Nogger's Blog

Calling A Top In The Wheat Market

15/01/11 -- I got invited to speak to a group of agri-reps a few months ago, my brief being to explain to them where the grain markets were currently at, and where they were going. I told them that it was a bit like trying to pick the winner of the Grand National months before the race, when you don't even know the going or the weights or anything.

Calling a top in the wheat market isn't exactly an easy thing to do, but there's no harm in trying is there?

I've said for a while now that I quite fancy May, and I'm still reasonably content to go with that. Here's a bit of a rationale behind my thinking.

It's seems pretty clear that UK and EU exports are running well ahead of themselves, and that availability is going to be tighter than a duck's you know what come the spring. So it seems a bit strange not to think that prices will peak in July, just before the harvest kicks off.

Certainly that is what the London futures market seems to be indicating, with July the only month to close above GBP200/tonne on Friday, and there then being a steep GBP32.75/tonne decline into new crop November.

Historically however there is a strong precedent for UK wheat prices to peak before new crop comes along, in May. Having searched the Internet high and low for a chart to back this theory up, and drawn a blank, there was only one thing for it - to gather the information necessary and produce one myself. And here it is:



As you can see, that chart is based on the last twenty years worth of information. It seems that the impending threat of harvest is frequently enough to get the market into decline well before July comes along.

I can already hear you saying, yes Nogger that might happen in a "normal" year when we are clearing the decks and trying to make room for new crop, but 2011 is not a "normal" year. And you may well be right, and there is no denying it - unless you are Defra of course.

So here's a few things to consider in this abnormal year:

1. Hefty compound feed price increases are on the cards come May. If the livestock sector can't afford current levels they certainly aren't going to fancy stumping up what's likely to be thrust in front of them in late spring.

2. Livestock numbers are in decline as producers the world over up slaughterings on the back of soaring feed costs.

3. The slump in demand associated with turnout time could be particularly acute this year I feel.

4. I wonder idly outloud if our chums at a leading grain merchant have a significant volume of old crop wheat put to one side with "new bioethanol refinery - DO NOT TOUCH" written on it. If so, and if/when it becomes clear that said refinery isn't going to be ready to open during the current crop year then that could mean a ruck of wheat coming back onto the market. May/July is the premium position after all, so it would make no sense whatsoever to carry it into Aug/Oct would it?

5. The US wheat harvest will have started in the south by May, and despite market rhetoric US stocks are already very comfortable - the second highest in the past decade in fact.



That's my thoughts on the matter anyway.

Oh, I almost forgot....Becauseicouldntsee 30/1 on Betfair for the Grand National. Nailed on cert that is!

Chicago Closing Comments

14/01/11 -- Corn

March 11 corn closed at USD6.48 3/4, up 6 1/4 cents; New crop December 11 corn closed at USD5.71 1/4, up 3/4 cent. Corn was lower early in the session, but switched in positive territory as funds bought an estimated 9,000 contracts on the day. March corn was up 53 3/4c on the week following the release of a bullish USDA report on Wednesday. After closing near limit up that night, corn managed to maintain enough bullish momentum to see it through until the end of the week, if only just. News that China continues to tighten it's fiscal policy took a bit of the bullish shine off the markets today.

Soybeans

Expiring Jan 11 soybeans went off the board at USD14.06 1/2, down 3 1/2 cents; New front month Mar 11 soybeans closed at USD14.22 1/2, up 6 1/2 cents; New crop Nov 11 soybeans closed at USD13.23 1/4, up 10 3/4 cents; Jan 11 soybean Meal closed at USD377.00, down USD1.60; Jan 11 soybean oil closed at 56.70, down 60 points. Jan beans gained 48 3/4 cents of the week. The NOPA December soybean crush came below expectations at 149.4 million bushels, 18.8 million bushels down from a year ago. Argentina will get a welcome cool down next week, but variable rains may miss some needy Central and Northern areas.

Wheat

Mar 11 CBOT wheat closed at USD7.73 1/4, down 10 1/4 cents; Mar 11 KCBT wheat closed at USD8.60, down 8 1/2 cents; Mar 11 MGEX wheat closed at USD8.90 1/4, down 3 1/2 cents. The gap between lower protein SRW Chicago and the premium wheats of Kansas & Minneapolis continues to widen. Despite corn and beans maintaining their upwards momentum stoked up by Wednesday's bullish USDA report, wheat couldn't hold onto its gains today. Mar CBOT wheat actually closed the week 3/4 cent lower overall, whereas the other two exchanges posted gains of around 15-20 cents.

EU Wheat Close

14/01/11 -- EU wheat futures closed lower Friday with Jan London wheat down GBP2.65 to GBP193.35/tonne and Nov GBP3.00 lower at GBP167.50/tonne. Paris wheat saw Mar down EUR4.25 at EUR251.00/tonne and Nov EUR4.50 lower at EUR223.75/tonne.

A stronger euro dented Paris wheat's ambitions, as too did a weaker US market on end of week consolidation and profit-taking ahead of a three day weekend in America.

On the week as a whole Jan London wheat fell GBP2.25/tonne with Nov down GBP1.10/tonne.

Commodities in general took a knock after China upped it's banks' reserve requirements for the seventh time in the recent past, in a concerted effort to try to rein in inflation. So far however this seems to have largely failed to affect demand for grains, or indeed anything else from the Far Eastern powerhouse.

Argentine wheat production estimates are creeping higher, with a crop of around 15 MMT now expected, double last season's output.

Of the three big commodities, wheat, corn and soybeans, wheat is the one where global and US stocks aren't cited as running at historically tight levels. In addition the US wheat harvest is now only four months away from kicking off in the south.

The weather in Europe has warmed up, with widespread heavy rains welcome after a cold and dry December.

Whilst demand for milling wheat remains strong, feed wheat offtake could fall off a cliff come May on a combination of falling livestock numbers and turnout following a long hard winter.

The jungle drums tell me that feed compounders will be looking at some very hefty price increases by then, which may cut demand even more acutely than normal once we get past Easter - weather permitting.

