Nogger's Blog

Chicago Close

17/06/11 -- Soybeans: Jul 11 soybeans closed at USD13.33, down 17 1/2 cents; Nov 11 soybeans closed at USD13.33 1/4, down 17 cents; Jul 11 soybean meal closed at USD349.00, down USD4.70; Jul 11 soybean oil closed at 55.92, down 40 points. Beans shed 54 1/4 cents on the week, with meal losing USD24.30 and oil 93 points. Funds were liquidating again today, selling an estimated 6,000 bean contracts on the day, as oil slumped USD2/barrel with front month July ending at it's lowest since Jan 27th. Beans settled at their lowest levels in a month on continued concerns over Greek debt, and the impact it might have on demand from Europe.

Corn: Jul 11 corn closed at USD7.00 1/4, down 1 1/4 cents; Dec 11 corn closed at USD6.60, up 7 cents. July corn was down 86 3/4 cents, or 11%, on the week. Funds were estimated to have bought 9,000 contracts on the day, but liquidated something like 50,000 lots on the week overall. That's a weighty 6.35 million tonnes as reports circulate of ethanol producers closing down and looking to sell their inventory back onto the market. Crude oil falling to its lowest levels for a front month since February wont help improve their margins any, so I guess that corn prices need to do that to make the industry economically viable again, even whilst they still hang onto their 45c/gallon tax break.

Wheat: Jul 11 CBOT wheat closed at USD6.72 1/4, down 1 cent; Jul 11 KCBT wheat closed at USD8.04 1/2, up 6 1/2 cents; Jul 11 MGEX wheat closed at USD8.97 1/4, down 3 cents. Chicago wheat lost 87 cents on the week, with Kansas down 63 1/2 cents and Minneapolis falling a dollar and 2 /34 cents. This was the lowest front month close for Chicago wheat in three month as it closed lower every day this week. The US harvest is ongoing and with widely variable results although protein levels are generally high. Harvest pressure and global economic concerns, along with Russia's arrival back onto the export market being just two weeks away are the main fundamentals behind the slump. Widespread fund liquidation has meant that despite suggestions to the contrary speculators really do move markets.

EU Wheat Close

17/06/11 -- EU grains closed mixed with July London wheat down GBP0.15 to GBP176.50/tonne and with new crop Nov up GBP1.00/tonne to GBP174.50/tonne. Nov Paris wheat closed EUR3.00/tonne lower at EUR210.25/tonne whilst May12 fell EUR2.50/tonne to EUR218.25/tonne.

On the week as a whole July London wheat fell every day to close GBP15.50/tonne, or 8% lower. Nov was down GBP9.95/tonne, or 5%. Interestingly Nov Paris wheat was down EUR21.00/tonne, or 9%, on the week. That narrows the gap between Nov Paris milling wheat and Nov UK feed wheat to around 16 euros.

Heavy rain fell across much of southern England, central and northern France and much of Germany too today. Opinion is divided over how much good it will do, but it certainly can't do any harm.

Very early barley harvesting in France a few weeks ago reported some "disastrous" yields, but as the harvest has progressed results are coming in generally not as bad as feared.

Better than expected yields and quality are also being reported from the US winter wheat crop.

The barley harvest in Ukraine is expected to begin next week when the combines start rolling in Crimea, according to our man on the ground over there Mike Lee.

The EU has extended the duty free period for imports of feed wheat and barley, due to expire at the end of the month, until the end of the year.

Russia's Deputy Economy Minister Andrei Klepach says the the country's grain crop could top 85 MMT this year, in his personal opinion. There are mixed reports coming out of Russia, some well-conncected people are suggesting that yields will be 15-20% below normal (not on last year obviously). Others on the inside suggest that lack of moisture in some parts "isn't really an issue" at the moment.

Fund money exiting the commodities arena has certainly been a feature this week. NYMEX crude oil finished two dollars down on the day for a loss of more than six dollars on the week. Brent closed with losses of almost five dollars on the week.

Early Vibe

17/06/11 -- With Chicago wheat closing 35 1/4c down last night, and the overnights being lower again this morning then I guess that we're going to see London and Paris wheat extending their losses again today.

July London wheat is already down GBP15.35/tonne, or 8%, on the week so far, with Nov Paris wheat down a slightly more modest EUR15.25/tonne, or 7%.

It would seem that we may be adopting the seasonal price trend of a May peak slumping into a harvest low. Here's a chart of the seasonal price trend for London wheat 1990-2010:



Keen to cash in on high prices Pakistan have exported a record 2 MMT of wheat so far this year, and are likely to have shipped out another 1 MMT by the time the UK harvest gets going in August, traders say.

Funds sold an estimated 21,000 CBOT corn contracts yesterday, bringing their weekly dumping to around 60,000 say Agrimoney.com, that's equivalent of more than 7.6 million tonnes.

