Quake, Rattle And Roll
12/03/11 -- The devastating Japanese earthquake certainly got the markets rattled on Friday, although beans and corn rebounded from early losses to close around the middle of the day's trading range. Wheat closed close to session lows.
Funds will be closely monitoring the situation in Japan over the weekend, asking themselves are these levels a God given opportunity to roll back into the market, or is this only the start of a return to historically "normal" levels?
As I type this the world media is reporting of a "huge explosion" at an ageing Japanese nuclear power plant at Fukushima (there's probably a joke in there, but I won't attempt to find it right now). Officials are being quick to reassure everyone that the container housing the reactor was not damaged.
The Japanese don't have a great track record in being completely, or even quite, truthful when it comes to incidents of this kind though. What they have said though is that radioactivity has been found in the area, and that they've extended the evacuation zone around the plant to 20km, although the BBC are reporting that one of their reporters was stopped by police 60km from the area.
It seems that the world is now sitting and waiting to discover if one of the plant's four reactors has in fact gone into meltdown.
What we do know and will all have seen on our televisions is the magnitude of the devastation caused by the earthquake and the resultant tsunami. Destruction that will take years and many billions of dollars to put right, in a country already saddled with a large debt problem.
Certainly there are going to be dramatic, and long-term, economic implications. In the short-term there are also the effects of plant closures to major Japanese manufacturers like Sony, Honda, Toyota and Panasonic to consider, and the resultant effect on demand for commodities.
So what are the likely implications for the grain markets then I hear you ponder. One report I read today said "none, people still have to eat". That's true of course, although I suspect that the fund's appetites have been severely damaged by this particular latest dose of indigestion.
Indeed their stomachs may well be in for a further testing next week I suspect once they've digested the weekend news. I'd suggest that Friday's price action was somewhat confused and that nobody could really make their minds up whether the latest developments really were that bearish.
I also suspect that many will have made their minds up on that point over the weekend and come up with the answer: "Bloody hell, they are!" Next week could bring another sea of red across our screens I feel.
Chicago Meltdown
11/03/11 -- The market had already been in turmoil all week, watching the events unfold in the Middle East and North Africa. Throw a massive earthquake and a tsunami into the mix and traders just want to get out. The thing is nobody knows right now what the state of play is going to be on Monday morning, and that is making speculators "revisit" their enthusiasm for being long grains.
We'd already been down all week on long liquidation and concerns that rising oil prices would damage global economic growth. Now we have the cost of Friday's devastation to the world's third largest economy, and the possible implications of at least one of Japan's ageing nuclear reactors going into meltdown over the weekend.
Soybeans: Mar 11 soybeans closed at USD13.26 1/2, down 22 1/4 cents; Mar 11 soybean meal ended at USD346.10, down USD3.00; Mar 11 soybean oil closed at 55.49, down 99 points. Mar beans were down 81 1/4c on the week, with Mar meal falling USD17.70 and Mar oil down 347 points. "Very heavy rain in Mato Grosso - Brazil’s largest soybean state producing nearly 30% of the national crop - boosted pod filling last month. Parana - Brazil's second largest soybean state - is also expecting a bumper crop," say Martell Crop Projections.
Corn: Mar 11 corn closed at USD6.59 1/4, down 17 cents; Dec 11 corn closed at USD5.77 3/4, down 9 1/2 cents. Corn was limit down at one point on the news from Japan - the fifth largest corn consumer in the world and America's top buyer of the grain. On the week as a whole Mar corn was down 62c. A warmer and drier forecast for much of the Midwest next week is welcomed, and although that warmer pattern continues into the following week more unneeded rainfall may come with that, say Martell Crop Projections.
Wheat: Mar 11 CBOT wheat closed at USD6.95, down 19 cents; Mar 11 KCBT wheat closed at USD8.20 1/2, down 18 1/2 cents; Mar 11 MGEX wheat closed at USD8.53 1/4, down 23 cents. Mar CBOT wheat finished last week above USD8/bushel and now closed it under USD7/bushel for a 105 1/2 cent loss on the week. Japan is a regular US wheat consumer, routinely tendering for 100-150 TMT most weeks. It seems like they maybe have an enforced absence from the market for a while.
