Nogger's Blog

EU/US Grains Weekly Price Change

15/10/10

CBOT Close

15/10/10 -- Soybeans

Nov soybeans closed at USD11.85, down 3 1/2 cents; Dec soybean meal closed at USD328.20, down USD3.50; Dec soybean oil closed at 47.77, down 25 points. Today’s CFTC report showed Managed Money increased their net long by 7500 contracts, and that Index Funds increased their net longs by about 4,000 contracts this past week. Weekly export sales were in line with expectations at 1,109,195 MT. Additional sales of 278,803 MT to unknown and 240,000 MT to China were reported by private exporters today.

Corn

Dec corn closed at USD5.63, down 4 1/4 cents; Mar corn closed at USD5.75, down 3 1/2 cents. Weekly export sales were below expectations at a combined 1,180,349 MT for both marketing years. Funds were estimated to have sold approximately 5,000 contracts on the day. Weather forecasts remain positive for harvest potential for the next week in most parts of the Midwest with only limited precipitation predicted.

Wheat

Dec CBOT wheat closed at USD7.04 1/2, up 3 3/4 cents; Dec KCBT wheat closed at USD7.45, up 4 1/2 cents; Dec MGEX wheat closed at USD4, up 4 cents. Weekly export sales were only 377,012 MT, well below trade expectations. Decreases were reported for "unknown" of 134,500 MT and 55,200 MT for Egypt. Given the weakness of the US dollar of late, sales at these levels can be considered pretty disappointing.

EU Wheat Ends Narrowly Mixed

15/10/10 -- EU wheat futures closed narrowly mixed in a relatively uneventful day with November London wheat down GBP0.25 at GBP162.50/tonne, and Nov Paris wheat up EUR1.25 to EUR214.75/tonne.

The euro was a little bit weaker today for once, which helped support Paris wheat. The pound rose above 1.61 at one stage against the US dollar, but slipped back below 1.60 by the close of play.

Open interest in November Paris wheat is declining, but only relatively slowly given that we are only three and a half weeks away from the contract's expiry on Nov 10th.

The pace that Brussels is issuing export licences is slowing, with only 253,000 MT of soft wheat cleared for export during the past week. Barley intervention auctions will begin on November 24th.

The USDA said that weekly export sales for the week ending Oct 7th only reached 377,000 MT compared to expectations of 500-700,000 MT, spurring ideas that world demand maybe isn't that great even with a weak dollar.

The Buenos Aires Grains Exchange estimate the 2010/11 Argentine wheat crop at 11.3-12.0 MMT, an increase of 50-60% on last season.

UK/EU Plantings For Next Season

14/10/10 -- Strategie Grains reckon that EU-27 rapeseed plantings could be down 5% for the 2011 harvest, which is probably not a bad guess, based on lower sowings than anticipated in Germany and Poland due to wet weather in August and September.

They are pegging the total EU-27 oilseed area (including sunflowers) at 11.4 million hectares, compared to 11.7 million for this season.

The total grain area will increase to 57.2 million hectares from 56.0 million, with soft wheat and barley plantings both rising by 3%, whilst the corn area will by 4% higher, they say.

In the UK most pundits are forecasting an increase in the winter rapeseed area of around 5-10%, with ADAS saying that the crop was "was all drilled into plenty of moisture and has germinated really well and evenly and looks quite good so far."

If all goes well then we could be looking at our second record OSR crop in a row.

Only a modest increase in the UK wheat area is being forecast from the 1.9 million hectares sown for the 2010/11 crop, despite current high prices.

Disillusioned barley growers could shy further away from the grain again, so if you have bollocks the size of an African elephant that could be worth a punt. We may have just about got rid of two years worth of barley indigestion (and our intervention stocks) by then. Spring barley plantings could decline 5-10% as beer consumption in the UK continues to fall despite my best efforts.

Beans and peas area could also be in for a reduction is the word on the streets.