Chicago Closing Comments

16/06/11 -- Soybeans: Jul 11 soybeans closed at USD13.50 1/2, down 17 1/2 cents; Nov 11 soybeans closed at USD13.50 1/4, down 16 1/2 cents; Jul 11 soybean meal closed at USD353.70, down USD6.30; Jul 11 soybean oil closed at 56.32, down 73 points. Soybean weekly export sales were 185,400 MT, a bit slack but in line with trade ideas of just 100-200 TMT. Widespread nervousness surrounding the global economy is encouraging money to continue to exit commodities. Spillover weakness from slumping corn, which soybeans managed to ignore yesterday, was simply too great today.

Corn: Jul 11 corn closed at USD7.01 1/2, down 24 1/4 cents; Dec 11 corn closed at USD6.53, down 13 cents. Weekly export sales for corn were 794,700 MT, again a bit flat compared to expectations of 700,000 to 1,200,000 MT. In its second vote in a week the Senate went 73-27 in favour of cutting the 45 cent ethanol blenders tax break, also cutting the 54 cent import duty on shipping ethanol into the US from abroad. We're still a long way off that becoming law though. Front month July has dropped almost a dollar in four down sessions in a row as large fund length exits the market.

Wheat: Jul 11 CBOT wheat closed at USD6.73 1/4, down 35 1/4 cents; Jul 11 KCBT wheat closed at USD7.98, down 21 1/4 cents; Jul 11 MGEX wheat closed at $9.00 1/4, down 36 3/4 cents. Wheat remains cheaper than corn by virtue of the fact it is falling even faster than it's competitor based on today's performance. Weekly export sales were 455,500 MT - at the low end of pre-report expectations of 400-800 TMT. Technically July CBOT wheat put in a damaging performance from a chartists viewpoint having failed to break through resistance at 6.90 on three previous occasions.

EU Grains Close

16/06/11 -- EU grains closed mixed with July London wheat down GBP1.35 to GBP176.65/tonne and with new crop Nov falling GBP1.50/tonne to GBP173.50/tonne. Nov Paris wheat closed EUR0.75/tonne higher at EUR213.025/tonne whilst May12 rose EUR1.25/tonne to EUR220.75/tonne.

Paris wheat rose on the back of a weak euro on a continuation of the Greek debt crisis. London wheat fell as it continues to re-align itself with wheat markets elsewhere, having fallen less than either Paris or Chicago since the Russian export ban was agreed to be lifted.

French analysts Strategie Grains cut their EU-27 soft wheat production estimate by 6 MMT from last month to 125.6 MMT, now 1 MMT lower than last year. They've correspondingly cut export projections for 2011/12 by 4 MMT from last month to 12.9 MMT, 6 MMT below what they expect in 210/11.

Barley production is seen down 2 MMT from last month to 52.2 MMT and the corn crop reduced 100,000 MT to 59.0 MMT.

The market hardly reacted to the news, a worrying sign. US corn futures meanwhile continue to decline at an alarming rate given the much publicised tight ending stocks highlighted in last week's USDA report.

Anecdotal reports from many parts of the UK suggest that the wheat crop isn't looking as bad as feared after some decent rains finally arrived a month or so ago.

More rain is forecast to bring further moisture relief to much of the country by the weekend, indeed one market report today has to be credited with being the first to say that there can be too much of a good thing!

Brussels issued export licences for 151,000 MT of soft wheat this past week, bringing the YTD total to 17.95 MMT with two weeks of the campaign left to run. That's only a 3% increase on where we were a year ago, before Christmas we were running at 35% ahead of a year previously.

EU Rapemeal Prices

16/06/11 -- Guide prices for EU rapemeal, basis FOB Lower Rhine in euros/metric tonne, with change from previous day:

Early Call On Chicago

16/06/11 -- The overnights closed lower again with beans down around 12-14c, corn 7-11c easier and wheat 4-8c weaker.

Wonder if we may have fallen enough these past few sessions to flush out one or two bargain hunters this afternoon? The market certainly has a different feel to it this week, even though there are plenty of bullish stories about.

July corn is down 72 1/4 cents from last Friday's close with July CBOT wheat falling 58 3/4 cents and July beans down 33 3/4 cents.

Weekly export sales from the USDA were within the range of trade estimates, although nothing spectacular. The dollar is firm as investors shun the euro, and crude oil is flat.

S. Korea has bought 55,000 MT of corn from Cargill, Japan has bought 259,303 MT of US/Canadian/Oz wheat for August delivery. Algeria has bought 350,000 MT of probably French wheat and also 50,000 MT of feed barley.

For the time being market direction will be led by the funds willingness to continue to liquidate longs, with almost all other factors playing second fiddle. Who was it that said "speculators aren't driving global commodity prices" again? They drove them up and they're driving them back down again now from where I am standing.