EU Wheat Down Again
11/03/11 -- EU wheat took another battering to end the week with Mar London wheat ending down GBP3.00 to GBP181.85/tonne and new crop Nov down GBP1.00 at GBP153.50/tonne. New front month May Paris wheat fell EUR3.25 to EUR223.00/tonne, with Nov down EUR2.25 to EUR203.75/tonne.
Mar London wheat finished the week a hefty GBP14.70/tonne lower than it began it, whilst May Paris wheat has how fallen EUR21/tonne since last Friday.
London, Paris and Chicago wheat fell every day this week as spec money poured out of grains leaving longholders bewildered and with their confidence in tatters.
This week we've had an escalation of turmoil in the Middle East, downgrades to Spain and Greece's credit ratings, increases in world and US wheat ending stocks from the USDA and now an earthquake and tsunami in Japan.
We've been on major bull run since the end of June 2010 and the market was overdue a correction and all of those factors have helped to spark one.
In the case of world wheat stocks yesterday's USDA revisions now peg stocks to usage at 27.4% - we've only been higher than that twice in the last ten years - so where's the crisis?
The real crisis may still be six months away when pork chops and fillet steaks are being sold on eBay along with Take That tickets.
Who Cut The Lift Cables?
11/03/11 -- Pretty it isn't, as nervous longs scramble for the exit doors pushing little old ladies out of the way and biting the heads off children. They told us the only way was up.
May London wheat down GBP4.50 just after 10am this morning, with May Paris wheat down EUR6.50 and May Paris rapeseed down EUR7.00, oh dear, oh dear. Get me my medication.
The pound has slipped below 1.60 against the dollar and 1.16 against the euro and even that doesn't seem to have helped. Nurse!
Early Vibe
11/03/11 -- Having switched the PC on this morning fully expecting a modest corrective bounce, my flabber is gasted to see virtually another entire wall of red.
If corn ends lower again tonight it would be it's sixth straight day of losses. With Mar currently standing at USD6.74 1/4 on the overnights the front month has lost 55 1/2 cents since that run of bad luck started.
Having staged a lone stand last night, beans have lost those modest gains and then some, and are bathed in red again this morning. Mar beans are down 72 3/4c since Friday night's close including this mornings declines. But even that is eclipsed by Mar CBOT wheat's fall from grace - down 86 1/2 cents since the end of last week.
Brent and NYMEX crude are both down a dollar to a dollar and a half this morning.
The US dollar has firmed this week, which hasn't helped US grains, after rating downgrades for Greece and Spain and increasing turmoil in the Middle East prompting a flight to safety.
China's trade deficit announcement yesterday coincided with news that their Feb soybean imports slumped by more than half last month to just 2.32 MMT.
That decline can at least partially be blamed on the Chinese New Year celebrations, although the figure is also down 21% on last February.
I'm out for much of the day today, and as it's been dead all week I don't suppose that I'm going to miss much. As far as London wheat is concerned, I've packed all the 2's away and put them back up in the loft. They're next to my old 28in waist jeans and my "Everton League Champions" flag. I wonder which of those will be the next to see the light of day!
CBOT Close
10/03/11 -- Soybeans: Mar 11 soybeans closed at USD13.48 3/4, up 4 3/4 cents; Mar 11 soybean meal closed at USD349.10, up USD0.60; Mar 11 soybean oil closed at 56.48, down 19 points. Given the weakness in corn and wheat this was quite an impressive performance by soya today. The USDA production numbers were neutral to slightly bearish, with Brazil's crop getting raised 1.5 MMT to a record 70 MMT. US ending stocks were left unchanged at 140 million bushels, although the trade is already dismissing that as too high. Weekly export sales at a combined 470,000 MT were in line compared with estimates of 350-500 TMT.