Shortly After The Bell

14/01/11 -- Shortly after the opening of today's CBOT session wheat is leading the way lower, with March down 16c, March corn down 7c and March beans 15c lower.

Profit-taking looks like the name of the game ahead of a three day weekend. Uncertain weather forecasts for Argentina could make things look different again come Monday night.

"Oppressive heat is causing serious moisture stress with 90s F but strong thunderstorms are on the way, promising for .5 to 2 inch rains. Showers began last night in the western growing areas but amounts were extremely variable from traces to 1 inch. More rain is still coming. It is a dicey situation because extreme heat will prevail in the northern grain belt. The worst conditions would be in Cordoba, Santa Fe and Entre Rios where daytime highs may exceed 100 F on the weekend," say Martell Crop Projections.

Early Call On Chicago

14/01/11 -- The overnights closed lower, with wheat leading the way down 12-13c, beans off around 6c and corn 4-5c lower.

It looks like time to take profits ahead fo a long weekend, it's Martin Luther King Day on Monday and the grains have had another good week.

CBOT July wheat is up 16 1/2 cents on the week so far; March corn up 47 1/2 cents; March soybeans up 51 cents; Mar soymeal up USD20.90 and Mar soyoil up 89 points.

China has raised it's reserve requirements again (for the seventh time in the recent past in fact), by 50 basis points this time as they continue to try to rein in inflation.

Argentina is looking a bit wetter, yesterday's weekly export figures were ho-hum, crude oil is down the best part of a dollar. Chinese buyers may be looking to cancel DDGS shipments.

The NOPA December soybean crush came below expectations at 149.4 million bushels, well below December 2009.

Wheat again looks the weakest, with further widening expected on the differential between CBOT and KCBT/MGEX.

It all looks a little tired heading into the weekend, opening calls are: Beans down 5 to 7 cents, corn down 4 to 6 cents and wheat down 10 to 14 cents

EU Rapemeal Prices

14/01/11 -- Latest guide prices for EU rapemeal.

Basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:

News Bites

14/01/11 -- News snippets that may be of interest this morning:

• The People's Bank of China has raised reserve requirements 50 basis points in a further effort to curb inflation


• January CBOT contracts for soybeans, meal and oil expire tonight


• Reuters report that some Chinese buyers with US DDGS on their books are attempting to cancel their contracts for fear that Chinese authorities will introduce punitive anti-dumping levies on the commodity in March


• Drought continues in the North China Plain wheat belt, with no relief in the 7-day precipitation outlook


• The Baltic Dry Index, the benchmark guide to drybulk shipping rates on 40 routes around the world, has fallen to it's lowest in almost two years as the Australian floods disrupt shipping


• The Rhine was closed to traffic yesterday after a barge carrying 2,000 MT of sulphuric acid sank just north of Mainz

Don't Panic The Cavalry Are Coming

14/01/11 -- After a couple of quiet weeks over Christmas and New Year it was back to business as usual this past week for EU grain exporters, with Brussels granting 675,000 MT of soft wheat export licences - the fourth largest weekly total of the 2010/11 marketing year so far.

Once again France picked up the lion's share with 537,000 MT of that. Export licences for a further 128,000 MT of durum wheat were also granted. Price clearly isn't rationing demand too much just yet by the looks of it.

FranceAgriMer currently peg their exports for the current season at 18.66 MMT, a 9% increase on last year, with exports to non-EU destinations accounting for a record 11.8 MMT of that. That is starting to look conservative.

They currently see 2010/11 wheat ending stocks declining 42% year-on-year to less than 2.2 MMT. They're going to need to slow down their sales considerably to even make them as high as that with five and a half months of the marketing year remaining.

Meanwhile French supplies of durum wheat are also dwindling after Algeria bought 225,000 MT of the grain over the Christmas/New Year period. Local prices have shot up from EUR280/tonne to EUR315/tonne since the beginning of the month as traders scramble to unearth sufficient stocks to fulfil the Algeria order, according to a report on Bloomberg.

French officials have been quick to hotly deny rumours that some form of export ban might need to be introduced before the end of the current marketing year as wheat continues to pour out of the country.

Southern hemisphere suppliers like Australia and Argentina will soon step up sales to fill the void left by dwindling French stocks, they insist.

Yet we still don't know how much of Australia's wheat isn't going to make the grade required for bread-making. Some suggest only half the rain-deluged crop might be suitable instead of almost all of it normally.

Additionally, Argentina's reputation as an unreliable trade partner is bordering on legendary, and has been built on solid foundations. The Kirchner government have a history of tinkering with export quotas and duties in an attempt to wring every last peso in income for their cash-strapped coffers.

Recent years have been littered with a series of on-off strikes between farmers and the government over taxes on grain exports. Indeed, farmers there are set to begin a week long strike on Monday. Port workers too are prone to regular strikes over pay and working conditions.

Meanwhile they're rioting on the streets of North Africa whilst we continue to turn grains and oilseeds into fuel. An activity that is mandated and subsidised by, at best well-meaning but ill-conceiving politicians that merely seem to be lining the pockets of big business.

At worst it won't just be big business who's pockets are getting lined either will it? "Bollocks to the starving in Africa, I want a yacht."

Chicago Closing Comments

13/01/11 -- Soybeans

Jan 11 soybeans closed at USD14.10, up 1 cent; Nov 11 soybeans closed at USD13.12 1/2, up 4 1/2 cents; Jan 11 soybean Mmal closed at USD378.60, up USD1.20; Jan 11 soybean oil closed at 57.30, down 13 points. Beans rose to fresh contract highs early on but fell later in the day om fund selling. Weekly export sales were in line with expectations at 495,000 MT old crop and 180,000 MT for new crop. Once again China tok most of that. The Buenos Aires Grains Exchange dropped their estimate for 2011 soybean production by 2.5 MMT to 47 MMT.