Early calls for this afternoon's Magical Mystery Tour: corn down 8-10c, wheat down 6-8c, beans down 12-14c.

USDA Export Sales

16/06/11 -- The USDA's weekly export sales report pegs wheat sales at 455,500 MT (including 57,800 MT for Egypt) at the low end of pre-report expectations of 400-800 TMT.

Corn sales came in at 794,700 MT, again a bit flat compared to expectations of 700,000 to 1,200,000 MT considering that we already knew about the recent sale of 548,600 MT of new crop to Mexico.

Soybean sales were 185,400 MT, slack but in line with trade ideas of just 100-200 TMT.

It's A Sea Of Red As Greek Tragedy Turns To Farce

16/06/11 -- The boards are a sea of red again this morning with front month July CBOT wheat down 10c, corn down 14c and beans down 15c in overnight trade. London wheat is around GBP2-3 lower, with Paris down EUR1-2 and Paris rapeseed falling EUR3.50-6.50 in a general commodity malaise.

Concerns over Greek debt defaults seem to be sending spec money scurrying for the sidelines. "What we need most today, is unity," says French President Nicolas Sarkozy. That is most certainly what they haven't got as Greek PM George Papandreou attempts to reshuffle his government and hang onto enough power to force austerity measures through.

The French and Germans meet tomorrow to attempt to find a solution to a problem that effectively means either throwing good money after bad or standing by to see Greece default on it's debts, much of which they already own. It's a bit like lending someone some money so that they can pay you back the money that they owe you. Except that you know that the money you are lending them to pay you back with can't be repaid unless you lend them even more next week.

Which puts me in mind of the classic Laurel and Hardy sketch where Stan gives Ollie some money to pass onto Stan's wife. "Do you mean to say that the money he gave to you that you gave to him that he gave to me was the same money that I gave to him to pay him?"

As it's Royal Ascot, the term "the form book has gone out of the window" seems somewhat appropriate at this juncture. Recent price moves highlight the totally unpredictable nature of this market.

Much of the information that has come out in the past week or so would have sent the market soaring a month or two back, yet bullish news is now being cast aside. The smart money continues to want out it seems.

Agrimoney carry an interesting article today warning that Rabobank are warning that "history suggest(s) that commodity markets… should be about to fall off a cliff". Oh dear, missus.

Where are we going from here then? I fall into the camp that would suggest that prices shouldn't have fallen as much as they have, BUT neither should they have got as high as they did in the first place. It's funny how quickly GBP200/tonne becomes "normal" isn't it?

A report on Dow Jones Newswires today quotes the director of sales at Openfield as saying yesterday that farmers here probably only have about 30% of their crop sold on average, and that fresh business has "slowed to a trickle".

That could mean that there are a lot of sellers once the harvest is upon us IF final yields aren't as bad as many have feared, as I suspect will be the case. You can't blame UK growers for not wanting to sell now, they certainly don't want to get caught oversold, yet I suspect that come harvest time they'll be wishing that they had chanced their arm a little bit more.

Still, if that happens at the end of the day nobody has died, and we can all put the kettle on and sit down and have a bloody good moan. Unless yields ARE through the floor and prices go back up through the roof. Then we can all put the kettle on and sit down and have a bloody good moan.

World Crop Weather Highlights

16/06/11 -- World agri-weather highlights from the excellent Martell Crop Projections:

• Wet weather pattern is under way in Canadian prairies, northern US Plains, Midwest corn belt; recurring showers expected this week; trough of low pressure entrenched, more rain expected next several days; afternoon temps Tuesday unseasonably cool Canada and Midwest; warmth and sunshine needed to spur growth


• Brazil Mato Grosso state received rain in June, .5 to 1.5 inch in scattered showers; the first important rain in over 2 months; rain too late to save safrinha corn; Parana got much needed rain this month; freshly planted winter wheat is struggling, still needs more rain in Rio Grande do Sul; relief may be at hand as South Brazil forecast is wet


• Argentina drought a worry in Buenos Aires province; scattered light rains yesterday were a help, much more needed; was super-dry the past 8 weeks; Cordoba and Santa Fe have better field moisture, winter wheat faring much better in central Argentina; more rain coming in 7-day outlook


• Europe drought is easing with June showers; too late for most wheat, helpful for late-filling grain; UK wheat yield may be 15% reduced, reports indicate; France wheat losses were similarly severe; much cooler temperatures are developing across Europe; increased showers also expected next week; improved growing conditions for summer crop development


• Australia soil moisture declining southeast growing areas, southern New South Wales, Victoria, South Australia; low rainfall received the past 4-6 weeks; mild days, cold nights with low humidity is reducing field moisture; some rain in forecast, variable amounts expected; Western Australia rainfall increasing, 65-80% of normal in the past month; much more needed to replenish subsoil moisture; forecast unfavourable turning warmer and drier