Early Vibe

14/10/10 -- Nice, but ever so slightly wet, French analysts Strategie Grains have increased their EU-27 soft wheat production estimate by 700,000 MT from last month to 127.9 MMT. They've upped their barley estimate too, by 400,000 MT to 52.7 MMT. Corn production is seen down 400,000 MT from last month to 55.6 MMT.

The pound has popped up above 1.6050 against a weak US dollar for the first time since late January.

Gold prices have reached a fresh all time high in dollar terms close to USD1.390/oz this morning. Chinless wonders Goldman Sachs have raised their 12-month gold price forecast to USD1,650/oz.

The US Environmental Protection Agency has approved a higher concentration of ethanol in gasoline. The move to allow the so-called E15 blend in newer cars looks a lot like a politically motivated move designed to help the Democrats in the nation’s Corn Belt. It comes just three weeks before the mid-term elections.

The move seems to have been met with surprisingly relative apathy by the corn market so far, although corn is around 8c firmer on the overnight Globex market.

Winter grain plantings in Ukraine are now running slightly ahead of last years pace at 6.76 million hectares. Corn harvesting is around three quarters complete, with sunflower harvesting "on the final leg" according to my chum Mike Lee in Ukraine.

It's the Hull Corn Trade Dinner tonight, marking my second corporate jolly of the week, hence the lack of blogging. If you're in attendance then come and say hello.

CBOT Close

13/10/10 -- Soybeans

November soybeans closed at USD11.76 1/2, down 2 cents; October soybean meal closed at USD325.20, down USD4.20; October soybean oil closed at 47.22, up 68 points. Forecast rains for South America over the next couple of days, particularly with heavier rains forecast for next week in Brazil prompted soybean selling. Private exporters reported the sale of 297,500 MT of soybeans to China for 2010/11 delivery. Weekly export sales announcements will be Friday instead of Thursday because of Monday’s holiday.

Corn

December corn closed at USD5.69 1/4, down 9 3/4 cents; March corn closed at USD5.80 1/4, down 8 1/2 cents; May corn closed at USD5.85 1/4, down 8 1/4 cents. The EPA officially announced the approval of E15 ethanol, but only for newer model cars from 2007 onwards. However, with crude oil at USD82/barrel, the immediate imapct is likely to be negligible as far as fresh corn demand is concerned.

Wheat

December CBOT wheat closed at USD7.02 3/4, down 7 1/4 cents; December KCBT wheat closed at USD7.43, down 8 cents; December MGEX wheat closed at USD7.51, down 3 1/4 cents. Private exporters reported the sale of 100,000 MT of HRW wheat to Iraq and 220,000 MT to Egypt yesterday. Despite media rhetoric that wheat stocks are running low, last week's ESDA numbers in fact pointed to US wheat ending stocks at the second highest levels in the last ten years.

EU Wheat Close

13/10/10 -- EU wheat futures closed modestly lower with Nov London wheat ending GBP0.45 easier at GBP163.80/tonne and Nov Paris wheat falling EUR2.25 to EUR218.25/tonne.

Open interest in Nov Paris wheat continues to decline in an albeit orderly fashion. Dock worker strikes in France have so far managed to elude the major grain port of Rouen.

An under pressure pound is supportive for UK wheat, but a resurgent euro weights on Paris grains.

A lower than expected harvest and robust domestic demand means that UK exports will fall to only 1.3 MMT in 2010/11, according to the HGCA, not far short of half last season's total.

Form the feed compounder viewpoint other raw materials such as wheatfeed are starting to look much more attractive than UK wheat at the moment.

Always a fest or famine raw material, wheatfeed is very much in the feast category at the moment due to a variety of different factors. Flour production is peaking due to pre-Christmas demand just as compounders have switched out of the product due to summertime availability issues.

CBOT Close

12/10/10 -- Soybeans

November soybeans closed at USD11.78 1/2, up 26 cents; October soybean meal closed at USD329.40, up USD6.30; October soybean oil closed at 46.54, up 56 points. Beans are now at their highest levels since August 2009. The US harvest is well advanced at 67% done compared to the five year average of 48%, the USDA said tonight. Celeres report Brazilian soybean plantings at 3% complete as of Friday, compared to 7% a year ago.