Corn

Mar 11 corn closed at USD6.42 1/2, up 11 1/2 cents: Dec 11 corn closed at USD5.70 1/2, up 10 1/2 cents. The complex posted new contract highs as follow through from yesterday. Funds were estimated to have bought 15,000 to 18,000 contracts on the day. Private exporters reported the sale of 116,000 MT of corn to unknown. Weekly export sales were in line with estimates at 507,530 MT. The Buenos Aires Grain Exchange left Argy corn production unchanged at 20.35 MMT.

Wheat

Mar 11 CBOT wheat closed at USD7.83 1/2, up 13 cents; Mar 11 KCBT wheat closed at USD8.68 1/2, up 16 1/2 cents; Mar 11 MGEX wheat ended at USD8.93 3/4, up 16 1/4 cents. Chicago continues to lose ground to premium quality wheat from Kansas and Minneapolis. Weekly export sales were very poor at 175,200 MT with Egypt taking 64,300 MT. The Buenos Aires Grain Exchange upped wheat production in Argentina by 0.5 MMT to 15 MMT. Japan bought almost 120,000 MT of US wheat in its regular Thursday tender.

EU Wheat Close

13/01/11 -- Jan London wheat closed GBP0.65 lower at GBP196.00/tonne, with new crop Nov GBP0.75 higher at GBP170.50/tonne. Mar Paris wheat fell EUR0.25 to EUR255.25/tonne, whilst new crop Nov rose EUR0.50 to EUR228.50/tonne.

It was a mixed bag for EU wheat, with most new crop months managing to post gains on old crop positions.

The pound fell sharply against the euro to around 1.1850 from over 1.20 in early trade. The single currency gained after Portugal's bond auction was well supported yesterday and on ideas that Spain's auction tomorrow will meet with similar approval by the markets. The US dollar dived following disappointing jobs data.

Spillover support came from sharp gains in Chicago overnight and again this morning following yesterday's bullish data from the USDA.

If you want quality EU wheat then France is pretty much your only option. There are reports circulating this week that they are importing feed wheat and also corn from Ukraine themselves, as milling grade wheat continues to pour out of the country leaving a feed grain vacuum behind it.

FranceAgriMer yesterday pegged exports to non-EU nations at a record 11.8 MMT and pegged 2010/11 soft wheat ending stocks at less than 2 MMT, 42% down on last season and the lowest in seven years.

Defra raised UK wheat production for 2010 slightly to 14.88 MMT. Their estimate for exports during the current season is woefully understated at 1.33 MMT considering that 1.2 MMT had left our shores by the end of October.

Defra To Launch Find The Wheat Competition?

13/01/11 -- Defra, which is an acronym for inept, have had a good rummage down the back of their old settee and managed to scrape together an extra 45,000 MT of wheat from last year's UK crop.

They now peg UK production for 2010 fractionally higher at 14.88 MMT, 3% up on 2009. For reasons that are unclear to all but them they peg UK exports for the whole 2010/11 marketing year (July/June) at only 1.33 MMT. Surely they must know that we've already exported more than that already?

Carryover at the end of the current season was left unchanged at 2 MMT. If ever there was a case of think of the number you want to end with and work backwards then this is surely it.

I'd like to know where they think that 2 MMT is going to be at the end of June. Maybe they are planning on running a competition? Providing us with a series of clues to run round the country in our 4x4's trying to locate it. "I'm not in a store, I'm not in a shed, I'm not in a silo, but I am in my head. Where am I?" that sort of thing.

I think that's a great idea, they could bring out a Nintendo Wii version and call it the Big Grain Academy. With Jamie Redknapp sitting in his lounge trying to find it, without realising that it's down the back of the very settee that he's sat on.

That Louise is useless when it comes to putting the hoover round I reckon, and it's just kind of built up over the past couple of years.

Early Call On Chicago

13/01/11 -- The overnights closed mostly firmer with corn leading the way in follow through trade from last night's strong close after the USDA released their bullish crop data.

Corn finished the Globex session around 9-11c higher, with wheat and beans up 6-7c. Just to add to the underlying support for corn the USDA this afternoon reported the sale of 116.000 MT of US corn to unknown.

The dollar is sharply weaker on jobs data, falling to around 1.5850 against the pound.

Weekly export sales were in line with trade expectations for corn (507,500 MT) and soybeans (675,000 MT) but well under expectations of 400 - 500 TMT for wheat at only 175,200 MT.

Wheat struggled to stay up with beans and corn last night and may perform similarly tonight on the back of those sales. The USDA didn't paint as bullish a picture for wheat as the others two yesterday either.

Japan bought almost 120,000 MT of US wheat in its regular Thursday tender. Jordan tendered for 100,000 MT of hard wheat today.

All eyes remain on Argentina, the threat of drought there comes of course too late to affect wheat production, the USDA raised that by half a million tonnes yesterday, but it is right in the eye for corn and soybeans.

The October-December rainfall in Argentina is tracking close to that of 2007, also a La Nina year, warn Martell Crop Projections. "We will have to wait and see what happens in January with rainfall. This month's growing conditions would influence kernel-filling and late corn pollination. The next week's forecast is quite wet," they add.

In Brazil things look much more promising apart from in southern RGDS where it's very dry. Further north, in Matto Grosso very early soybeans are already being harvested with decent yields.

Early calls for this afternoon's CBOT session: Beans up 6 to 8 cents, corn up 8 to 10 cents, and wheat up 6 to 8 cents. Once again I'd expect corn and beans to lead the way and wheat to remain the laggard.

USDA Weekly Export Sales

13/01/11 -- USDA weekly export sales for the period December 31-January 6 were very disappointing for wheat compared with trade expectations, although corn and soybean sales were in line with trade ideas.

Soybean sales were split 495,000 MT old crop and 180,000 MT new crop. China took 217,400 MT of the old crop and all of the new crop. Corn sales included 68,300 MT of new crop.

Wheat sales were down 68 percent from the previous week and 75 percent from the prior 4-week average. Egypt took 64,300 MT.

EU Rapemeal Prices

13/01/11 -- Latest guide prices for EU rapemeal.

Basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:

The World Corn Situation

13/01/11 -- The Argy soybean crop "isn't likely to top 40 million tons" whilst corn output "is unlikely to top 17.5 million tons this season" said Argy analysts AgriPac earlier this week.

Unsurprisingly the USDA disagree, yesterday pegging bean output there at 50.5 MMT and corn production at 23.5 MMT. Although they were down on their December estimates (by 1.5 MMT on each) that still places them way above the AgriPac numbers. So who is likely to be nearer the mark?

Another well-known South American analyst Kory Melby says that yesterday's USDA estimates are probably 5 MMT too high on both beans and corn. That suggests corn production of 18.5 MMT, much closer to AgriPac's ideas. Considering that world ending stocks/use is already the second tightest in the last 35 years using yesterday's USDA numbers, then that's pretty significant if we were to lop another 5 MMT off the bottom line.

It should also be noted that almost half of those corn stocks are in China (60 MMT), which means that a) they probably don't all exist b) they won't be coming onto the open market c) we are reliant on them having a crop of 168 MMT this year to even manage to hit that target.

Now the Chinese authorities tell us that they are in for a crop around 4/5 MMT in excess of the USDA's targeted 168 MMT, but let's face it we don't really believe a word they say do we? Other private estimates are as much as 13 MMT lower than the USDA.

So IF the USDA are calling the Argy and Chinese corn crops correctly we have 55 days worth of supply to end 2010/11. What does it mean if they're wrong? Take 5 MMT off Argentina and 10 MMT off China's production and we come down to less than 49 days worth of supply - and that's if China really does have 60 MMT of reserves in store.

Having auctioned off in excess of 40 MMT of state-owned reserves in the last twelve months in a failed attempt to keep rising prices under control that seems pretty unlikely to me.

World Crop Weather Highlights

13/01/11 -- World agri-weather highlights from Martell Crop Projections:

• Sub-zero overnight lows in Kansas winter wheat; No rain predicted in HRW this week as temperatures moderate


• Scanty rainfall in Brazil forecast next 7 days; Mato Grosso normally gets 40-45 mm per week (1.65 ") in the peak monsoon


• Hot 90s F have returned to SW Argentina; Cordoba-Santa Fe crops coming under moisture stress in January; rainfall forecast indicates variable showers


• Rain keeps coming to France, UK, Benelux, Germany, Sweden; favorable for winter wheat and rapeseed; warm forecast suggests crop growth is possible following very cold December


• Heavy rain for second straight day in Victoria, New South Wales, South Australia growing areas; forecast threatening for more; not sure how much wheat is still left in the field


• Cold dry weather persists in North China Plain wheat where crop is dormant; rain is badly needed in a super dry winter. Northeast China corn and soy fields are subject to deep layer frost with bitter cold


• When will it rain in Southern Russia? Ukraine winter crops have adequate soil moisture in winter but Black Sea wheat in Russia is dry

Strike!

12/01/11 -- Yes that is the General Belgrano just before it went to sleep with the fishes.

Our bezzie hand-ball loving mates the Argies have decided to do what they do best/ Finding themselves with a bit time on their hands just as the wheat harvest is almost over and before the soybean/corn harvest begins. That's right folks they're going on strike.

Argy farmers will launch a one week strike starting Monday in protest to government limits on grain exports - sound familiar?

Front-end premiums here we come again then by the looks of it.

Chicago Close

12/01/11 -- Soybeans

Jan 11 soybeans closed at USD14.09, up 58 1/2 cents; Jan 11 soybean meal closed at USD377.40, up USD18.20; Jan 11 soybean oil closed at 57.43, up 126 points. Beans touched limit up early doors, fell back and then rallied to close near limit higher later in the session. The USDA report was bullish with 2010 US soybean yields and production cut, contrary to expectations for a small rise. Ending stocks for 2010/11 fell 25 million bushels from last month to 140 million - equivalent to only 15 days of supply - the tightest of the past 40 years.

Corn

Mar 11 corn closed at USD6.31, up 24 cents; May 11 corn closed at USD6.39 3/4, up 24 1/2 cents. Corn also touched limit up early doors but retreated slightly later in the session, ending with strong gains nevertheless. Pretty much all the USDA report numbers came in below the average trade guesses this morning, with 2010 yields 0.2 bu/acre below the lowest trade estimate. Global ending stocks were reduced to 127 MMT, the second tightest stocks/use ratio in the last 35 years, equivalent to around 55 days of supply.

Wheat

Mar 11 CBOT wheat closed at USD7.70 1/2, up 11 cents; Mar 11 KCBT wheat closed at $USD.52, up 14 cents; Mar 11 MGEX wheat closed at USD8.77 1/2, up 12 1/4 cents. The USDA numbers were less bullish for wheat than corn or beans, with global ending stocks pegged 1.3 MMT higher than last month at 178 MMT. Even so US wheat exports for 2010/11 are now seen at their highest level since 1993/93. Winter wheat plantings were broadly in line with trade estimates at 41 million acres.

EU Wheat Close

12/01/11 -- EU wheat closed higher with Jan London wheat up GBP1.10 at GBP196.65/tonne, and new crop Nov GBP1.75 higher at GBP169.75/tonne. Mar Paris wheat rose EUR1.50 to EUR255.50/tonne and Nov climbed EUR0.75 to EUR227.75/tonne.

The long-awaited USDA stocks and world production reports came in bullish, sending prices higher in afternoon trade.

The wheat numbers were probably the least bullish of the grains, but wheat nevertheless got dragged higher on the back of friendly data for US and global corn and soybeans.

Nearby March Paris wheat rose to a two year high of EUR261.00/tonne, before giving up some of those gains late on as Chicago wheat fell from early highs on profit-taking.

The USDA increased Argentine wheat production by half a million tonnes to 14 MMT and dropped that in beleaguered Australia by a similar amount to 25 MMT. In the US they increase exports to their highest levels since 1993/93.

Even though world production was reduced 0.8 MMT to 645.8 MMT, global ending stocks for 2010/11 were increased by 1.3 MMT to 178 MMT.