• Northeast China corn-soybean belt wet, keeps receiving showers; May rainfall was very heavy Heilongjiang, Inner Mongolia, Jilin; suspect planting was delayed; intense spring drought has unfolded in Eastern China, less than half of normal rainfall in March-May; winter rapeseed crop yield is predicted sharply lower; June has turned sharply wetter in dry areas of Yangtze Valley-East China; reservoirs reportedly had dried up ; now North China Plain has gone dry, a key area for summer cotton, peanuts, soybeans; virtually no rain has occurred in June and very hot temperatures


• India monsoon season is under way; rainfall has been good in many areas of central India; Northwest India still hot and dry, typical for mid June; monsoon comes later to this area; forecast very wet in central India; monsoon may unleash 6-10 inch rains in Madhya Pradesh


• Drought-stressed wheat and rapeseed benefited from heavy rainfall in east and north Ukraine; April-May weather was abnormally dry and hot; Russia Black Earth crops got variable showers yesterday, limited relief from drought; Rainfall is spreading east into the Volga; ample soil moisture exists there for spring grains; drought in West Siberia is concerning; spring weather March-May was very dry; big country, variable conditions for Russia new crop grain harvest

The Morning Line

16/06/11 -- The overnight markets are mostly lower at 9.00am London time, with only wheat managing to display a little bit of green. Soybeans, which managed to keep their heads above water in last night's CBOT session, appear to have succumbed to the pressure that the rest of the complex was under and are 10-12c lower. Corn remains under pressure, particularly in front-month July where there is still a large spec long, down 6c. Wheat is mixed a cent or to lower to a cent higher.

Despite the recent demise of corn, it is still a premium to CBOT wheat nearby. There are now some fairly widespread reports of some ethanol plants taking downtime rather than operate with corn at these levels.

US ethanol production fell 35,000 bpd to 880,000 pbd last week, using 92.4 million bushels of corn to do so. To meet the USDA's current estimate of 5 billion bushels going into ethanol manufacture in the current marketing year that total should be 104.2 million.

The USDA's weekly export sales report is out this afternoon. Trade estimates for corn are 700,000 to 1,200,000 MT (old and new crop combined, including the recent sale of almost 550,000 MT of new crop to Mexico). Soybean sales are only expected in the 100-200 TMT region, with wheat at 400-800 TMT.

French analysts Strategie Grains have this morning cut their EU-27 soft wheat production estimate by 6 MMT from last month to 125.6 MMT, now 1 MMT lower than last year. They've correspondingly cut export projections for 2011/12 by 4 MMT from last month to 12.9 MMT, 6 MMT below what they expect in 210/11.

Barley production is seen down 2 MMT from last month to 52.2 MMT and the corn crop reduced 100,000 MT to 59.0 MMT.

It will be interesting to see how European markets react to that news today, if at all.

On the weather front at home we've got a band of rain, heavy in places, clearing southern counties of England around lunchtime before more rain comes in from the west to cover much of the country by Friday afternoon and into Saturday.

Anecdotal reports from many parts of the UK suggest that the wheat crop isn't looking as bad as feared after some decent rains finally arrived a month or so ago.

EU-27 rapeseed output will fall to a four year low of 18.9 MMT this year, according to Oil World.

Did You Know?

15/06/11 -- An obscure an interesting piece of late night trivia for you here before you go to bed. July London wheat closed at GBP178.00/tonne this evening. It has only closed lower than that once since Nov 23rd. Yes, tonight was it's lowest close in almost eight months barring Mar 15th when wheat famously suffered double digit GBP11.00/tonne one day losses in the immediate aftermath of the Japanese earthquake and tsunami. Night night boys and girls.

Chicago Close

15/06/11 -- Soybeans: July soybeans ended unchanged at USD13.68; Nov beans finished up 3c at USD13.66; July soymeal was up USD1.30 to USD360.00; July soyoil closed up 20 points at 57.05. The NOPA crush report for May came in as expected at 120.3 million bushels. Beans managed to distance themselves from sliding corn and wheat as wet weather in the Northern Plains continues to delay plantings. Beans put in a decent performance considering the firm dollar and slumping crude oil together with a range of other negative outside influences. Nov beans came close to testing key support levels around 13.50/13.52 but bounced right back to close the day at 13.66 3/4, up 3c on the day.

Corn: July corn ended down 29 3/4c at USD7.25 3/4 a bushel; Dec corn closed down 19c at USD6.66 a bushel. It was a bad day for corn with funds rushing to exit front month long positions, with July offered at limit down for large parts of the day. Crude oil fell more than USD4.00/barrel and the dollar was higher, adding to the bearish theme. Funds sold an estimated 20,000 contracts on the day, adding to the 15,000 sold yesterday and were given credit for maybe rolling a further 20,000 into forward months. US ethanol production dropped 35,000 barrels/day from last week, whilst stocks rose to 19.745 million barrels. A market saturated with length and with little regard for downside potential seems somewhat stunned tonight.

