Ask Nogger
16/04/11 -- Today's problem comes from Pete of Stamford, he writes:
Q: Dear Nogger, I'm 42 and straight as a die but I've never come close to getting married, I long to be like all the other lads like you, what can I do?
A: Matrimony is one of my many specialist subjects Pete, so you've certainly come to the right shop with this one. There's a few little things you can do to get yourself "in the zone" as it were. Try switching the FA Cup Final over to Corrie just as the game enters extra-time, or hang around outside the changing rooms in Monsoon looking at your watch and shifting uncomfortably from foot to foot for a couple of hours. Drag yourself all round the shops aimlessly every Saturday before throwing fifty pound notes down the grid. Stretch yourself to the limit by buying a lovely big house, give it to somebody you don't like and then put all you clothes in bin bags outside in the rain. Next...
Chicago Close
15/04/11 -- Soybeans: May 11 soybeans closed at USD13.31 3/4, up 3/4 cent; Nov 11 soybeans closed at USD13.39 3/4, down 5 1/2 cents; May 11 soybean meal closed at USD345.20, up USD2.70; May 11 soybean oil closed at 56.84, down 3 points. May beans were down 60 1/2 cents on the week, with new crop Nov falling 56 1/4c. The USDA confirmed the sale of 165,000 MT of new crop US soybeans to China today. As buying interest switches to South America though, generally US sales are flagging, with only one of the last five weeks seeing sales in excess of 150,000 MT.
Corn: May 11 corn closed at USD7.42, down 12 1/4 cents; Dec 11 corn closed at USD6.56, up 1/2 cent. May lost 26c on the week whilst new crop Dec gained 3c. A violent storm is bringing unwanted snow to the Northern Plains before moving east, which will inevitably delay spring plantings there, supporting new crop months. The USD7.44 level was seen as a pivotal support point for May corn, a close below there could signal a major downwards correction, according to the chartists out there. As you can see corn did indeed close below that level, so next week's action could be interesting.
Wheat: May 11 CBOT wheat closed at USD7.44 1/4, up 3 3/4 cents; May 11 KCBT wheat closed at USD8.65 1/2, up 1 1/2 cents; May 11 MGEX wheat closed at USD8.89, down 3/4 cent. CBOT wheat fell 53c on the week, with Kansas wheat down 67 1/4c and Minneapolis declining 64 1/4c. The forecast rains may improved conditions for HRW wheat in Kansas/Oklahoma, but may hinder spring wheat plantings further north. CBOT wheat manged to close the week only a marginal 2 1/4c higher than corn. Two months ago that differential was more than 170c!
EU Grains Close
15/04/11 -- May London wheat closed GBP0.75/tonne lower at GBP207.00/tonne with new crop Nov down GBP1.00 to GBP164.50/tonne. May Paris wheat was up EUR0.50/tonne at EUR238.25/tonne whilst Nov was down EUR0.25/tonne to EUR208.00/tonne.
London wheat was under pressure from a combination of factors including a firmer pound and ideas that old crop is overpriced relative to French wheat, May's close at GBP207.00/tonne is the equivalent of around EUR234.00/tonne, little more than four euros underneath where the better quality Paris contract closed.
Front month May in London is clearly getting technical in a relatively illiquid market, running at a GBP3.00/tonne front-end premium to July.
The Nov London/Paris differential is around a more ample EUR22.00/tonne.
Brussels issued 198,000 MT of soft wheat export licences this past week, bringing the year to dat total to 15.9 MMT, 13% up on year ago levels. That's the lowest weekly figure in the last nine weeks.
In the UK the weather is seen turning a little cooler and wetter, although with these weather fronts moving in from the west how much rain manages to make it's way into eastern counties is questionable.
There's some rain relief ahead for HRW wheat areas in Kansas, improving crop prospects there. The crop maybe isn't looking quite as bad as you might imagine judging on these pictures posted on Twitter yesterday: Hutchison, Kansas and Pratt, Kansas.
Ukraine are gearing up to double their grain exports in 2011/12, according to local analytical firm UkrAgroConsult, and there is a growing feeling that Russia may not be absent from the export arena for as long as had originally been thought.
Meanwhile, wheat production in Kazakhstan is forecast by FAO at around 16 MMT this year, 60% above the 2010 level of 10 MMT.
On the week as a whole May London wheat managed to finish slightly higher, up GBP0.25/tonne whereas Nov fell GBP5.00/tonne. May Paris wheat fell EUR9.00/tonne and Nov lost EUR7.00/tonne.
Ukraine 2011/12 Grain Exports To Double
15/04/11 -- There's a long way to go before the harvest is in, but UkrAgroConsult are already predicting Ukraine to export 22-23 MMT of grain in 2011/12, double the 11 MMT that they are expected to export in the current MY.
It doesn't matter if it doesn't rain between now and harvest, these lads are salivating so much at the prospect of getting some foreign wonga in that they're self-irrigating the crops themselves.