Meanwhile FranceAgriMer increased their estimate on exports outside the EU-27 by 200,000 MT to a record 11.8 MMT, 2 MMT more than last season. They also cut projected 2010/11 ending stocks to under 2 MMT from more than 3.4 MMT a year ago.

Chicago Opening

12/01/11 -- Shortly after the opening beans and corn are testing the daily limits with corn up 29 1/2c and beans up 67c. Wheat is following suit up 27c, with soymeal up USD20 and soyoil 195 points higher. Can the market hold onto these gains or will fund rebalancing drag it all lower by the close?

16.30 PM Update: grains off highs after corn and beans hit daily limits earlier. Wheat the laggard at "only" 15/17c firmer. Just got a sneaky feeling that things might work a bit lower on profit-taking towards the close of play.

Report Reaction

12/01/11 -- The numbers are out and there's a lot to digest, but the gist is that it's almost universally bullish, perhaps slightly less so for wheat.

CORN

US yields and production for 2010 were cut more than anticipated, with yields down 1.5 bu/acre from last month and 1.1 bu/acre lower than the average trade estimate and 0.2 bu/acre below the lowest trade estimate.

US 2010/11 ending stocks were dropped 87 million compared to the 54 million expected, to an uncomfortably low 745 million, well below the 1 billion "comfort blanket".

Argy corn production was decreased 1.5 MMT to 23.5 MMT and world ending stocks reduced by 3 MMT to 127 MMT, giving us the second tightest stocks/use ratio in the last 35 years, equivalent to just over 55 days of supply.

SOYBEANS

US yields and production were cut for 2010, contrary to market expectations of a slight increase. Yields fell by half a bushel to 43.5 bu/acre.

US Dec 1st stocks came in at 2.28 billion bushels against expectations of 2.35 billion. Ending stocks for 2010/11 fell 25 million bushels from last month to 140 million - equivalent to only 15 days of supply - the tightest of the past 40 years.

Argy soybean production was cut by a conservative 1.5 MMT to 50.5 MMT, although that's still well above some other local private estimates. World ending stocks were reduced 2 MMT to 58 MMT.

WHEAT

US winter wheat planted area rose 10% to just over 41 million acres, slightly less than the average guess.

Dec 1st stocks came in 10 million bushels less than anticipated and 2010/11 ending stocks were down 40 million bushels from last month to 818 million, some 24 million lower than expected. US wheat exports are now seen at their highest level since 1993/93.

Australia's wheat crop was cut just 0.5 MMT to 25 MMT and Argentina's was raised a similar amount to 14 MMT. The world wheat crop for 2010/11 was seen down 0.8 MMT, although global ending stocks were pegged 1.3 MMT higher at 178 MMT.

SUMMARY

The numbers are seen as bullish across the board, with early calls for this afternoon's CBOT session varying quite a bit at the moment. Some are saying beans up 15/20 and others up 30 or even 40c higher. Calls on corn are generally up 15/20c with wheat seen 10-20c higher. I'd tend to side with the higher end of these estimations.

The Magic Numbers

12/01/11 -- The USDA's eagerly awaited raft of important numbers including US winter wheat plantings, revised 2010 production numbers for corn and beans, quarterly stocks and 2010/11 ending stocks estimates look pretty bullish across the board:

Portugal Raise The Cash - For Now

12/01/11 -- Cash-strapped Portugal have managed to raise enough cash at today's government bond auction to stave off a humiliating capitulation into being forced to seek financial aid from the EU/IMF.

A defiant finance minister told reporters that there was "no need for external help" after they raised EUR1.25 billion selling a mixture of bonds maturing in 2014 and 2020.

The 2014 auction produced an average yield of around 5.4%, up from around 4% when they last held a similar auction in October. The auction was reportedly 2.6 times over-subscribed, compared to 2.8 times in October, proving that they can at least still borrow money for now, although it comes at a price.

BradburyWatch

12/01/01 -- What else is there to do when we're all just sitting here, the phones not ringing, waiting for the USDA to come out. I know let's do a bit of Julia Bradbury spotting. Here she is in a Mole Valley store looking for a fresh helmet, the luscious TV lovely. What's that bloke grinning in the background thinking I wonder? BBC Babe

UK Retail Feed Production Up 4.9% In November

12/01/11 -- Production of retail animal feed production in the UK was up 4.9% in November compared to a year previously, according to Defra. Total UK integrated feed production rose by 2.2% during the same period, they add.

In retail feed production, usage of wheat was up 5.8% year-on-year despite the large increase in price. At 236,500 MT wheat accounted for 29% of the ration.

Other notable changes year-on-year include corn gluten feed usage up more than 500% and DDGS usage up more than 50%. Rapemeal, sunmeal and "other oilseed cake/meal" all showed declines in usage of around 15-25%.

Biofools

12/01/11 -- The world has finally gone completely mad. A report today on the thoroughly excellent Agrimoney.com here suggests that the price of biofuel made from rapeseed in Europe has now got so high that it is cheaper for fuel companies to use fossil fuels instead and pay the associated fine for not meeting their blenders mandate. If ever there was an indication that a bit of rethink was needed then this is surely it.

The USDA And Women's Bra's

12/01/11 -- Just when you think you've got them sussed, both can prove difficult when you least expect it. I used to consider myself a bit of an expert at the old "one-handed undo" in the old days. Women say we can't multi-task, well call me an old romantic but I could snog, grope and simultaneously undo a bra with my spare hand (left or right, I'm ambidextrous me) all at the same time back then.

But then when I started seeing MrsN#1 it was like trying to do a rubic's in the mirror, in the dark with one hand. That was until I realised that she was wearing a completely different type of bra to the one me gran used to wear. :0

And so it is with the USDA, after years of thinking you've got them sussed they start coming out with all sorts of outlandish numbers. It's a bit like watching play your cards right where it's "higher or lower than a queen?"..."lower"..."oh, unlucky it's a king."