Corn

December corn closed at USD5.79, up 23 1/4 cents; March corn closed at USD.88 3/4, up 23 3/4 cents. This afternoon’s crop progress report showed corn harvesting at 51% complete, fully 21 points ahead of the five year average. Corn crop condition ratings improved from last week by 2 points to 68% in the good/excellent category.

Wheat

December CBOT wheat closed at USD7.10, up 3/4 cents; December KCBT wheat closed at USD7.51, up 4 1/4 cents; December MGEX wheat closed at USD7.54 1/4, up 4 1/4 cents. This afternoon’s crop progress report showed an increase to 70% of the winter wheat planted, which is above the five year average. Egypt bought 220,000 MT of US hard wheat today, although French wheat was excluded from that particular tender.

EU Wheat Closing Comments

12/10/10 -- EU wheat futures were on the defensive for most of the day, with Nov London wheat closing GBP1.90/tonne lower at GBP164.25/tonne. Nov Paris wheat fell EUR2.75/tonne to EUR220.50/tonne at the end of the day.

Chicago wheat was lower in the overnight session, and still remains the weakest leg, although some support was garnered from firmer corn and soybeans.

London wheat also managed to find some support from the continued weakness of sterling.

The pound remains under pressure falling back below 1.14 against the euro and under 1.58 against the dollar. Sterling bulls are nervous ahead of next week's news from George Osborne, and probably rightly so. He will announce exact details of where the impending spending cut axes are to fall, and how deep they will go, on Weds 20th Oct.

Whilst we all know that bad news is coming, the temptation to get as much of it out of the way as early as possible could prove too difficult to resist. A slump towards the 1.10 level against the euro, an area not visited since March, could easily be on the cards if that is how the market interprets things.

That should however underpin London wheat at the expense of Paris, where open interest in November continues to gradually erode, falling beneath 100,000 lots yesterday for the first time in months.

French customs data shows that they exported 1.3 MMT of soft wheat in August, taking the cumulative marketing year so far (just the two months of July-Aug) to 2.7 MMT, 9% up on last year. An increase, but not exactly a torrid pace.

CBOT Close

11/10/10 -- Soybeans

CBOT Nov soybeans ended 17 1/2 cents higher at USD11.52 1/2; Dec soymeal ended USD10.90 higher at USD327.10; Dec soyoil settled 27 poimts lower at 46.35. Price limits were extended for corn, wheat, soybeans, soymeal and oats due to limit up closes Friday on all of them. Although the USDA revised bean yields and output slightly lower on Friday, both are still at record levels. That beggars the question are prices at over USD11/bushel justified?

Corn

Dec corn ended dup 27 1/4 cents at USD5.55 3/4 per bushel.; March corn closed at USD5.65 a bushel, also up 27 1/4 cents. Prices traded up the new 45c limit in early overnight trade, but subsequently failed to hold at those levels. Now that the emotion has died down a bit the trade may start to focus on whether demand will be tempered at these levels. Recent evidence would seem to suggest that it will. The usual USDA reports normally out today - export inspections & crop progress - will be delayed until tomorrow due to the Columbus Day holiday.


Wheat

Dec CBOT wheat ended 10 cents lower at USD7.09 1/4; December KCBT wheat ended  at USD7.46 3/4, down 11 3/4 cents; December MGEX wheat finished at USD7.50, down  14 1/2 cents. Wheat has the least bullish news, and is therefore struggling to post gains of the same magnitude as corn or soybeans. Despite some rhetoric, global stocks are more than adequate, and US stocks are bordering on bumper. The trade will be looking to this week's export sales report to confirm that the weak US dollar can continue to help offload some of these inventories at current levels.

EU Wheat Closing Comments

11/10/10 -- After trading higher for most of the session EU wheat futures moved lower late in the day after CBOT wheat failed to hold onto overnight gains.