As reported earlier in the week Kazakhstan are eyeing up a "return to normal service" this year. All we need now is for Russia to get their finger out and we'll have Primark, Matalan and TK Maxx all fully restocked and ready to throw the great summer sale doors open come harvest time, and the rest of the High Street can go hang.
Early Call On Chicago
15/04/11 -- The overnight grains closed mostly lower with wheat down around 2-4c and corn & beans both 5-7c easier. Crude oil is also lower. Goldman Sachs issued another "it's time to reduce your commodity longs" rallying call, the second in a week.
"The morning satellite image shows a violent storm in the United States midsection. Snow is developing in North Dakota. Northwest Kansas has a blizzard warning for 3-7 inches of snow today. Kansas has another chance for rain next week in a new developing storm," say Martell Crop Projections.
That should be beneficial for HRW wheat, although not so kind for early plantings of spring wheat and corn further north and also across the border into Canada.
Inflation in China is now running at 5.4% prompting fears of waning demand for commodities in general. That said, they've just been confirmed as buying 165,000 MT of new crop US soybeans this afternoon.
Bean production in South America keeps creeping higher. The Buenos Aires Grain Exchange upped their estimate for Argentine soybean output from 48.8 MMT to 49.2 MMT yesterday. They also increased their corn production estimate by 0.5 MMT to 20 MMT.
Including the overnight price action we now see May beans down 67 1/4c, May corn down 21 1/2c and May CBOT wheat down 61c on the week so far.
Early calls for this afternoon's CBOT session: corn and beans seen 5-7c lower with wheat down 2-4c.
EU Rapemeal Prices
15/04/11 -- Latest guide prices for EU rapemeal.
Basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:
| Apr11 | 180.00 | -2.00 |
| May11 | 180.00 | -2.00 |
| May/FH Jul11 | 182.00 | unch |
| Aug/Oct11 | 172.00 | -2.00 |
| Nov11/Jan12 | 176.00 | -2.00 |
| Feb/Apr12 | 178.00 | -2.00 |
Interesting
15/04/11 -- A report on the official Itar-Tass website quotes First Vice Prime Minister Viktor Zubkov as saying that sales of grain out of the government-owned intervention fund has stopped due to lack of demand.
"The decision was made that the minimum price per tonne would be 6,000 roubles...but the price reached 6,000 roubles and continued to go further down. And there are no bids now," he is quoted as saying.
Six thousand roubles is around GBP130/tonne. Other reports I have read suggest that internal wheat prices are closer to 4,000 roubles/tonne (around GBP87/tonne) as farmers and merchants are unable to take advantage of world prices at much higher levels.
They have sent an open letter to the President imploring him to remove the existing sales embargo, throwing in a little arm-twisting "without that extra revenue we won't be able to afford to buy the seed to plant anything for the 2012 harvest."
Hmmmm, maybe the export ban will be lifted a bit sooner than expected?
Chicago Close
14/04/11 -- Soybeans: May 11 soybeans closed at USD13.31, down 2 1/2 cents; Nov 11 soybeans closed at USD13.45 1/4, down 6 1/4 cents; May 11 soybean meal closed at USD342.50, up USD0.30; May 11 soybean oil closed at 56.87, down 49 points. Weekly export sales were poor at 130,200 MT against hopes for sales of 200-400 TMT. The March NOPA crush came in more than a million higher than trade estimates at 134.39 million bushels. The threat of Chinese cancellations and increased production from South America is weighing on the market.
Corn: May 11 corn closed at USD7.54 1/4, down 1 1/4 cents; Dec 11 corn closed at USD6.55 1/2, up 10 1/2 cents. Corn sales of 848,000 MT old crop and 253,500 MT of new crop were robust again, making a combined 1.1 MMT against expectations of 550-950 TMT. Current weather forecasts aren't conducive for early corn plantings. "The Midwest would receive 3-4 inches of rain in the next 7 days if the GFS model verifies. The hardest hit areas would be Nebraska, Illinois, Indiana, Missouri and Michigan and almost 40% of the Corn Belt," say Martell Crop Projections.
Wheat: May 11 CBOT wheat closed at USD7.40 1/2, down 12 1/4 cents; May 11 KCBT wheat closed at USD8.64, down 21 cents; May 11 MGEX wheat closed at USD8.89 3/4, down 14 1/4 cents. Weekly USDA wheat export sales were in line with trade ideas at 443,600 MT old crop and 102,000 MT new crop. "Kansas, the leading US wheat state is expecting 1.5 - 3 inches of rain in the northern areas over the next few days, ending drought with a flourish. Wheat certainly would benefit, but a miraculous recovery should not be expected," say Martell Crop Projections.
EU Grains Closing Comments
14/04/11 -- EU grains closed mostly lower with May London wheat down GBP2.25/tonne to GBP207.75/tonne and with new crop Nov falling GBP1.40 to GBP165.50/tonne. May Paris wheat declined EUR2.50/tonne to EUR237.75 and Nov was EUR0.75/tonne lower to EUR208.25/tonne.