Wheat: CBOT July wheat fell 22 3/4c to USD7.08 1/2 a bushel; KCBT July wheat was 20 1/2c lower to USD8.19 1/4; MGEX July wheat slid 31 1/2c to USD9.37. Algeria bought 350,000 MT of optional origin milling wheat for July shipment, probably from France. A sinking euro on the back of Greek debt concerns was bearish for US wheat. So too is news that Australia is expecting another bumper crop later this year, with ABARES estimating output at 26.2 MMT, only fractionally short of the 26.3 MMT record set in the current marketing year. Wheat exports meanwhile are pegged at 18.5 MMT this season and 20.1 MMT next, that's 1 MMT and 3.1 MMT more than the USDA estimate.

EU Wheat Close

15/06/11 -- EU grains tried to arrest their recent sharp declines but failed miserably with July London wheat finishing GBP5.00 lower for the second day in a row at GBP178.00/tonne and with new crop Nov falling GBP2.25/tonne to GBP175.00/tonne. Nov Paris wheat closed EUR3.50/tonne lower at EUR212.50/tonne whilst May12 also declined EUR3.50/tonne to EUR219.50/tonne.

Both London and Paris wheat were a little higher in early trade but got caught in the crossfire of tumbling Chicago corn futures which saw front month July at down the daily 30c limit at the time that London closed.

July London wheat has lost GBP40.00/tonne in less than two months, with Nov falling GBP24.25/tonne from a contract high of GBP199.25/tonne in less than three weeks.

Trade in London was relatively quiet with many participants away at Cereals 2011 in Lincolnshire. The vibe coming back from that was that crops there looked better than many had expected. Also there were some heavy showers throughout the day which maybe coloured a few people's judgement.

The NFU used day one of the event to publish their first forecast for English wheat, saying the the crop here would yield 6.5 MT/ha (a more than 20 year low) and production total "under 12 MMT" - a fall of around 15% on the five year average.

Based on recent performances such news would have been greeted with London wheat trading ten pounds higher, but not today. The whole of the ag sector looks tired, and you have to wonder about the foundations of a market when such ostensibly bullish news is greeted by a sharp downwards move. Much as we have also witnessed recently in Chicago corn, which has fallen 60c, or 7.6%, since the USDA's bullish stocks report was released last week.

Some of the smart money seems to be leaving the building before things get too nasty. Greece now has the lowest credit rating of any country rated by Standard & Poor's. EU policymakers can't seem to reach a consensus on a second bailout for the country and meanwhile protests against austerity measures turned violent in Athens today.

NYMEX crude oil fell by more than USD4/barrel to a four month low today.

NFU Peg English Wheat Crop At Under 12 MMT

15/06/11 -- On the opening day of Cereals 2011 the NFU have given everybody something to talk about by pegging the English wheat crop at 'under 12 MMT' with yields forecast to average 6.5 MT/ha.

"This year's forecast yield decrease was largely due to poor growing conditions since winter," they helpfully inform us. I'm glad that they pointed that bit out as it had completely passed me by that's for sure.

Bear in mind though that this is the English wheat crop, not the UK wheat crop that we are talking about here. The NFU appear to either not know that Scotland, Wales and Northern Ireland exist, or simply don't care. And who can blame them for that?

The thrifty Jocks, or the ginger ninjas as I like to call them, have had oodles of rainfall so should be capable of chipping in with around 850,000 MT of wheat of their own this year I'd guess, maybe even a tad more than that.

Allowing for what the inbred Welsh can cobble together and a very modest showing from the Micks, we're looking at a top end of an extra million tonnes to add onto what the NFU are giving us to come up with a UK crop of 13 MMT top whack.

That would be around 12% down on last year.

It should be pointed out here though that the NFU have a bit of a track record of underestimating the size of the wheat crop at this time of year compared to what Defra have eventually come up with. Or on the other hand you could say that Defra don't know their spotty botties from a hole in the ground. They've weren't exactly overly accurate with their export estimates for the current season were they?

It remains a fact though that the NFU have been around half a million tonnes shy of what is popularly accepted as being the eventual size of our wheat crop when issuing their summer estimates in both 2010 and 2009. (One of the virtues of having a blog that's been around for some time now is that I can look back and find all this trivia for you).

If they are down by that amount again then we may end up with a UK wheat crop approaching 13.5 MMT this year, which would be 9% down on last year and the third lowest crop in the last ten years.

English Rapeseed yields are pegged at 3.1 MT/ha, 10% down on last year. If we use that yield on a UK level then we are probably looking at a crop of around 2.1 MMT this year, only slightly down on last year thanks to a sharp increase in plantings.

Stupid, Misguided Or Just Plain Corrupt?