Corn: Mar 11 corn closed at USD6.76 1/4, down 18 3/4 cents; Dec 11 corn closed at USD5.87 1/4, down 23 cents. The USDA supply demand report was considered only slightly negative. World ending stocks were increased to 123.1 MMT from 122.5 MMT and the 121.6 MMT expected. US ending stocks were seen at 675 million bushels, unchanged from last month and a bit above the 665 million anticipated. Weekly export sales were disappointing though, and the trade already now seems to be focusing on spring plantings. Corn sowings look like increasing significantly at these levels, hence new crop falling more than old crop today.
Wheat: Mar 11 CBOT wheat closed at USD7.14, down 18 1/4 cents; Mar 11 KCBT wheat closed at USD8.39, down 14 1/2 cents; Mar 11 MGEX wheat closed at USD8.76 1/4, down 15 3/4 cents. The USDA's wheat numbers were the most bearish of the trilogy. World wheat ending stocks were pegged at 181.9 MMT vs 177.8 MMT last month and the 177.77 MMT expected by the trade. US ending stocks were also increased, contrary to expectations of a small decrease. Weekly export sales were also under pre-report estimates.
EU Wheat: We're Running Out, Of Buyers Not Stock
10/03/11 -- EU wheat took another pasting today with Mar London wheat ending down GBP4.25 to GBP184.85/tonne and new crop Nov down GBP1.45 at GBP154.50/tonne. Expiring Mar Paris wheat fell EUR4.25 to EUR234.00/tonne, with Nov down EUR2.50 to EUR206.00/tonne.
That might sound bad, but it could have been much worse. May London wheat was down GBP7.75 at one stage and May Paris wheat was EUR12 lower after the USDA upset the apple cart with a few wheat-related surprises mid-afternoon.
They raised Australian and Argentine wheat production for the current season by 1 MMT each, and also upped US and world ending stocks for 2010/11 when the trade had been expecting a modest reduction in each.
"Exporter stocks remain relatively high and are boosted almost 4 MMT this month. In fact, they are estimated to be 55 percent higher than during the price crisis of 2007/08," they said.
The magic number for world wheat ending stocks was just shy of 182 MMT, now only 15 MMT below what everybody was calling the "burdensome" levels of 2009/10, and there have only been two other years in the past twenty when stocks have been higher.
A front month on London wheat hasn't been lower than this since the first day of December, and for Paris wheat it's the 7th December. Spec longholders have suddenly got a severe dose of the jitters.
News that China has just posted its biggest trade deficit in seven years and slumping crude oil, metals and other outside markets did nothing to settle the nerves.
To add insult to injury US weekly export sales were disappointing, and then as Europe was closing, we hear that Brussels only issued soft wheat export licences for a disappointing 249,000 MT for the week ending 8th March.
USDA Scores On The Doors
10/03/11 -- Here's the all important numbers guys and gals:
WHEAT
World wheat ending stocks pegged at 181.9 MMT vs 177.8 MMT last month and the 177.77 MMT expected by the trade. They upped the Australian crop by 1 MMT to 26 MMT, and did likewise for Argentina to 15 MMT. EU-27 output trimmed slightly to 136.1 MMT from 136.5 MMT in Feb. US wheat ending stock pegged at 843 million bushels vs 818 last month and trade expectations of 810 million. Pretty bearish all round.
CORN
The Brazilian crop upped 2 MMT to 53 MMT and the Mexican crop reduced 2 MMT to 22 MMT. Argentina left unchanged at 22 MMT. World ending stocks increased to 123.1 MMT from 122.5 MMT and the 121.6 MMT expected. US ending stocks seen at 675 million bushels, unchanged from last month and a bit above the 665 million anticipated. Neutral to slightly bearish.