Stratégie Grains forecast grain production in the EU-27 in 2011 at 289.8 MMT, up 6% on last year's 273.6 MMT. Wheat production will account for 143.6 MMT of that, also up 6% from 135.1 MMT in 2010.
UK wheat output will amount to 16.1 MMT, and increase of 8% on last season's 14.9 MMT. German production will total 25.8 MMT (up 11%) and French output will be 37.5 MMT (up 5%), they say.
EU barley production will rise 3% to 54.5 MMT, with UK output up 4% to 5.4 MMT, they add.
At one stage today UK feed wheat was trading at a premium to French milling wheat. Using an exchange rate of 1.1280 at the close, London wheat is still only marginally cheaper than superior quality French wheat.
FranceAgriMer say that the country will export a record 12.75 MMT of wheat to non-EU destinations in 2010/11. Ending stocks for the current season will finish at 2.3 MMT, they add.
The US agricultural attaché projects the rapeseed crop in the EU-27 at 20.8 MMT, up 2.5% on last year. Even so that still falls significantly short of domestic consumption projected at 23 MMT, necessitating an increase in imports for the coming season.
Early Call On Chicago
14/04/11 -- The overnight grains closed lower with wheat down 14-16c, corn around 8c easier and soybeans down 11-13c. Crude is around a dollar lower whilst the USD is showing little change.
The USDA's weekly export sales report was bullish corn, bearish beans and neutral wheat.
Beans are staring to look like the poor relation, with export sales sluggish, production increases coming out of Brazil and demand from China not quite as insatiable as it has been.
The Chinese government are set to auction off 3 MMT of state-owned soybean reserves at knock-down prices. Crush margins are poor and processors there are said to be running at well below capacity as analysts reduce their projected soybean import estimates for the world's largest buyer a little.
China are said to have cancelled some cargoes of beans and be actively looking to reschedule others.
On a domestic front in the US, the March NOPA crush came in more than a million higher than trade estimates at 134.39 million bushels.
Higher than anticipated yields see the Paraguay agriculture ministry forecasting the nation's 2011 soybean crop now at a record 8.4 MMT, 1 MMT up on last year.
Snow and cold temperatures across the northern US Plains may bring some beneficial moisture as far south as northern Kansas, say QT Weather. That may help HRW wheat a little, but it will also further delay spring wheat and corn planting further north.
Stratégie Grains forecast grain production in the EU-27 in 2011 at 289.8 MMT, up 6% on last year's 273.6 MMT. Wheat production will account for 143.6 MMT of that, also up 6% from 135.1 MMT in 2010.
Early calls for this afternoon's CBOT session: corn down 5-7c, wheat down 12-14c, beans down 12-14c.
USDA Export Sales
14/04/11 -- The USDA have reported the following weekly export sales for the week ended Apr 7th 2011:
Corn sales of 848,000 MT old crop and 253,500 MT of new crop were robust again making a combined 1.1 MMT against expectations of 550-950 TMT. There were no sales to China although the new crop sales went to "unknown".
Wheat sales were 443,600 MT old crop and 102,000 MT new crop for a combined total of 545,500 MT, in line with expectations for sales of 300-750 TMT.
Soybean sales were disappointing at 130,200 MT against hopes for sales of 200-400 TMT. China did take some, although there were also cancellations to "unknown" largely offsetting these.
EU Rapemeal Prices
14/04/11 -- Here's the latest guide prices for EU rapemeal, basis FOB Lower Rhine in euros/metric tonne, with change from previous day:
| Apr11 | 182.00 | -2.00 |
| May11 | 182.00 | -3.00 |
| May/FH Jul11 | 182.00 | -3.00 |
| Aug/Oct11 | 174.00 | -1.00 |
| Nov11/Jan12 | 178.00 | -3.00 |
| Feb/Apr12 | 180.00 | -3.00 |
Newsflash Live From The Floor
14/04/11 -- With May London wheat currently residing GBP0.50/tonne higher at GBP210.50/tonne (equivalent of EUR238.50) and May Paris wheat EUR5.00/tonne lower at EUR235.25/tonne, we have a crazy situation where London feed wheat is now dearer than Paris milling wheat!
With Nov London wheat currently down GBP2.90/tonne to GBP164.00/tonne we now have a May/Nov spread of GBP46.50/tonne. That's widened considerably from exactly a month ago today when that differential was "only" GBP31.00/tonne.
Romania Update
14/04/11 -- Here's a bit of interesting trivia for you, they plant more corn in Romania than any other European country. In fact this season they expect to plant more than 50% as much again as they will in France. It's a pity for them then that yields there aren't much more than a third of what they get in France, otherwise they'd have so much of the blinking stuff that they'd be thinking that they'd died and gone to corn heaven.
This year they are expected to plant 2.5 million hectares of corn, far more than France's 1.6 million, meaning that they'll account for a whopping 29% of the entire US corn area.