15/06/11 -- The US Senate voted 59-40 against repealing the ethanol blenders tax credit last night. Swapping a perceived thimble full of national security against imported oil prices for a USD6 billion/year budget hit and global food insecurity. God bless America.

And don't give me the there's 70,000 jobs depending on this argument. You might as well employ half those people to tear up 100 dollar bills whilst the other 35,000 get paid to brush them up and incinerate them.

That'd probably be cheaper and more environmentally friendly to boot, whilst enduring that food goes to feed people and animals not power 4x4's. If I had a cat I'd kick it.

Chicago Close

14/06/11 -- Soybeans: Jul 11 soybeans closed at USD13.68, down 14 3/4 cents; Nov 11 soybeans closed at USD13.63 3/4, down 13 cents; Jul 11 soybean meal closed at USD358.70, down USD11.40; Jul 11 soybean oil closed at 56.85, up 3 points. Funds sold an estimated 7,000 bean contracts in what appears to be a general falling out of love with agri-commodities. Weakness from corn spilled over into beans despite firmer crude oil.

Corn: Jul 11 corn closed at USD7.55 1/2, down 27 cents; Dec 11 corn closed at USD6.85, down 19 1/2 cents. Corn led the market lower with funds given credit for selling 16,000 contracts on the day. The market was nervous ahead of a Senate vote on whether to repeal the ethanol blenders tax credit. The vote only got 40 of the 60 yea's needed to get passed. Weak spec money exiting the market was a feature, and some stronger spec cash rolling out of nearby July and into Dec also seems to have been going on.

Wheat: Jul 11 CBOT wheat closed at USD7.31 1/4, down 11 3/4 cents; Jul 11 KCBT wheat closed at USD8.39 3/4, down 11 1/4 cents; Jul 11 MGEX wheat closed at USD9.68 1/2, down 16 3/4 cents. Wheat also suffered at the hands of a ag commodity depression despite Egypt buying 60,000 of US wheat in it's first tender since February. Japan are also in the market for 260,000 MT of wheat this week, some of which is expected to be of US origin. Spring wheat plantings remain well behind schedule at only 88% done compared with 100% normally.

EU Wheat Extends Recent Declines

14/06/11 -- EU grains extended their recent declines with July London wheat finishing GBP5.00 lower at GBP183.00/tonne and with new crop Nov falling GBP3.10/tonne to GBP177.25/tonne. Nov Paris wheat closed EUR5.25/tonne lower at EUR218.75/tonne whilst May12 declined EUR5.25/tonne to EUR223.00/tonne.

July London wheat has now fallen GBP35.00/tonne, or 16%, from it's contract high set less than two months ago. It's difficult to put a concrete reason behind it's fall from grace, as old crop stocks do remain undeniably tight.

The problem is that few people want them at these levels. Wheat has well and truly prices itself out of feed rations, demand for which remains slack as the livestock sector continue to battle to make a margin.

Export interest is similarly sluggish, the UK exported only 93,000 MT of wheat in April, the lowest so far during the 2010/11 marketing year according to customs data released today.

There's a general air of malaise about. Rising US unemployment, concerns over Greek debt and divisions within the EU as to how to tackle it (Standard & Poor's cut their credit rating from B to CCC yesterday and warned that further downgrades are likely) and worries about inflation in China forcing the central bank there to up bank's reserve requirements for the ninth time since October.

On top of all that the US Senate is set to vote today on whether to repeal the contentious US ethanol blenders' 45c/gallon tax credit. Reports are already circulating of producers there taking downtime as margins get squeezed with US corn at record levels.

On the export front Egypt bought one cargo each of US and French wheat in a tender today, their first appearance in the market for four months. Russian and Ukraine wheat was excluded from the tender. Algeria are shopping for 50,000 MT each of wheat and barley too.

Early Call On Chicago

14/06/11 -- The overnights closed lower with beans down around 4-6c, corn 10-14c weaker and wheat 2-4c lower on old crop and 7-13c down on new crop.

Corn is leading the pack lower, despite last week's bullish USDA report on news that corn planting in the US is amazingly 99% done. Talk of ethanol plants idling due to high prices and poor margins is also seen as a negative factor.

Corn crop conditions improved week on week to 69% good/excellent.

News that the Senate are due to vote today on whether or not to repeal the costly ethanol tax credit could prove to be crucial in terms of corn demand and therefore ending stocks for 2011/12.

Under Senate rules the amendment needs the support of 60 of the chamber's 100 members to get passed.

Given the weight of speculative length a yes vote could trigger some very significant corn liquidation, with wheat and soybeans also likely to get caught in the crossfire.

China has raised it's bank reserve requirements for the ninth time since October after data showed inflation there rising in May to 5.5 percent, its highest level in almost three years.

Egypt and Algeria are in the market to buy wheat, for the first time in four months in the case of the former. Breaking news confirms that Egypt bought one 60,000 MT cargo each of French and US wheat.