So what do they have in store for us this afternoon, who can tell? Maybe today's shock will be that there are no shocks and everything comes in pretty much as anticipated.

2010 CROP PRODUCTION

Only relatively minor revisions are anticipated to last year's yields and production estimates for US corn and beans. Corn yields are seen falling 0.4 bu/acre to 153.9 bu/acre and bean yields are forecast to rise 0.1 bu/acre to 44.0 bu/acre.

WINTER WHEAT AREA

There's plenty of room for a surprise here, with the range of estimates pretty wide, varying from 39.377-43.200 million acres. There is a school of thought that record high cotton prices may have "stolen" some of those anticipated wheat acres and that the real planted area may be lower than many people think.

There is also now a large question mark over exactly how many of those acres that were planted will actually make it through to harvest. Given the poor crop ratings at the end of November and the difficult winter conditions since then, the high prices of other crops is providing an incentive to rip up or graze poorly established wheat and plant something else in the spring.

2010/11 US ENDING STOCKS

The market is expecting downward revisions for wheat, corn and beans. Wheat is expected to fall on the back of increased exports, and possibly increased domestic usage due to a tight corn stock situation.

Corn stocks are seen falling on the back of reduced 2010 production and increased ethanol usage. The market seems to be disregarding the possibility that high prices may be rationing export demand and that projected exports for 2010/11 could fall, leaving carryout virtually unchanged.

Soybean ending stocks are also seen lower on improved export potential and increased domestic usage following the re-introduction of the blenders tax credit.

QUARTERLY STOCKS

Wheat stocks are estimated at 1.938 billion bushels as at Dec 1st 2010, the largest second-quarter stocks since the 1987/88.

Corn stocks are pegged at 10.067 billion bushels - the smallest first-quarter stocks number of the past four years. Bear in mind here that both the last two quarterly stocks reports (June and September, 2010) have provided major surprises. Many felt that the September report may have included some early harvested new crop corn. The continued expansion of corn usage by the ethanol sector however may be starting to impact upon corn usage in feed, given the increased availability of DDGS.

Soybean stocks are seen at 2.345 billion bushels, indicating robust first quarter usage/exports - the second largest first quarter usage ever in fact on the back of strong demand from China.

WORLD STOCKS/PRODUCTION

World wheat ending stocks are expected to decline by around 2 MMT to 174.61 MMT, still a healthy 26.2% stocks/use ratio.

Global corn ending stocks are seen falling by around 2.5 MMT, cutting stocks/use to 15%, the tightest since 1973/4. Argentine production could fall 1-2 MMT.

World soybean stocks are forecast around 1.5 MMT lower, pegging stocks/use at 22.7%. Argentine soybean production will likely be cut, but probably by only 1-2 MMT.

Chicago Close

11/01/11 -- Soybeans

March soybeans settled 23 1/2 cents lower at USD13.57; March soymeal fell USD7.70 to USD362.90; March soyoil declined 52 points to 56.61. Traders booked a few remaining profits ahead of tomorrow's crucial USDA reports. The market doesn't expect too many life changing figures for beans, but you never know with the USDA. Argentina weather forecasts are a bit wetter. Private exporters announced the sale of 116,000 MT of soybeans to China for 2010/11.

Corn

March corn closed unchanged at USD6.07 a bushel. May was down 1/4c at USD6.15 1/4c. Crude oil was almost USD2/barrel higher at the close, lending some support. The USDA are expected to drop US corn yields and production for 2010, combined with a decline in ending stocks for 2010/11 in tomorrow's reports. The USDA today reported sales of 125,000 MT of corn to Mexico and 116,000 MT of corn to unknown, both for 2010/11 delivery.

Wheat

CBOT March wheat settled down 7 3/4 cents at USD7.59 1/2; KCBT March wheat fell 3 1/2 cents to USD8.38; MGEX March wheat closed unchanged at USD8.65 1/4. Private exporters announced the sale of 82,650 MT of HRW, 36,450 MT of HRS and 36,500 MT of soft white wheat to an unknown destinations today. Tomorrow's USDA report on wheat area could throw up anything from 39.377-43.200 million acres compared to 37.335 million a year ago, according to trade estimates.

EU Wheat Close

11/01/11 -- Jan London wheat closed GBP0.05 lower at GBP195.55/tonne, with new crop Nov GBP0.25 higher at GBP168.00/tonne. Mar Paris wheat was unchanged at EUR254.00/tonne, whilst new crop Nov fell EUR1.50 to EUR227.00/tonne.

It was a quiet subdued session, with little movement either way ahead of tomorrow's important USDA data on global supply and demand, US production for 2010 for soybeans and corn plus US wheat plantings.

Trade estimates for the latter vary quite widely, from 39.377-43.200 million acres compared to 37.335 million a year ago. That represents an increase of around 5-15%, albeit from the lowest acreage in almost 100 years.

There are plenty of question marks worldwide over wheat production in 2011. Severe drought in Northern China, incessant rain in Australia and drought and freezing temperatures in the Great Plains amongst them.

Despite soaring world prices anxious buyers keep coming back to feed. Turkey became the latest to pay up buying 300,000 MT of mostly US wheat today.

Early indications out of Ukraine suggest that they may harvest 21 MMT of wheat in 2011, up 22% from 2010, according to UkrAgroConsult.

Masstock warn that much of the UK's winter rapeseed crop may have been hard hit by this winter's early and sharp arrival. Lack of attention to winter hardiness looks like providing the industry with a "major wake-up call" this year, they say.