In contrary to western Europe, the weather in Romania has been quite different of late. Our man on the ground over there reports "wet and cold for the last 5 days. Around 25mm of rain in the last few days, temps at 11c whilst the UK etc are frying. Crops look OK, winter kill on ours very low at less than 2% and even then only a case of watching carefully as opposed to ploughing it up."
"Progress on seeding in the north is nonexistent but normal seeding starting date for sunflower in this area would be 15/4 so no dramas yet. Seeding in the south is moving albeit slowly."
Informa See Record US Corn Crop In 2011
14/04/11 -- Informa Economics are forecasting a record 13.9 billion bushel (353 MMT) US corn crop this year, an increase of 11.7% on 2010, as US farmers look to cash in on record high prices.
That would see 2011/12 ending stocks increase from a very tight 575 million bushels (15.6 MMT) this season - note: 100 million lower than the USDA's widely dismissed estimate released last week - to 871 million (22.1 MMT).
Soybean output in 2011 will fall slightly from 3.33 billion bushels (90.6 MMT) to 3.30 billion (89.8 MMT), with 2011/12 ending stocks rising to 246 (6.7 MMT) million bushels from the USDA's 140 million (3.8 MMT) projected at the end of the current marketing year.
All wheat production in 2011 is estimated at 2.18 billion bushels (55.4 MMT) against 2.21 billion last year (60.1 MMT). Ending stocks for 2011/12 were pegged at 715 million bushels (19.5 MMT) against 839 million (22.8 MMT) in 2010/11.
Morning Machinations
14/04/11 -- The overnight grains are mostly lower this morning ahead of what could be an interesting set of weekly export sales from the USDA this afternoon.
The trade is looking for soybean sales of 200-400 TMT, corn sales of 550-950 TMT and wheat sales of 300-750 TMT. What everyone will be looking for is evidence of Chinese old crop soybean cancellations/deferrals. The other thing I'll be looking for is if there is any sign of price rationing kicking on for corn. Third, and finally, I don't suppose that China might feature anywhere as a corn or wheat buyer will they?
We shall know at 13.30 BST.
I'll predict lower soybean net sales than the trade is anticipating, possibly even negative sales, and another week of robust corn sales with wheat coming in on target.
Japan have bought nearly 148 TMT of US wheat in their regular weekly tender today, that won't feature in this week's sales reports though.
In other news FranceAgriMer say that the country will export a record 12.75 MMT of wheat to non-EU destinations in 2010/11, out of total exports of 19.36 MMT. That's an increase of 30% on wheat heading outside the 27-member bloc compared with 2009/10.
French soft wheat ending stocks will amount to almost 2.3 MMT at the end of the current marketing year, they said. That's actually up slightly on last month despite an increase in exports due to an upward tweak in 2010's final production numbers. Corn ending stocks will total 2.5 MMT.
Plantings for the coming harvest are seen at 5 million hectares, 1.6% higher than last year, they added.
Chicago Close
13/04/11 -- Soybeans: May soybeans rose 3 3/4c to USD13.33 1/2 a bushel, and November was up 7 1/4c to USD13.51 1/2. May soymeal finished down USD0.20 at USD342.20, May soyoil ended up 12 points at 57.36. China said that it will auction up to 3 MMT of state-owned soybeans at discounted prices to keep food price inflation under control. Tomorrow brings the March NOPA crush data and weekly export sales numbers from the USDA, the latter are estimated at 200-400 TMT. The reality could be on the low side, with continued talk of Chinese cancellations as crush margins there wane.
Corn: May corn closed up 3c at USD7.55 1/2 per bushel, Dec CBOT corn closed up 8 1/2c at USD6.45 1/2 per bushel. Crude oil rebounded from yesterday's steep losses, adding some support. It's very early in the season, but already the bulls are talking of planting delays in the Midwest, which maybe helped new crop gain a little on old crop today. Export sales estimates for tomorrow's weekly USDA report are seen at 550-950 TMT.
Wheat: CBOT May wheat ended down 6 3/4c at USD7.52 3/4 a bushel. KCBT May wheat ended down 9c at USD8.85 a bushel. May MGEX wheat ended down 7 3/4c at USD9.04 a bushel. May CBOT wheat closed 2 3/4 lower than May corn on the back of heavy rain forecast for Kansas later in the week. Estimates for the USDA weekly export sales report tomorrow are 300-750 TMT. Jordan is tendering for 100,000 MT of optional origin wheat.
EU Grains Close
13/04/11 -- May London wheat closed GBP1.50/tonne higher at GBP210.00/tonne with new crop Nov down GBP0.85 to GBP166.90/tonne. May Paris wheat was unchanged at EUR240.25/tonne whilst Nov was up EUR0.25/tonne to EUR208.75/tonne.