BEANS
Brazil's crop upped 1.5 MMT to 70.0 MMT, Argentina left unchanged at 49.5 MMT. China's crop also increased by 800,000 MT to 15.2 MMT. World ending stocks 58.33 MMT, up a tad from last month but below the 59.2 MMT expected. US ending stocks left unchanged at 140 million bushels. Neutral to slightly bearish.
EXPORT SALES
Wheat sales of 575,700 MT for 2010/11 and 81,500 MT for delivery in 2011/2012 were on the low side of expectations for combined sales of 700 TMT-1 MMT. Corn sales of 477,200 MT old crop and 298,800 MT were in line with expectations of 700 TMT-1 MMT. Bean sales were 412,100 MT old crop and 57,900 MT new crop - in line compared with estimates of 350-500 TMT.
Wheat looks like the poor relation this afternoon with early calls of 10-15c down, corn is called 5-7c lower and beans 8-10c easier.
UK Rapeseed Area Up 11.5 Percent
10/03/11 -- Defra say that UK growers planted just under 700,000 hectares of winter rapeseed for the 2011 harvest, an increase of 72,000 ha or 11.5% on the previous year.
That's a record area which would produce a record crop of close to 2.5 MMT if we were to match last year's yields.
Almost half of that increased area looks like it's come from winter barley where plantings are down 7.5% to 310,000 ha. Winter oats area is seen down 17% to 78,000 ha.
Winter wheat plantings are seen virtually unchanged, despite soaring prices, at 1.937 million hectares.
China Posts Largest Trade Deficit For Seven Years
10/03/11 -- News this morning that China posted it's largest trade deficit in seven years as February exports slowed seems to have got the market thinking today.
Whilst February exports only grew by 2.4% year-on-year, imports were up by 19.4% leading to a trade deficit of USD7.3 billion.
Lots Happening Today
10/03/11 -- We've got the USDA's US stocks and world supply & demand numbers out at 13.30 GMT and the Bank of England's announcement on interest rates before that at 12.00 noon. In addition to that excitement we've got the USDA's weekly export sales also at 13.30 GMT and Mar Paris milling wheat also goes off the board today too.
The USDA WASDE numbers aren't really expected to throw up any big surprises, although you can never really tell with them. Most eyes will be on Brazil's soybean output, which was pegged at 68.5 MMT last month although private estimates elsewhere are now in the 70-72 MMT region. They dropped Argy bean production 1 MMT to 49.5 MMT last month. It's not beyond the realms of possibility that they may trim that again a little more this month. Indeed a decent punt might be for them to add a million or half a million to Brazil and reduce Argentina by exactly the same amount.
The USDA... think of a number, don't tell me, right double it, now halve it, now add on your birth year, now subtract you birth year, now multiply by 3.14, go on you're nearly there, now divide by 3.14 and what have you got? The number you first started with? Amazing, it works every time. Nah, I can't tell you how I did it or I'd have to kill you.
For US 2010/11 ending stocks the trade forecasts corn at 665 million versus 675 million last month. For beans it's 142m against 140m last time and for wheat 810m vs 818m previously.
World soybean ending stocks are forecast to rise from 58.21 MMT in Feb to 59.186 MMT this time round, with corn and wheat both showing modest declines. In the case of corn from 122.51 MMT to 121.628 MMT and for wheat from 177.77 MMT to 177.569 MMT.
After three days of solid declines it's a little surprising to see beans down fairly sharply again this morning - currently trading around 12c lower on the overnight Globex market. Corn is also down 2-4c with wheat showing mostly fractional gains.
The weekly export sales could be interesting with the trade expecting some fairly solid numbers with corn pegged at 700 TMT-1 MMT, wheat in a similar range and beans coming in at 350-500 TMT.
We've seen some significant losses so far this week with Mar beans down more than 75c from last Friday's close (including this mornings action), Mar corn down 29 1/4c and Mar CBOT wheat posting 68 14/c declines. Yet there hasn't been any hugely significant shift in the balance of the fundamentals.