Early calls for this afternoon's CBOT session: corn down 10-12c, wheat down 2-4c, beans down 4-6c.

This Would Be A Game Changer

14/06/11 -- Some of corn's nervous overnight action may be attributed to the news that the US Senate is set to vote this afternoon on a proposal by Oklahoma Senator Tom Coburn the repeal ethanol blenders' tax credit, which he says costs US taxpayers USD6 billion a year.

It would certainly be a financial shot in the arm for the ailing patient that is the out of control US budget deficit, and it would sort out next season's "incredibly tight" corn stocks too.

Which is of course exactly why they probably won't buy it.

"American ethanol employs some 76,000 American farmers and workers directly in producing ethanol or providing goods and services to ethanol producers," bleats one senator against the move. That old chestnut. That's USD80,000 each and every one of those "ethanol dependants" is costing the US taxpayer.

And we haven't begun to calculate how much USD8 corn adds to their weekly food bill yet either.

I do hope I'm wrong.

Senate Poised to Vote on Coburn Ethanol Amendment

The Rumour Mill

14/06/11 -- Unconfirmed rumours suggest that a major corn ethanol producing plant in Clearfield, Pennsylvania which only opened in early 2010 is closing for an unspecified period. Anyone getting deja vu? Maybe this has something to do with USD8 corn, or maybe it doesn't, who knows.

Just downtime, or more than that?

There's some interesting debate on the truth, or otherwise, of these reports and the whole morality of the corn into fuel issue here.

Morning Mumblings

14/06/11 -- Egypt are back in the market for wheat for the first time since February in a tender released last night. Russian/Ukraine wheat isn't on the menu, although all the other usual origins are. It will be interesting to see who wins and if anyone throws in the option of Black Sea wheat at a hefty discount just for the hell of it.

Japan are also looking for wheat in their regular weekly tender, although the quantity is higher than normal at almost 260,000 MT.

The overnight markets are mostly in the red, led by corn which is 10-12c lower on the back of the US crop being 99% planted according to the USDA last night. The idea that tight stocks or not corn is simply too dear relative to wheat for livestock producers may also have an influence.

London wheat has come in sharply lower, with Nov11 down GBP3.85 and front month July GBP6.00 easier. Nov has shed more than GBP22 in just over a fortnight, that's one hell of a diet isn't it? July is down GBP36 from the contract high set less than two months ago.

Paris grains are also lower, although not as much due to the weak euro.

Agritel say that all of Ukraine got rain over the weekend with 10mm falling in the south and 30mm in the east and north east. Meanwhile "abundant" rainfall is on the cards for central, southern and the Volga regions of Russia, they add.

At home, Unison leader Dave Prentis has called for "sustained strike action" if a deal can't be thrashed out over public sector pensions. The NUT and the Public and Commercial Services union are also flexing their strike muscles as austerity measures bite.

Unison have 1.2-1.3 million members, with the Telegraph yesterday reporting that the PCS, the NUT and another teachers union the ATL (Association of Teachers and Lecturers) potentially have a further 750,000 workers itching for more time off.

We're in for a second half of discontent by the looks of things.

CBOT Closing Comments

13/06/11 -- Soybeans: Jul 11 soybeans closed at USD13.82 3/4, down 4 1/2 cents; Nov 11 soybeans closed at USD13.76 3/4, down 5 cents; Jul 11 soybean meal closed at USD370.10, down USD3.20; Jul 11 soybean oil closed at 56.82, down 3 points. A Reuters poll pegged soybean planting at 82% in this afternoons Crop Progress report, in fact it came in at 87% done. Dry weather in Ohio saw that laggard state leap from 26% complete to 77% in just one week. Soybean crop conditions at 67% good/excellent are down on last year but better than anticipated. Crude closed more than USD2/barrel weaker adding to the bearish tone.

Corn: Jul 11 corn closed at USD7.82 1/2, down 4 1/2 cents; Dec 11 corn closed at USD7.04 1/2, down 8 cents. The USDA Export Inspections report this morning came in at 32.084 million bushels, well below what is needed to meet the existing forecast for 2010/11 exports. An assortment of outside influences weighed on corn such as European debt, weak crude oil and a negative vibe for the global economy. The USDA pegged the corn crop at 99% complete, a pretty astonishing figure with sowings in Ohio jumping from 58% done last week to 97% finished as of Sunday night. Crop condition ratings are put at 69% good/excellent, down on last year's 77%, but pretty impressive nevertheless.

Wheat: Jul 11 CBOT wheat closed at USD7.43, down 16 1/4 cents; Jul 11 KCBT wheat closed at USD8.51, down 17 cents; Jul 11 MGEX wheat closed at USD9.85 1/4, down 14 3/4 cents. Wheat has derived some benefit of late from the notion that historically high corn prices, and the unusual corn premium to wheat will lead to increased wheat demand from a feed perspective. Falling corn prices today where therefore seen as negative for wheat. Weekend rains and the chances for more later in the week saw EU futures fall, reinforcing the notion that US wheat is overpriced. The USDA pegged the winter wheat harvest at 22% done, versus 10% last week and 13% normally. Good/excellent conditions improved one point to 35% and spring wheat plantings rose to 88% done, up 11 points although things are normally all over by now.