May London wheat closed within GBP0.25/tonne of the highest ever close for a front month. With July closing at GBP206.90/tonne we now have an unusual front-end premium of over GBP3.00/tonne. We also have a large GBP40.00/tonne differential between old crop July and new crop November.
We also have a state of play where May London feed wheat is less than EUR4.00/tonne cheaper than it's Parisian milling wheat counterpart.
Whilst London wheat continues to paddle it's own canoe, other UK feed raw materials are showing distinct signs of weakness, with Erith rapemeal today trading at less than GBP160.00/tonne. A significant saving for a by-product containing more than three times the protein content of wheat.
There's some trade talk around that Russia may be set to lift it's export embargo sooner than anticipated, possibly as early as June. That would delight local growers and merchants as the ban on foreign sales has depressed Russian wheat prices to levels far below those available externally on the international stage.
With 2011 grain plantings running behind schedule due to the late arrival of spring, it seems rather unlikely to me, but that is what is being bandied about.
Kazakhstan Latest
13/04/11 -- According to the FAO planting of the 2011 mainly wheat spring cereal crops is underway in the main growing areas of Akmola, Kostanai, North Kazakhstan, and Pavlodar.
Spring crops account for 95 percent annual wheat production. Official forecasts of the area planted to grains in 2011 have been revised downwards to 15.9 million hectares, which is some 5 percent lower the 2010 actual level of 16.7 million hectares, they say.
In spite of below average precipitation during the first quarter of 2011, soil moisture is reported to be adequate for planting operations, due to the high snowmelt. The minor winter cereal crops survived winter better than last year, when crops were badly damaged by frosts, they add.
Overall, and assuming a recovery in yields after last year’s drought-reduced level, the 2011 wheat production is forecast by FAO at around 16 MMT, significantly above the 2010 level of 10 MMT.
The Rozzers Are In At Vivergo
13/04/11 -- Rozzers, that's a blast from the past isn't it? I remember that some of the Starsky & Hutch influenced kids at school calling them the Feds. The filth was another one, and of course coming from Liverpool "the bizzies" as in they were always too busy to come round until long after whatever altercation they were being asked to attend had broken up. "There was dead bodies everywhere before the bizzies arrived, our kid, like. Will this be in tonight's Echo or tomorra's la, 'cos I don't wanna waste me giro money buying tonight's if it's not gonna be in it do I?"
Anyway, the bizzies weren't too busy to send sixty of their finest round to Vivergo yesterday to sort out protesters demonstrating outside, even though their dispute seems to be with the engineering company involved and not with Vivergo themselves. One union man however is quoted as saying that this is just a 48 hour suspension:
Unions suspend protest after police intervene
Europe Dry
13/04/11 -- This map, from the excellent Martell Crop Projections shows how dry things have been for almost all of Europe over the past two and a half months, with the exception of Spain and Italy.
There's precious little in the forecast for the UK or France over the next few days, although eastern Germany and Poland should see some showers today/tomorrow. Click the map to enlarge.
Morning Markets
13/04/11 -- The overnights are firmer, rebounding modestly from last night's steep losses. Wheat is currently up 4-5c, corn up 5-6c and beans 7-10c firmer. The gap between May CBOT wheat and corn is only 5 1/4c, with corn having traded at a premium to wheat at one point past night.
If it's feed wheat you want then Australia have it aplenty, the problem is that it's all in the east which is causing all sorts of logistical problems. See: Grain export slows
London wheat has opened with May unchanged, July up GBP1.50 and new crop Nov down GBP0.25. It's interesting to note that we now have a front-end premium on May over July and also that there's a hefty GBP40/tonne differential between old crop July and new crop Nov.
May Paris wheat has opened EUR0.75 higher at EUR241/tonne. May London wheat is trading at GBP208.50, which is equivalent to EUR234/tonne, only marginally cheaper than French milling wheat!*
Defra report that compound feed production in the UK totalled 6.6 MMT between July 2010 and Feb 2011, up 0.2 MMT or 3% on the same period a year previously. It's interesting to note that wheat inclusion was 1.85 MMT - representing 28% of the diet versus 29% in 2009/10.
Corn gluten feed inclusion rates jumped from 0.5% to 2%, although at 137,000 MT it was still quite a small volume. Rapeseed's share of the ration fell from 8% to 7% and soya's increased from 11% to 12%. No big mind-blowing changes there then despite prices being very much different to twelve months previously.
* Footnote: as at 10.45am May London feed wheat is still GBP208.50/tonne, ie EUR234/tonne, May Paris milling wheat is now down EUR1.50 to EUR238.75/tonne. If corn can trade at a premium to wheat in Chicago for the first time since 1996, could feed wheat in the UK actually trade at a premium to French milling wheat before long?!