Global Agri-Weather Highlights

11/01/11 -- World agri-weather highlights from Martell Crop Projections:

• Subzero temperatures overnight in Great Plains hard red winter wheat; most areas were protected by snow dry, cold forecast in week ahead


• Troublesome heat (mid 90s F) returns to Mato Grosso Brazil; not enough rain in the forecast to compensate; soybeans also at risk in South Brazil with dry forecast


• Argentina soy and corn under stress with low rainfall, now affecting northern half of the grain belt; forecast rather dry only 0.50 - 0.75 " expected next week against 1 inch normally


• Bitterly cold and dry conditions have eased in northern Europe; welcome precipitation will replenish dry wheat and rapeseed areas UK, Benelux, northern Germany, Denmark, Sweden


• It won't stop raining in Queensland, Australia; new flooding with another 4-5 inches of rain; New South Wales and Victoria got 1-2 inches


• North China Plain drought-stressed wheat is dormant with sub-freezing temps; no hope for rain in the 7-day outlook


• India weather unremarkable with dry conditions in winter monsoon


• Russia Black Sea wheat is slipping into dormancy 4-6 weeks late; very low winter precipitation has occurred the past 60 days; snow needed but forecast remains dry

Early Call On Chicago

11/01/11 -- The overnights closed mostly firmer with beans and corn generally up around 3-5c and wheat around 5-8c firmer nearby.

Crude oil is a bit firmer and the dollar a tad lower, both of which should help the grains complex.

Brazilian farmers seem to like these soybean prices, they've sold 42% of their 2010/11 crop, well ahead of the 24% sold this time last year, according to Celeres.

China sold only 164 TMT of the 1.77 MMT of corn on offer at today's government sponsored auction. No bids were again received for the soybeans on offer. Wheat will be auctioned tomorrow.

The trade is divided over how much irreparable damage may have already been done in Argentina. Central areas remain largely dry although some beneficial rains have fallen in the south and east over the past few days.

The North China Plain is in the grip of an acute drought too, with 50% of the nation's wheat crop affected.

There are unconfirmed rumours doing the rounds again of Chinese buying interest in corn. The last time these did the circuit they were without foundation.

Tomorrow's eagerly awaited USDA report should provide the direction in which we go for the next few weeks. The trade is expecting an increase in US wheat acres of anywhere from 2 million up to almost 6 million. They are also anticipating reduced US corn yields and production for 2010, combined with a decline in ending stocks for 2010/11. For beans US 2010 yields and production are seen broadly unchanged from last month although carryout is expected down on the back of strong exports.

The USDA will also report on global production, with Argentine corn and soybean output most under the microscope. The precedent for them to react slowly to change whether up or down means that they may err on the side of caution. Last month they pegged corn output at 25 MMT and soybean production at 52 MMT. Revised figures of 23/24 MMT and 50/51 MMT might therefore be more likely than some of the other private estimates doing the rounds.

Almost everybody is universally bullish, which is usually a worrisome sign. Downside risk is very limited, welcome to the new normal, many are now saying.

Haven't we been here before?

Early calls for this afternoon's CBOT session: corn and beans up 3-5c, wheat up 6-8c.

EU Rapemeal Prices

11/01/11 -- Latest guide prices for EU rapemeal.

Basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:

Tomorrow's USDA Report

11/01/11 -- If there's one thing you can usually rely on from the USDA it's to expect the unexpected. Tomorrow's report is almost universally expected to be bullish for beans and corn, so what are the chances of a bearish surprise?

Pretty good based on last year's January report, where US 2009 corn production was surprisingly raised from 12.920 billion bushels to 13.151 billion. The trade had been expecting a cut to 12.821 billion bushels on the back of the wet harvest that left uncut corn acres still standing in Midwest fields. Carryout was subsequently pegged at 1.764 billion bushels, much higher than trade expectations of 1.587 billion.

The corn market subsequently fell limit that night with 85,000 unfulfilled sell orders on corn at one stage. Beans closed down 32 1/4 cents and CBOT wheat down 36 3/4 cents.

After that corn declined for a further five sessions in a row, with beans and wheat losing for four of those five days. By the end of the sixth trading session following last year's January report corn was 54 3/4 cents lower, with beans down 70 1/2 cents and wheat off 71 3/4 cents.

By the way, the January 2009 report was also surprisingly bearish.

This year we've got the Food and Agriculture Organisation warning that world food prices are "in danger territory" and the associated rioting (and death) on the streets of assorted countries worldwide. I just wonder if the USDA might not feel that it's their duty to attempt to stem the tide with something bearish again this year?

We'll soon know.

CBOT Close

10/01/11 -- Soybeans

March soybeans rose 15 1/2 cents to USD13.80 1/2; March soymeal traded USD7.90 higher at USD370.60; March soyoil climbed 31 points to 57.13. China imported 54.8 MMT of soybeans in 2010, according to customs data - an increase of 29% on 2009. Argentina got some weekend rains in the south but the northern two-thirds of the grain belt got less rainfall, if any, and saw crop potential worsen with hot temperatures, say Martell Crop Projections. One analyst says that the soybean crop there now "isn't likely to top 40 million tons" - fully 12 MMT less than the USDA's December estimate. The USDA are out Wednesday with revised numbers for January. Weekly export inspections at 38.3 million bushels were almost double last week's total.

Corn

March corn closed up 12c at USD6.07; May corn ends up 11 3/4c at USD6.15 1/2 a bushel. Corn rebounded from last week's losses, contrary for expectations in some quarters of heavy fund rebalancing. The USDA export inspections report showed 20.6 million bushels inspected for export, almost 5 million up on last week. Weather concerns in Argentina remain, with one analyst saying that production there this season "is unlikely to top 17.5 MMT" - the USDA said 25 MMT just last month. The USDA are expected to make slight downwards revisions to US corn yields and production for 2010 on Wednesday.

Wheat

CBOT March wheat closed down 6 3/4 cents at USD7.67 1/4; KCBT March wheat fell 4 3/4 cents to USD8.41 1/2; MGEX March wheat slid 5 1/2 cents to USD8.65 1/4. Fund rebalancing may have accounted for some of wheat's losses today. Spillover support from beans and corn helped limit downside. Egypt buying US wheat over the weekend was supportive. Unrest is growing in other North African nations with riots last week in Tunisia and Algeria over rising food prices. The former bought wheat in a tender last week and the latter announced plans to buy wheat in a tender today. Morocco also made moves to subsidise wheat imports. Fifty percent of China’s winter wheat crop is seeing serious drought, say QT Weather, adding that "severe to extreme drought has set and no end is in sight".