What maybe has changed is the funds' previously unshakable confidence. I think that the sudden and violent shake-out that we saw a fortnight or so ago has led to a reassessment of the infallibility of just being blindly long. It has probably also meant that stop-losses are being fixed much closer to current market levels, leaving the market more vulnerable to computer-driven selling if and when these orders get automatically triggered.
Meanwhile the BoE's MPC aren't expected to increase interest rates today, although the minutes will make interesting reading when they come out later this month. May or June seems to be most peoples ideas on when we may start to see rates start to move up, which could be the start of some sterling appreciation in the second half of 2011.
Beans Lead Chicago Lower
09/03/11 -- Soybeans: Mar 11 soybeans closed at USD13.44, down 31 1/2 cents; Mar 11 soybean meal closed at USD348.50, down USD6.90; Mar 11 soybean oil closed at 56.67, down 130 points. The USDA will release their monthly world supply demand figures tomorrow, and will probably raise soybean production numbers in South America. Further selling ahead of this report was evident again today. Mar beans have now fallen by 64 cents this week alone, with Mar meal down USD15.30 and oil by 229 points. Outside markets offered little support with crude oil and metals also falling.
Corn: Mar 11 corn closed at USD6.95, down 3 3/4 cents; Dec 11 corn closed at USD6.10 1/4, up 1/4 cent. Mar corn closed below USD7/bushel for the second day running for a 26 1/4 cent loss on the week so far even though tomorrow's USDA report isn't expected to contain much in the way of bearish news for corn. Once that is out of the way the trade will start to concentrate on the month-end planting intentions numbers. These are expected to show a significant increase in US corn plantings this spring based on current price levels.
Wheat: Mar 11 CBOT wheat closed at USD7.32 1/4, down 19 cents; Mar 11 KCBT wheat ended at USD8.53 1/2, down 11 cents; Mar 11 MGEX wheat finished at USD8.92, down 20 cents. Mar CBOT wheat is down 68 1/4 cents on the week so far. India says that it's Mar 1st wheat stocks were a more than ample 17.2 MMT, and they are expected to add around 82-83 MMT more to that when the impending harvest is concluded. China says that it is done buying Australian wheat for now. After beneficial recent precipitation the North China Plain is seen reverting back to a drier pattern.
EU Wheat Down Again
09/03/11 -- It was another one of those days. EU wheat was higher for much of the session, but a weak opening by Chicago and everything soon sold off. Traders' confidence has taken a real battering over the past month or so where we've seen Mar London wheat decline by GBP21.15/tonne and Mar Paris wheat by EUR40.25/tonne since Feb 9th.
EU wheat futures ended the day with Mar London wheat down GBP2.25 at GBP189.10/tonne, and new crop Nov falling GBP1.55 to GBP155.95/tonne. Paris wheat closed with Mar down EUR5.00 to EUR238.25/tonne and Nov EUR3.25 easier to EUR208.50/tonne.
This was Paris wheat's lowest close for a front month since 17th December and London wheat's lowest since 9th December.
As far as UK feed wheat is concerned, it has priced itself well and truly out of the market. Feed manufacturers report business to be generally sluggish at best, as livestock farmers liquidate numbers and hold off buying expensively priced finished feed.
So feed demand is slack, and at close to GBP200/tonne for feed wheat on a delivered basis, wheat is still one of the most expensive raw materials within the ration.
Open interest in May Paris wheat is still fairly hefty at the equivalent of 3.7 MMT, that may see the May/Nov spread continue to narrow.
FranceAgriMer increased their estimate for last season's soft wheat crop there by 200,000 MT to 37 MMT today.
Rain has arrived for parched winter wheat on the US Plains, although amounts are said to be "disappointing" in many parts. Further north spring wheat areas are cold and wet, with the problem extending across the border into Canada, where prairie temperatures are 10-15 F below normal, according to Martell Crop Projections.
Early Call On Chicago
09/03/11 -- The overnight grains were mixed with wheat recovering some of the past couple of days steep declines up generally 7-9c. Corn was 3-4c firmer and beans flat to 5c lower.