Chicago Close
12/04/11 -- Soybeans: May soybeans ended 38 3/4c lower at USD13.29 3/4; May soymeal fell USD7.360 to USD342.40; May soyoil settled 158 points lower at 57.24. A broad-based commodity sell-off was the order of the day after influential player Goldman Sachs advised clients to book profits in the raw material markets. Japan's ongoing nuclear crisis, a sharply lower crude oil market and increased soybean production estimates from Brazil added to the negative tone. China is being very vocal in citing current soybean prices as being detrimental to crush margins, you wouldn't expect them to say anything less I suppose. However there is evidence that they have cut back their buying quite sharply of late.
Corn: May corn fell 23 1/2c to USD7.52 1/2; Dec corn declined 20 3/4c to USD6.36 1/2. Funds were said to have ditched 15,00-20,000 contracts today as selling kicked in across more or less the full range of commodities. Front month May corn traded at a premium to wheat at one point for the first time since 1996. All the same problems afflicting soybeans dragged corn lower too, including Goldman Sachs, Japan and crude oil. Japan was cited to have bought up to half a million tonnes of optional origin corn, although that seemed to make little difference today. Who said that speculators had nothing to do with soaring food prices?
Wheat: CBOT May wheat fell 38 3/4c to USD7.59 1/2; KCBT May lost 25c to USD8.94; MGEX May dropped 24c to USD9.11 3/4. Last night's USDA crop report showed a fall in US winter wheat crop conditions, with Kansas wheat at it's worst since 2002. Even so fund selling kicked in after Goldman Sachs recommended profit-taking on a commodity basket including corn, wheat and soybeans. A general malaise surrounded the markets today. Do Goldman really carry that much clout? It's a difficult one to call. A couple of heavy shake-outs in Feb and March have maybe got long-holders less convinced of their infallibility than they had been previously.
EU Grains Close
12/04/11 -- EU grains closed with May London wheat down GBP1.00/tonne to GBP208.50/tonne and with new crop Nov falling GBP2.25 to GBP167.25/tonne. May Paris wheat fell sharply, EUR8.00/tonne down to EUR240.25/tonne and Nov was down EUR8.75/tonne at EUR208.50/tonne.
London wheat attempted to paddle it's own canoe early on, trading slightly higher for most of the morning, but eventually found the tide too strong to swim against.
A weak sterling helped London to fare much better than Paris wheat today, with UK retail sales for March falling the most since records began in 1996 and a surprise drop in inflation last month (making an imminent interest rate hike less likely) putting the pound under pressure.
An escalation of the Japanese nuclear disaster and a note from Goldman Sachs recommending clients book profits and exit longs in commodities encouraged traders to take some money off the table.
Crude oil fell around USD3-4/barrel and gold and other metals were sharply lower.
Chicago opened on the back foot and quickly retreated further, adding to European losses late in the session. London's close was positively buoyant in comparison, which may mean further losses in the morning.
In the UK feed manufacturers don't want wheat at this sort of money, it's simply too expensive. One large UK grain merchant said to me the other day "if the (futures) market wants it, the market can have it." Indicating that physical buyers are few and far between at levels now well in excess of GBP200/tonne again.
Pairs wheat fell around EUR10/tonne on the day with corn falling in the region of EUR5/tonne.
Early Call On Chicago
12/04/11 -- The overnight grains closed lower with wheat down around 11-13c, corn off 5-7c and soybeans 8-10c easier. Another earthquake in Japan overnight and the increase of the severity rating of the nuclear crisis there to 7 spooked the market.
Golden Sacks are recommending cashing in a few chips at these levels for many commodities. "Although we believe that on a 12-month horizon the (commodity) basket still has upside potential, in the near term, risk-reward no longer favours being long the basket and we are recommending closing the position," said Goldman commodities strategist Jeffrey Currie.
Brent crude is down a dollar and a quarter and NYMEX has fallen more than two dollars. Gold and most other metals are also weaker.
Last night's crop conditions report rated Kansas wheat 37% poor-very poor, the worst early April condition report since 2002 when wheat was 40% poor-very poor, according to Martell Crop Projections.
"That year only 270.6 million bushels of wheat was harvested in the state, down 36% from the 1997-2001 average. Sixteen percent of wheat land was ploughed up compared with 5% normally in the top US wheat state," they add.
Reports continue to circulate of Chinese soybean cancellations and/or deferrals. Thursday's USDA weekly export sales report will be interesting to see if it throws up any evidence of this.
Also of interest will be the volume of corn sold in the past week, will there be any sign of price-rationing at these levels?
Personally I think that soybean sales will be poor and that corn sales will probably be pretty strong.
Brazil's harvest is now more than three-quarters done, and what's left to come in is down in the south where yields are bumper. "People down here are getting slowly desperate with big crop and not quite so big storage. Everything seems to be coming out of the fields at the same time and we’re not seeing anywhere near enough ships loading to help us out of the bind," says my man in RGdS.
Early calls for this afternoon's CBOT session: beans down 8-10c, wheat down 10-12c, corn down 5-7c.
The Morning Vibe
12/04/11 -- The overnight grains are sharply lower on the back of a general malaise this morning.