EU Wheat Close

10/01/11 -- EU wheat closed mixed Monday with Jan London wheat unchanged at GBP195.60/tonne, and new crop Nov GBP0.85 lower at GBP167.75/tonne. Expiring Jan Paris wheat rose EUR2.00 to EUR258.00/tonne and Nov also climbed EUR2.00 to EUR228.50/tonne.

The euro fell to fresh 4 month lows against both the dollar and sterling on continued worries over EU debt, with Portugal becoming the new front runner to be expected to be forced into a handout situation from the EU/IMF.

That helped French wheat gain on London grain despite missing out in Egypt's weekend tender. French stocks look like being so tight come the end of the current marketing year that the odd missed export order could be a blessing in disguise.

French wheat was still USD10-15 cheaper on an FOB basis than US and Australian wheat was CIF. Whilst that rules out exports of 55-60,000 MT panamax sized vessels, it doesn't necessarily mean that smaller cargoes won't still find their way into North Africa and/or the Middle East.

In addition it also means that domestically prices could still rise further before imports become a more viable option.

In shades reminiscent of 2007/08 Algeria and Tunisia were the scene of repeated rioting last week between the police and demonstrators protesting against rapidly increasing food prices. Five people were reportedly killed in Algeria, while the Tunisian government reported 14 deaths.

The Algerian government has said that it will cut food prices by 14% and increase the amount of soft wheat it supplies to local markets.

Algeria immediately issued a tender to import at least 50,000 MT of soft wheat. Tunisia meanwhile bought 100,000 MT of wheat last Thursday.

Global Crop Weather Highlights

10/01/11 -- World agri-weather highlights from the excellent Martell Crop Projections:

• Kansas missed heavy snow; weekend precipitation followed a southern storm instead; drought persisting in US hard red winter wheat


• Top Brazil soy state Mato Grosso getting beneficial heavy rain alleviating dryness that worsened in December; now South Brazil faces a dry forecast; tables have turned; watching Rio Grande do Sul for emerging drought


• Small but intense area of hot, dry weather in North Argentina, Rio Grande do Sul, Brazil


• Wet conditions will persist in Western Europe again this week along with mild temps; winter crops may be coaxed out of dormancy


• Stormy, wet weather has redeveloped in southeastern Australia wheat, stalling the harvest; cool and cloudy forecast will slow drying


• Drought continues in North China Plain wheat zone; very cold temperatures keeping wheat dormant; Northeast China temps -20 F in the corn-soy belt; deep layer frost


• India dry monsoon season continues; no important rainfall in winter rapeseed and rice areas


• Black Sea wheat area much colder forcing winter wheat into dormancy; unusual December warmth extended growing season

USDA Numbers

10/01/11 -- The USDA are out on Wednesday with a raft of important numbers including US winter wheat plantings, revised 2010 production numbers for corn and beans, quarterly stocks and 2010/11 ending stocks estimates.

Here's a note of what the trade is expecting.

EU Rapemeal Prices

10/01/11 -- Latest guide prices for EU rapemeal.

Basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:

Early Call On Chicago

10/01/11 -- The overnight grains were mixed, but mostly higher, with beans generally up 4-6c, corn up 3-5c and wheat up 1-4c.

Crude oil is higher on news of a major pipeline closure due to another leakage problem for BP, this time in Alaska. The dollar is also a bit firmer.

Kansas weekend snowfall largely disappointed ahead of temperatures of 7-8F below zero forecast starting tonight. October-December precipitation in Kansas was around 40% below normal, Say Martell Crop Projections.

US wheat was the cheapest on offer over the weekend in Egypt's latest tender.

The USDA are out on Wednesday with their latest world supply and demand numbers, plus US quarterly stocks and wheat planting figures. Nervousness ahead of these numbers may limit upside potential over the next couple of sessions.

One private firm now estimate Argy soybean production potential as unlikely to top 40 MMT, 12 MMT below the USDA's December number, with corn output also seen sharply lower.

Meanwhile parts of Queensland reportedly got a foot of rain over the weekend, according to one radio report I heard. That will continue to cause logistical problems. Reports filtering through from NSW and Victoria continue to suggest bumper yields on wheat, barley and rapeseed although quality is still an issue.

Early calls for this afternoon's CBOT session: Corn up 3-5c, beans up 5-7c, wheat up 2-4c.

Portugal Denies Bailout Rumours

10/01/11 -- Under pressure Portugal has denied weekend rumours that it needs an Irish/Greek-style bailout. In a manner reminiscent of earlier Irish denials, of that of a Liverpool vote of confidence in Roy Hodgson, it only looks like a matter of time before the Portuguese are forced to capitulate.

The day of reckoning might come sooner rather than later, with an EUR1.25 billion bond auction lined up for Wednesday this week. Yields on Portuguese 10-year bonds rose to a new euro-era high on Friday. Nobody wants them.

Last week Portugal borrowed EUR500 million at an interest rate of 3.69%, compared to the eurozone benchmark rate of 0.45%.

A poor auction this week would seem to effectively mean that the country has effectively lost access to "normal" borrowing markets and may be forced to go cap in hand to the EU/IMF for assistance.

That would likely prompt further euro weakness in the months ahead as attention then turns to "who's next?" - and most eyes will switch to neighbouring Spain.

Very Interesting, Mr Bond

10/01/11 -- The Argy soybean crop "isn't likely to top 40 million tons" whilst corn output "is unlikely to top 17.5 million tons this season" according to this report quoting Argy analysts AgriPac.

That would certainly set the cat amongst the pigeons if true, with the USDA currently predicting 52 MMT and 25 MMT respectively.

Although it doesn't say so on the website this is actually a Dow Jones Newswires story, not one made up by some Indian outfit that you've never heard of, which should lend the report some credence.

Knocking 12 MMT of soybeans and 7.5 MMT of corn off the global bottom line in 2011 would certainly tighten the supply screw a whole lot more.