Crude is up again on reports of an oil storage facility in Libya being hit in an aerial bombardment by pro-Gaddafi forces.
"Kansas wheat received valuable precipitation in recent days, but there is a long way to go to restore field restore for spring growth and development. Oklahoma and Texas were largely bypassed by the storm," say Martell Crop Projections.
"Hard red winter wheat has received only 1.58 inches of precipitation since December 1, compared to 3.1 inches normally," they add.
China sold 1.4 MMT at this week's wheat auction, a notably larger volume than in recent sales.
India says that it has over 17 MMT of wheat reserves, far more than government set minimums and there's an anticipated 82 MMT crop on the way imminently.
France have upped the size of it's 2010 soft wheat crop from 36.8 MMT to 37 MMT.
Book squaring ahead of tomorrow's USDA report looks likely to be today's theme.
Early calls for this afternoon's CBOT session: Corn, up 3-5c, Beans up 1-2c, Wheat up 5-7c.
CBOT Traders Book Profits Ahead Of USDA Report
08/03/11 -- Soybeans: Mar 11 Soybeans closed at USD13.75 1/2, down 12 1/4 cents; Mar 11 soybean meal closed at USD355.40, down USD2.70; Mar 11 soybean oil closed at 57.97, down 60 points. Profit-taking and position squaring ahead of Thursday's WASDE report from the USDA was the name of the game today. Rains continue to delay the Brazilian harvest, although traders are pretty unanimous that this season's production will be record large.
Corn: Mar 11 corn closed at USD6.98 3/4, down 12 cents; Dec 11 corn closed at USD6.10, down 1/2 cent. South Korea were in the market today for corn along with Mexico, whilst Taiwan are tendering tomorrow for up to 60,000 MT. As with beans book squaring and banking of profits ahead of Thursday was a feature, sending old crop lower for the third session in a row.
Wheat: Mar 11 CBOT wheat closed at USD7.51 1/4, down 17 3/4 cents; Mar 11 KCBT wheat closed at USD8.64 1/2, down 23 1/2 cents; Mar 11 MGEX wheat closed at USD9.12, down 28 1/2 cents. It was wheat's second heavy fall in a row on the back of a wetter outlook for the US Plains. The USDA isn't expected to make major adjustments to supply or demand numbers for wheat on Thursday.
EU Wheat Falls Sharply
08/03/11 -- EU wheat closed sharply lower with Mar London wheat down GBP4.00 to GBP191.35/tonne and new crop Nov GBP3.75 weaker at GBP157.30/tonne. Mar Paris wheat fell EUR5.25 to EUR243.25/tonne, with Nov down EUR0.25 to EUR211.75/tonne.
Paris corn, rapeseed and malting barley also fell significantly - the latter losing EUR8.50 on old crop and EUR4 on nw crop months.
US wheat has been under pressure so far this week on an improved weather situation on the Plains. Crude oil is also off recent highs on talk that Gaddafi may be willing to step down as Libyan leader.
Mar London wheat has now fallen GBP18.90 from it's all time highs in less than a month, with Mar Paris wheat down by EUR35.25 in the same timeframe.
Spec longs seem to now be questioning the infallibility of wheat's rally and the notion that GBP200/tonne wheat is the the new normal.
Gaddafi To Throw The Towel In?
08/03/11 -- Al Jazeera are reporting today that the cross dressing Libyan dictator has offered to throw the towel in, if they can get it off his head that is.
One of his representatives apparently approached the rebel National Libyan Council to negotiate the terms of Gaddafi's exit but the offer was rejected outright, they say.
Immunity from prosecution was top of his want list, along with a “golden parachute” payment, a Nintendo Wii, some Levi 501's, a new pair of Ray Bans and a complete set of steak knives in a presentation box. The cheeky bastard.
What Happened To Turnaround Tuesday?