Japan has upped the severity rating of the nuclear crisis to the maximum possible 7, the same level that applied to Chernobyl. Another earthquake, this time measuring 6.0, rocked the region again early this morning.
The hoped-for ceasefire in Libya looks less likely having viewed the images of African Union officials in Benghazi last night on the TV. It looked a bit like putting Bonnie Langford in to referee an old firm Rangers/Celtic derby.
An imminent rise in UK interest rates looks less likely after news that UK Consumer Prices Index (CPI) inflation fell to 4% last month, from 4.4% in February.
Eying America struggling to sort out it's massive budget deficit the IMF have lowered it's US GDP growth forecast from 3% to 2.8%. Growth in the UK was also downgraded from 2% to 1.7%.
UK retail sales for March fell the most since records began in 1996, according to the British Retail Consortium (BRC).
The BRC said that "uncomfortably high inflation and low wage growth have produced the first year-on-year fall in disposable incomes for 30 years".
The pound is down to 1.1250 against the euro, and has fallen from a peak above 1.64 against a similarly weak US dollar to around 1.6250 as the two currencies struggle to fight their way out of a wet paper bag.
Brent crude is up to USD124.35/barrel.
It just can't stop raining in eastern Australia with some parts of Melbourne picking up more than a months worth of rain (average 50mm in April) in less than 24 hours overnight. What they wouldn't give for some of that in Western Australia state.
Chicago Close
11/04/11 -- Soybeans: May soy ended down 23 3/4c to USD13.68 1/2 a bushel; May soymeal dropped USD7.50 at USD349.70; May soyoil slid 95 points to 58.82c/pound. Reports out of China that poor crush margins were leading to a slowdown in soybean imports were met with scepticism in some quarters. "Watch what China do and not what they say," one analyst rightly warned today. Unfortunately what they ARE doing is importing fewer beans, particularly US beans. US weekly export sales have been sluggish now for several weeks, and with China typically accounting for around 75% of all bean sales on a weekly basis, that is having a negative impact on the outlook for US soybean sales for the remainder of the season.
Corn: May corn jumped 8c to USD7.76 a bushel; Dec corn rose 4 1/4c to USD6.57 1/4 a bushel. Corn continues to be the strongest leg of the complex, with overnight levels hitting a fresh all time front month high. The USDA weekly export inspections report of 38.796 million bushels was OK, but below the total needed to attain the USDA's target of 1.95 billion bushels for the 2010/11 marketing year. The USDA came out with their planting progress report after the close pegging the 2011/12 US corn crop at 3% seeded, slightly below the 4% anticipated by the trade.
Wheat: CBOT May wheat rose 3/4c to USD7.98 1/4 a bushel; KCBT May dropped 13 3/4c to USD9.19; MGEX May fell 17 1/2c to USD9.35 3/4. Once again CBOT gained at the expense of better quality wheat on ideas that it and corn would soon reach parity, leading to increased demand for what from the feed sector. After the close the USDA pegged 16% of the US winter wheat crop as very poor, up from 13% a week ago. The poor category increased from 19% to 20%, Good/excellent fell from 37% to 36%. In Texas two thirds of the crop is rated poor/very poor.
EU Grains Close
11/04/11 -- EU grains closed with May London wheat up GBP2.75/tonne to GBP209.50/tonne and with new crop Nov climbing GBP0.50 to GBP170.00/tonne. May Paris wheat rose EUR1.00/tonne to EUR248.25/tonne and Nov was up EUR2.25/tonne at EUR217.25/tonne.
It was interesting to see old crop gain on new in London and the opposite happen in Paris. At home, competition within the feed sector from other raw materials makes UK wheat look very expensive indeed.
Summer (May/Sep) wheatfeed pellets ex Manchester traded today at GBP135.00/tonne, placing them at around GBP140.00/tonne delivered into Cheshire. A comparable price for feed wheat on today's market would be over GBP200.00/tonne, even with a couple of new crop months included. Wheat is clearly pricing itself out of the ration at this sort of money.
Spain and Italy have had much better rains than normal over the early part of 2011, giving them potential to deliver a very decent wheat crop this year. Things have not been so rosy further north, with varying degrees of "drought" in France, Germany and the UK.
"Scattered showers are expected this week, although no heavy rain is in the forecast for very dry areas," according to Martell Crop Projections.
Some rain arrived over the weekend for parched areas of the US HRW wheat belt, although they may have come too late to be of great benefit.
Australian conditions are looking very promising in eastern states. Good post-planting rains in Western Australia could signal a record harvest, unfortunately there is no sign of these in current weather forecasts ahead of sowing commencing in May.
Ample supplies of old crop feed wheat continue to see Australian wheat remain very aggressively priced into Asian markets.
Early Call On Chicago
11/04/11 -- The overnight grains closed mostly lower, with the exception of nearby corn which was 1-2c firmer. Apart from that most other months on corn were around 2-5 lower. Wheat closed around 3-6c easier and beans were down 10c or so.
