier pattern across the US southern Plains could also adversely affect the HRW wheat crop in states like Texas, Oklahoma and Kansas.

Dryness in Argentina may also spill over into southern Brazil and La Niña may also delay the arrival of rains in central Brazil, although when they do arrive they are frequently a deluge.

Central Brazil is currently hot and dry, as is normal for this time of year, with the seven day forecast calling for more of the same, which will take us through to the date when soybean planting can officially begin - September 15th.

We could be in for an interesting winter.

EU Rapeseed Meal Prices

Basis FOB Lower Rhine in euros/tonne:

Oct 206,00 -4,00
Nov/Jan 11 201,00 -1,00
Feb/Apr 200,00 -1,00
May/1st h.July 199,00 -2,00
Aug/Oct 11 180,00 unch

Muse At Ten

The overnight markets were all a bit firmer when the computer went on at 8am this morning, but they seem to be easing back now with eCBOT wheat 10-12c lower and corn around 6c easier.

London and Paris wheat have also opened on the defensive, although you would hardly call it a reversal. Profit-taking ahead of Friday's USDA report maybe.

Interesting to note the continued subtle liquidation of the open interest in November Paris wheat which is now down to "just" 130,000 lots, some 10,000 or so below the recent peak.

Ukraine farmers have already planted well over half a million hectares of winter OSR I hear, around 44 percent of the planned area, according to the Ministry.

Rain appears to have arrived nicely, particularly in the west of the country, where our old mate agronomist Mike Lee reports "seedbeds look great, the crop is emerging beautifully" adding that all his winter rape is already in and they are now looking at starting winter wheat.

Talking of rain, there's been no shortage of it in India, where monsoon rains have been heavier than normal and well ahead of last season's levels. That's already got them talking of potentially bumper winter crops again this season, with wheat planting set to start next month.

Things are looking pretty promising in South Australia too, where a major rainfall event moved across the state on 3rd-4th September bringing moderate to heavy rainfall to all districts and significantly boosting soil moisture levels going into spring.

Current yield potential of winter crops on a statewide basis is estimated to be well above the long-term average with ongoing upside potential, says the state's latest crop and pasture report.

They are forecasting an all wheat crop for the state of 4.14 MMT, 44% up on the five year average of 2.87 MMT, with barley output slightly better than average at 2 MMT.

EU Wheat Closing Comments

November London wheat closed GBP4.50 higher for the second session in a row at GBP165.00, and November Paris wheat closed EUR0.25 lower at EUR231.75.

London wheat was the days big gainer on follow through strength from a strong CBOT close on Friday night. With US markets closed for a holiday today EU wheat took centre stage and London gained on ideas it is too cheap relative to Paris wheat.

Sterling fell late in the morning on ideas that the Bank of England may have to consider increasing it's quantitative easing programme amidst signs that UK economic growth is slowing.

French wheat fell slightly on news that the Ministry there were increasing their production estimate for soft wheat by 500,000 MT to 35.7 MMT. The early harvest there also seems to have ensured that the vast majority of wheat there is of milling standard.

The French Ministry also slightly increased their production estimates for barley, corn and OSR from earlier forecasts.

Concerns remain however that the French are the only quality volume seller in Europe and that supplies there will be exhausted by early in 2011.

Excellent growing conditions in eastern Australia were improved further by significant weekend rains. They should have an excellent crop with one prominent forecaster predicting wheat output in NSW and Southern Australia state up by more than 50%. That should more than compensate for reduced production in Western Australia.

EU Rapemeal Prices

Basis FOB Lower Rhine in euros/tonne:

Oct 210,00 +7,00
Nov 205,00 +7,00
Nov/Jan 11 202,00 +6,00
Feb/Apr 201,00 +6,00
May/1st h.July 201,00 +6,00
Aug/Oct 11 180,00 +8,00

I'll Second That Emotion

On a relatively subdued day with US markets closed for the Labour Day holiday, I thought that it might be a good time to reflect a little on what went on on Friday, and where we may go from here.

One report I read this morning talks of Friday's CBOT action having a lot to do with emotion. Out of a wall of data released last week from the likes of FCStone, Allendale and Linn Group the market chose to focus on the caveat within Informa's corn production numbers rather than any of the other figures being bandied about.

This is indeed trading with emotion.

Informa also actually increased their US soybean production estimate from last month, but the bulls were so busy reading the corn small print that this piece of information seemingly passed them by, and front month beans closed within a gnats chuff of session highs of 1030, and fully 40 cents higher than Thursday's low.

Corn closed at it's highest levels of the year on the weekly chart, with beans and wheat both close to their highest of the year.

The problem with emotive trade is that it's so much more difficult to predict than trading the fundamentals. We don't know where it's going to go short-term, but what we do know is that longer-term it will almost certainly end suddenly and in tears. Very much like my previous marriages. Until we get to there meanwhile, we have little idea how much higher emotion can carry this rally.

If the market can trade on emotion, it can and will also plant on it. That might give the bulls something to think about in 2011.


Nobody loves their bacon more than me, or so I thought until recently. There are, it would seem, others out there who take their bacon-loving antics to a completely different dimension. Like even dressing up in it.

Ladies and gentlemen I give you Bacon Hitler

Check out the bacon store whilst you're over there for Bacon undies, t-shirts, bandages and air fresheners. A veritable homage to all things bacon.


Informa caused a few sparks (nice pun and it's not even 10 am yet) Friday with their corn production estimate. Although they pegged yields at 164.8 bu/acre, higher than Allendale and FCStone's estimates from earlier in the week, they suggested that things could ultimately prove to be significantly lower.

Their 164.8 bu/acre estimate implies a 13.349 billion bu crop using the USDA's August harvested acres, but their 158.5 bu/acre "downside" suggests a crop of only 12.839 billion bu. The latter number being well below the USDA's 13.365 billion bu estimate from last month.

That was plenty of fuel to light a fire under a market that already almost universally expects that last month's USDA yield estimate for corn of 165 bu/acre is way too high. Indeed many are now thinking 160 bu/acre is a best case scenario. Informa, you see, are normally famously on the high side of trade expectations.

A quick flick back through my records shows that in September 2009 Informa's yield estimates were pegging the US corn crop at 13.304 billion bushels, it ultimately ended up at 13.110 billion. In September 2008 they were suggesting 12.406 billion, against final production of 12.101 billion.

It seems unlikely to me that the USDA are going to drop 5 bu/acre in their yield estimate in just one month when they come out with their prediction on Friday. I'd guess that 162-163 bu/acre might be nearer the mark. Even so, the trade will probably quickly discount that as being albeit a step in the right direction, still too high again.

Footnote: Although Informa are sometimes regarded as being regularly too high, there are others who appear to be frequently on the low side. When bundled all together we should have a pretty accurate mix you'd have thought, especially this late in the season, right? Well not that accurate actually, coming into the USDA's September report last year the average trade estimate for corn was 12.901-12.932 billion bushels (depending on who's survey you picked) and for soybeans 3.249-3.253 billion (ditto). Both those estimates finally turned out to be significantly on the LOW side. In the case of corn 178-209 million bushels too low. In the case of beans 106-110 million bushels, beneath final output.