08/03/11 -- There's no sign of it so far. Last night's Chicago market closed sharply lower and those losses have been extended in overnight trade with beans now showing 10/14c easier for a combined decline of 30/40c. Corn is showing combined losses of around 14/15c and wheat in the region of 25/35c lower.
So what's happened to change things? I think that maybe the shake-out that we saw a fortnight ago at least partially shattered spec longs air of total invincibility. Up until then they were convinced to a man that downside risk was negligible and the only way was up. Forever.
Even the freshest-faced fund manager will be able to recall that prices have only been at these levels once before in history. They will also be able to remember what happened then, when the circus pulled out of town.
Just when you're suffering a little crisis of confidence the Food and Agriculture Policy Research Institute (Fapri) rock the boat by predicting that the hot potato that is the US blender's tax credit won't get renewed at the end of the year. As we all probably by now know, the ethanol industry in the US currently gobbles up 35-40% of all US corn production. For the full story on this issue see Agrimony.com.
Should that happen, and it seems more probable than previously given the current House/Senate split, then the corn demand goalposts won't have so much been moved as chopped down and burnt.
Reports on Reuters this morning that Gaddafi may be looking for a way of stepping down as Libyan leader, even though he said last week that he had no position to step down from, has taken the wind out of crude oil's sails too.
Based on what was on the BBC last night his position seems stronger now than it was a week ago, so I wouldn't go counting too many chickens on that front just yet. Even so the uncertainty may be enough to encourage more money to be taken off the tables.
Nymex crude is down a dollar and a half this morning, with Brent around a dollar weaker.
Chicago Ends Sharply Lower
07/03/11 -- Soybeans: Mar 11 soybeans closed at USD13.87 3/4, down 20 cents; Mar 11 soybean Meal closed at USD358.10, down USD5.70; Mar 11 soybean oil closed at 58.57, down 39 points. Rising crude oil prices, and the implications for global economic growth are taking money out of grains. An improved outlook for soybean production prospects in South America, reports that the strike in the major Argentine port of Rosario may be over and poor export inspections at only 26.379 million bushels from over 49 million last week added to the negative tone.
Corn: Mar 11 corn closed at USD7.10 3/4, down 10 1/2 cents; Dec 11 corn closed at USD6.10 1/2, up 1 cent. Higher crude oil dented corn's hopes today, as too did a report from the University of Missouri Food and Agricultural Policy Research Institute (FAPRI) forecasting a sharp slide in ethanol production, and a resultant large increase in ending 2011/12 stocks. The report was based on the assumption that tax credits on bioethanol production will not be extended at the end of the current calendar year.
Wheat: Mar 11 CBOT wheat closed at USD7.69 1/2, down 31 1/2 cents; Mar 11 KCBT wheat ended at USD8.88, down 30 cents; Mar 11 MGEX wheat finished at USD9.40 1/2, down 12 1/2 cents. Iraq bought mostly US wheat over the weekend, but a widespread sell-off in grains in general contributed to wheat's demise. An improved weather outlook for the Plains also dragged wheat lower. FAPRI forecast US harvested acres at 2.1 million more than the USDA currently predict, with a corresponding increase in production.
EU Wheat Declines
07/03/11 -- EU wheat closed lower with Mar London wheat down GBP1.20 to GBP195.35/tonne and new crop Nov GBP1.75 easier at GBP161.25/tonne. Mar Paris wheat fell EUR4.50 to EUR248.50/tonne, with Nov down EUR5.00 lower at EUR212.00/tonne.
EU wheat was modestly higher for much of the day, but fell away later in the session as Chicago futures quickly moved sharply lower shortly after the opening.
A strong euro was also a negative factor for French wheat prices relative to those in the UK. Rising crude oil prices as tensions escalate even further in the Middle East seems to be drawing money out of grains too, unlike the trend witnessed back in 2008.