Corn set a new high in early overnight trade, and beans and wheat were also showing significant gains at one point before falling away.
Comments by COFCO that Chinese crush margins are poor, and processors there are only running at 40% capacity and may look to cancel/defer existing soybean purchases may have been behind the demise of soybeans. Certainly US export sales have been a bit on the low side recently.
Brazil looks like bringing in a record soybean harvest as bumper yields in the south make up for some rain-induced yield losses further north. Paraguay are also expected to bring in a record 8 MMT crop this year due to higher yields.
Competition for America will also soon start to come from Argentina, where the soybean harvest is 21% done, according to the Ag Ministry there.
Parts of parched Oklahoma got almost 3 in of rain over the weekend, and although rains were lighter in other areas, many saw an inch or so of precious moisture.
A 7.1 on the Richter scale earthquake hit Fukushima again this morning, exactly a month after the original tremor shook global markets.
A ceasefire plan in Libya has supposedly been agreed to by Gaddafi and negotiators from the African Union are said to be on their way to Benghazi to meet with rebel leaders. Crude is a a bit weaker on the back of that.
Early calls for this afternoon's CBOT session: corn up 1-2c, beans down 8-10c, wheat down 2-4c.
All Change
11/04/11 -- In a sharp about turn, from trading sharply higher early in the session the overnight Globex market is now mostly red. What's caused all this then?
Reports of a possible ceasefire deal in Libya might have something to do with it, crude is lower on the back of that, although it's hardly falling out of bed. Brent is down 70c/barrel and NYMEX crude down 34c/barrel.
News that China "only" imported 3.5 MMT of soybeans in March may be a factor, along with COFCO saying that crushers there are only running at 40% of capacity due to poor margins, leading them to cut their 2010/11 soybean import estimate to 53-54 MMT (the USDA currently peg these at 57 MMT).
Last week's surprisingly high USDA corn ending stocks estimate seem to have been dismissed as a load of baloney.
Australian farmers may plant a record wheat area in 2011, in excess of 14 million hectares, according to Rabobank. With excellent subsoil moisture in the east that could potentially bring in a monster 30 MMT crop if production in Western Australia was to come in anything like normal.
With a domestic requirement of only 7 MMT that would leave the cricketing has-beens and wallaby-lovers with more wheat to export than you could shake an excrement-covered boomerang at. Unfortunately though, WA is as dry as a dead dingo's donger right now.
Morning Musings
11/04/11 -- The overnights are firmer, although well off earlier highs. May corn set a new record for a front month in overnight trade, hitting 7.83 3/4c, up 15 3/4c, at one stage before slipping back to currently trade at 7.74 1/2, up 6/12c.
Other grains have also lost early gains. May beans are currently down 1 1/4c at 13.91, having traded as much as 14 1/4c higher at one stage. May CBOT wheat is 1 1/2c firmer at 7.99, having reached 8.09 1/4, up 11 3/4c.
The dollar is weak, with the US having only just averted a federal shutdown on Friday night. The US have been slower to react to cutting their burgeoning budget deficit than the UK and Europe. Obama has the added difficulty of trying to push his cuts through against fierce Republican opposition.
Friday night's "deal" still has to be passed by the Republican controlled House this week, setting up a nervous and potentially choppy week for the US dollar.
Whether the proposals got through or not, it looks like a lose-lose situation for the dollar to me.
Not so for the euro, basking in the glory of a 25 point interest rate increase last week. The single currency is at it's highest against the pound since October this morning, and very close to it's best levels in more than a year. Against the dollar it's at it's highest since January 2010.
The market still seems to be pricing in a UK interest rate rise around May/June as inflation here continues to rise. The problem for the BoE is stagnant growth and low consumer spending as our own austerity measures bite into disposable income.
They might not admit to it, but it may just be that the Government don't mind the idea of a weak pound (especially against the euro) to boost our exports (especially to our near neighbours).
Inflation at well above the target 2% will also reduce the value of the massive public debt.
Maybe the much-anticipated hike in UK interest rates is further away than we might think?
Cutbacks
10/04/11 -- An eleventh hour deal late on Friday night bought US President Obama's Democrats a weeks grace in which to get swingeing budget cuts through Congress.
The Republicans agree that budget cuts must be made, they just don't agree with the Democrats on where. If Friday's late stop-gap deal hadn't gone through then "hundreds of thousands of government employees" might have turned up for work on Monday to find the closed signs hanging up on their office doors, according to media reports.
One of the areas where cuts are likely is within the budget of our very own mates the USDA. The weekly Monday crop progress report may be one of the first things to go, and there is even talk of the June planted acreage report also being cut.
Which gives me an idea. Sponsorship. The USDA's weekly and monthly crop reports could be sponsored by the Muppet Show, with Miss Piggy obviously responsible for the hog reports. I think it's a winner, get me Obama on line two....
Further reading: US Budget Deal Avoids Government Shutdown
Weekly crop reports threatened