EU Grains Suffer Another Bad Day At The Office

13/06/11 -- EU grains closed lower again with July London wheat down GBP4.00 to GBP188.00/tonne and with new crop Nov falling GBP4.10/tonne to GBP180.35/tonne. Nov Paris wheat closed EUR7.25/tonne lower at EUR224.00/tonne whilst May12 declined EUR6.00/tonne to EUR228.25/tonne.

Large parts of the continent were shut today for Whit Monday, so it was a relatively quiet session. Those that were in seemed to believe that recent rains across large parts of the UK and France/Germany may have done some good judging by the market's reaction.

This was the lowest close for a front month on London wheat since March 16th, just a few days after the Japanese tsunami-induced slump.

There seems to be a growing unease developing over the state of health, or otherwise, of the world's financial markets. Lauded New York University professor Nouriel Roubini (who famously forecast the huge 2008 financial crash) has warned of a "perfect storm" developing.

Citing the failure of the US to properly address it's budget deficit, European debt concerns and a growing rift over how to tackle the problem, Japanese recession in the aftermath of the cost of the March 11 earthquake and Chinese overcapacity Roubini is warning of potentially dark days ahead.

You probably don't need me to remind you what happened to the grain markets the last time he spoke out against common belief.

Green Day

13/06/11 -- Green Day are a band I've recently stumbled across and rather like, so I thought I'd attempt to find out a bit more about them by searching on Wikipedia. They've been going a lot longer than I thought, since 1987 in fact, and reading down the raft of info about them on there I saw that our old mate Johnny Rotten had ventured an opinion:

"...it pisses me off that years later a wank outfit like Green Day hop in and nick all that and attach it to themselves. They didn't earn their wings to do that and if they were true punk they wouldn't look anything like they do."

Says the crazy anarchist who now advertises Country Life butter on the telly.

Early Call On Chicago

13/06/11 -- The overnight grains finished mixed with beans 2-4c lower, corn 1 1/2c higher on old crop July but 4 1/2c lower on new crop Dec, and wheat 4 1/4c higher on front month July then mixed either side.

Crude is 75c weaker on reports that Saudi Arabia is to go it alone and ramp up production anyway, despite getting the thumbs down from OPEC last week. The dollar is weaker on rising US unemployment and signs of a faltering in the global economic recovery.

Not a lot has changed weather-wise from last week with extensive flooding along the Missouri River and parts of the Mississippi.

The USDA will report tonight on corn and soybean planting progress and also winter wheat harvesting. Spring wheat plantings will also be in the limelight.

Corn plantings may have moved up from 94% to around 97%, and that is likely to be about as far as they do progress. Soybean plantings have more time and are expected to go from 68% to somewhere in the top 80's done. Spring wheat planting was 79% complete last week.

European grains are lower after decent weekend rains and the outlook for more in many parts.

The clock is ticking on the early barley harvest in Ukraine, and also on the re-opening of the Russian export season. Some trade talk suggests that Russia may follow Ukraine and install some sort of export duty system. My contacts over there however suggest that this is unlikely.

Corn bulls will doubtless be setting their sights on attempting to break through USD8/bu this week, having only failed by a whisker to crash through that mark for the first time in history last week.

We've got to wait until Thursday's export sales report to see how much rationing is taking place with corn values where they are. As that seems likely to include last week's sale to Mexico of 822,960 MT then we should see export sales of around 1.2-1.5 MMT.

Early calls for this afternoon's CBOT session: wheat up 1-3c; old crop corn up 1-3c, new crop down 2-4c; soybeans down 2-4c.

News Snippets

13/06/11 -- China's winter wheat harvest is around 60% done, according to the Ministry there.

The euro is weaker as rifts widen to caverns between EU policymakers on how much rope, and who is providing it, they continue to let Greece have.

London and Paris wheat is lower after weekend rains. We got 12.7mm here in North Yorks yesterday, with a modest 0.8mm so far this morning but more looking likely. Paris has picked up 18mm in the past 24 hours.

Brazil will produce a record 161.5 MMT of grains/oilseeds in 2010/11, according to Conab. Planted area was up 3.8% but production rose 8.2%, including a 9.2% rise in soybean output to 75 MMT, they add.

Ukraine is cracking on with it's spring corn planting campaign with sowings up almost 40% on last year, according to the Ag Ministry there.

Crude oil is sinking, down USD1.37 to USD97.92/barrel at midday, on reports that Saudi Arabia will go it alone and up it's output by 10 million barrels/day next month.