A wetter outlook for dry Kansas was one of the reasons behind Chicago's demise with snowfalls of up to 10 inches on the cards for tonight/tomorrow, followed by rapid snow melt as temperatures push into the 60's and 70's by the end of the week, according to QT Weather.
In Europe, a lasting winter drought is still a big worry, with France, Slovakia, Hungary and the Balkans having had less than half of normal precipitation in the past 65 days. Germany and Poland are also now trending dry although the United Kingdom and Spain have been wetter, with increased soil moisture beneficial for winter crop development, say Martell Crop Projections.
Elsewhere in the Russia Volga and Black Earth regions winter wheat got more snow on Sunday. Temperatures here have moderated after a very cold February. More precipitation is needed in Russia Black Sea wheat, with temperatures now warming up to 40s-50s F, they add.
Early Call On Chicago
07/03/11 -- The overnight grains closed mixed with nearby months on beans flat to 3c higher, corn up 2-4c and wheat flat to a cent higher.
Crude is up again as the Libyan situation shows no sign of getting resolved. Brent is currently up USD1.60/barrel and NYMEX up USD2.40/barrel.
Dollar weakness may also lend some support to the grains today.
Kansas winter wheat areas look set to get some moisture at long last where "a developing storm will produce some badly needed precipitation. A wave of showers is moving through the state this morning. This will be following by heavy snow a 70-80% chance in the central-northern areas. The GFS model expects .75 inch of moisture in most of Kansas easing severe drought in the top US wheat state," say Martell Crop Projections.
Spring wheat areas in the Northern US Plains and Western Canada remain cold and wet however, they warn.
Iraq bought 400,000 MT of mostly US wheat over the weekend and Mexico booked 150,000 MT of corn.
China says that it has far more wheat than the rest of the world thought - 100 MMT of the stuff no less - the markets reaction to that at the moment largely seems to be "yeah right, who told you that again - Elvis or Sitting Bull?"
Looks like we may be in for a quiet couple of days ahead of Thursday's USDA figures.
Early calls for this afternoon's CBOT session: beans up 2-3c, corn up 2-4c, wheat up 1-3c.
Diamond Geezer
07/03/11 -- Barclays new head honcho Bob Diamond picked up a cool GBP6.5 million bonus in 2010 - equivalent to 26 times his annual salary - according to a report on the BBC. He's only been in the job for five minutes hasn't he? Not a bad return for facing a three hour grilling from the Treasury select committee back in January. GBP2.25 million an hour (including his salary) for fending off a bit of flak. Nice work if you can get it.
The "period of remorse needs to be over," he said back then. It looks like it certainly is in the Diamond household. Looks like Mrs D might get those new shoes she's had her eye on after all too.
The Morning Muse
07/03/11 -- There's nothing too exciting around to whet the old appetite on the overnight markets so far. Globex wheat and beans are a bit lower and corn a little higher. The dollar remains weak, with the pound pushing above 1.63 again. The euro is steady, where we begin the week where we ended the last at around 1.1640.
Crude is higher again, with Brent up a dollar or so and NYMEX up over a dollar and a half.
A leading Chinese grain official has stunned the market by saying that the country has 100 MMT of wheat reserves. That's two thirds more than the USDA's 60 MMT estimate and almost a year's worth of consumption.
He is Chinese and an economist, so it may be that it's the truth that he's being economical with of course.
If he's right that potentially pegs world ending stocks this season at a bumper 217 MMT, 20 MMT MORE than the "burdensome" year of 2009/10 when ex-farm prices in the UK slumped below GBP90/tonne!
Another leading Chinese official says that the current high price of corn will limit the country's corn imports this year.
Iraq bought 400,000 MT of US/Australian wheat split 300,000 MT US and 100,000 MT Ozzie over the weekend.
The plight of the British pig industry sprung to mind again over the weekend during a trip to Morrisons where they were practically giving away just about every cut of British pork. Large boned and rolled shoulder joints for a fiver and packs of ten or so ribs and/or four decent sized chops for two quid. Astonishing and depressing in equal measure.