Nov London wheat opened GBP3/tonne higher but closed GBP0.85/tonne lower at GBP166.15/tonne. Nov Paris wheat came in EUR3.50/tonne higher at the open but closed EUR0.50/tonne lower at EUR223.25/tonne at the end of the day.

Chicago wheat was firmer in the overnight session, but clearly remains the weakest leg, soon capitulating once the daytime CBOT session opened to trade around 10c lower by the time EU markets closed.

Despite being dragged higher by corn, in the cold light of day the USDA ultimately pegged US wheat stocks to usage at the second highest levels in the last ten years on Friday. World stocks to usage are also above the ten year average.

The pound and dollar continue to vie for the "who's the weakest currency" tee-shirt. Sterling might pick up the yellow jersey next week when Chancellor George Osborne puts some flesh on the bones of exactly how austere the new austerity measures are going to be.

UK and EU wheat exports continue to run ahead of schedule, likely leading to availability tightness in the spring.

Early Call On CBOT

11/10/10 -- The overnights closed sharply higher on follow-through from Friday's limit-up gains. Beans ended up around 48c, with corn up 40c and wheat 6c higher.

Corn is in the driving seat, with soybeans barking out instructions from the sidelines. Wheat is simply getting dragged higher by corn, although US ending stocks were reduced by the USDA on Friday the stock/use ratio is still the second highest in the last ten years.

Whilst US corn stocks/usage is the lowest since 1996, world stocks/usage is within "normal" ranges for the past ten years.

These prices must surely start to ration demand, yet the USDA increased domestic corn for feed usage by 150 million bushels on Friday.

US soybean stocks to use is now at 8.0%, well above last year’s 4.5%, and the highest since 2006/07.

Crude oil is offering little support, down 47c to USD82.19/barrel.

It will be interesting to see if we are witnessing shorts exiting the market or further fund cash flowing into it in search of more "easy money".

Early calls for this afternoon's CBOT session: corn up 40-45c, beans up 50c, wheat up 8-10c.

EU Rapemeal Prices

11/10/10 -- Latest FOB Lower Rhine in euros/tonne:

Oct             220,00   +6,00
Nov             215,00  +10,00
Nov/Jan 11      214,00  +12,00 
Feb/Apr         213,00  +17,00
May/1st h.July  210,00  +18,00
Aug/Oct 11      190,00  +13,00

The Morning Muse

11/10/10 -- Strength in corn from Friday night's unfulfilled buy orders saw corn open the expanded 45c limit higher, although it has slipped away slightly now to currently trade around 40c firmer. Beans are also trading around 40c higher, with wheat up 5c or so.

Corn is now well above USD5/bushel, with Dec having traded up to USD5.73 1/4 this morning, with many bulls now certain that USD6/bushel is on the cards (at the very least), possibly as early as this week. And they are probably right.

Yet rationing of demand has already seemingly started once we got through USD5/bushel, with US export sales dipping below expectations in two of the last three weeks.

The trade is already starting to think about plantings for 2011, and the need to "buy acres" is now being talked about on many of the newswires.

What nobody seems to be talking about is the livestock liquidation that will take place before US farmers even get around to tackling the thorny subject of whether to plant corn or soybeans next spring.

Food price inflation is starting to ring alarm bells around the world. Once again that will increase public awareness of the potential foolhardiness of the mandate (subsidised and paid for by the public) that requires a third of all the corn produced in America to go to produce ethanol.

I see the food vs fuel debate being resurrected, and this time the argument that crude oil is USD147/barrel wont wash.

The old chestnut of regulating speculative activity in the grains sector will also get a run out, and with the French at the helm of the G20 in 2011 there may be a greater chance of some action on that front than previously too.

Extreme volatility is the new name of the game. Nov London wheat went from GBP170 to under GBP150 (a move of more than 12%) in just one week last month, only to subsequently reside back at GBP170 again this morning.