EU Wheat Crashes Lower
30/09/11 -- EU grains crashed sharply lower following a bearish surprise from the USDA for US corn stocks. Nov London wheat slumped GBP5.75/tonne to GBP150.65/tonne and Nov Paris wheat crashed EUR7.25/tonne lower to EUR183.50/tonne.
The USDA pegged Sept 1st US corn stocks considerably higher than the market was anticipating, higher in fact than the top end of trade estimates at 1.128 billion bushels or 28.65 MMT. For wheat the numbers were mixed with slightly lower production than expected, but marginally higher Sept 1st stocks.
On the week as a whole Nov London wheat was down GBP5.85/tonne and Paris wheat down EUR8.00/tonne. On the month of September Nov London wheat is GBP24.10/tonne lower and Nov Paris wheat EUR27.75/tonne weaker.
This was the lowest close for a front month on London wheat in just under a year, and for Paris wheat the lowest since late July 2010.
Chicago corn was flirting with the recently increased daily 40 cent limit down when European markets closed, with Dec trading below USD6.00/bushel for the first time for a front month since January.
At home the NFU pegged the UK wheat crop at 14.7 MMT with yields averaging 7.4 MT/ha. That's lower than the HGCA's yield estimate of 7.5-7.7 MT/ha released on Thursday. The latter implies a crop of around 15.2 MMT if we use the median yield of 7.6 MT/ha.
Here's an obscure but interesting statistic for you. The NFU have been half a million tonnes below what has been generally accepted to be the correct final UK wheat production number in both September 2009 and September 2010, according to my records. Seems like they may be going for a hat-trick.
On a brighter note for all you impoverished farmers out there, the pound managed to rally above 1.16 against the euro for the first time since March in late trade on the day that the exchange rate is fixed for the single farm payment scheme. You jammy buggers!
The USDA Numbers Bearish For Corn
30/09/11 -- The USDA numbers threw up a bearish corn stocks figure of 1.128 billion bushels as of September 1st, 166 million bushels more than the 962 million that the trade was expecting and higher than even the highest trade estimate.
Just about everybody was expecting a sub-one billion number, so the USDA seem to have thrown a spanner in the works for corn bulls for the second year running with this report.
For wheat the news was mixed, with Sept 1st stocks 104 million bushels higher than expected at 2.15 billion, but all wheat production in 2011 a little lower than anticipated at 2.008 billion (2.046 billion expected). Spring wheat production this season was the reason for the fall in output, that was lowered to 462 million bushels, 36 million below the average trade estimate.
For soybeans Sept 1st stocks were a fraction below trade expectations of 225 million bushels at 215 million.
The overnight Globex market closed around 4-5 cents lower on corn and soybeans and narrowly mixed on wheat prior to the USDA report being issued. European markets reacted swiftly with London wheat down GBP3.00-4.00/tonne and Paris wheat falling EUR4.00-5.00/tonne lower shortly after the news came out.
In other news the USDA have just announced the sale of 176,000 MT of US corn to South Korea for Jan 2012 shipment.
Russia, and now Kazakhstan too, continue to undercut the rest of the market for a slice of Egypt's wheat business and that doesn't look like changing any time soon unless the world's largest wheat buyer decides to pay more for the privilege of not having all it's eggs in the one bread basket.
Early calls for this afternoon's CBOT session: corn down 20-25 cents, wheat down 10-12 cents, soybeans down 8-10 cents.
The Morning Vibe
30/09/11 -- A few things worth noting this morning. Firstly, now that the domestic harvest is just about over, a quick look at yesterday's more or less final yield numbers from the HGCA.
OSR is the big stand-out for me, with yields averaging 3.7-3.8 MT/ha we've certainly brought in a record crop, the only question now is how big exactly? That depends on who's acreage number you use. The HGCA themselves have a planted area figure of 696,000 ha, the USDA say 700,000 ha and Coceral reckon 720,000 ha.
Using the lowest area & yield figures we get final production of 2.58 MMT. Using the upper end of the scale we have output at 2.74 MMT. Which ever way you look at it that's a monster crop and thrashes last season's record production by around 15-22% leaving it crying in the corner like a whipped cur.
Wheat and barley output also look like they have come in ahead of expectations with a wheat crop of around 15.2 MMT and barley output in the region of 5.2 MMT.
Another thing of note, whilst it was of no great surprise to anybody really to see the Egypt wheat order go to Russia and Kazakhstan. What is worth noting though is that the prices paid were around USD11.00/tonne lower than last week's winning tenders. Also of note is that last week's prices paid were USD16.00/tonne cheaper than the previous week.
And guess what? The prices paid two weeks ago were USD12.00/tonne lower than those paid three weeks ago. That adds up to a USD39.00/tonne, the equivalent of GBP25.00/tonne, drop of the trousers in the space of just three weeks.
Do you know what that means? That means each wheat cargo sold to Egypt yesterday is worth USD2.34 million LESS than what they were paying at the beginning of the month. Nice work Nomani, think how many camels you can get for that.
French wheat incidentally was priced out to the tune of USD20.00/tonne. No surprises therefore that 13 weeks into the current marketing campaign Brussels have only issued EU soft wheat export licences for 3.48 MMT, 45% down on where we were this time last year.
Kazakhstan's grain harvest meanwhile now stands at 21.3 MMT off 82% of the planned area, leaving them on target to potentially beat the Ministry's recently revised crop estimate of 25 MMT - more than double what they turned out last year.
Now I am reading that Australia may squeeze through unnoticed on the rails and produce a record 27 MMT wheat crop of it's own this year, after beneficial September rains have boosted prospects in the eastern states. We already knew I think that WA was in for bumper production, but now their koala cuddling compatriots in the east look like getting in on the act. Link
On the global macro economic front European stocks are down this morning despite yesterday's news that the German parliament voted "ja" to expand the bolster the European Financial Stability Facility (EFSF) bailout fund to EUR440 billion.
Greece are first up to the counter for a slice of that with inspectors in Athens right now to see if they are doing what they should be doing to get the next EUR8 billion tranche of bailout cash.
German Chancellor Angela Merkel recently said that she would do "whatever it takes" to save the euro. She now appears to mean "whatever it takes up to the value of EUR440 billion." The problem is Italy's debt alone is four times the size of that.
Oh dear, there may be (more) trouble ahead...
Chicago Closing Comments
29/09/11 -- Soybeans: Nov 11 Soybeans closed at USD12.30, up 6 1/2 cents; Jan 12 Soybeans closed at USD12.41 1/4, up 5 3/4 cents; Oct 11 Soybean Meal closed at USD316.90, up USD1.50; Oct 11 Soybean Oil closed at 51.63, up 8 points. The markets breathed a small collective sigh of relief after Germany voted to extend EU bailout funding. Weekly export sales were strong at just over 1 MMT compared to the 550-750 TMT that the trade was expecting, with China taking 845,600 MT of the total. Funds were estimated to have bought 9,000 soybean contracts on the dsy as they position themselves ahead of tomorrow's USDA stocks numbers where a figure of 225 million bushels is the average trade expectation.
Corn: Dec 11 Corn closed at USD6.32 1/2, up 1 3/4 cents; Mar 12 Corn closed at USD6.45 3/4, up 1 3/4 cents. The news out of Germany was supportive, although this can only be described as a very modest recovery indeed from yesterday's steep losses. The trade is expecting tomorrow's USDA report to peg Sept 1st US corn inventories in the range of 820-1050 million bushels, with an average of 962 million. Weekly export sales were in line with expectations at 787,900 MT for 2011/12 and 25,000 MT for 2012/13. China took 182,100 MT of that total. Funds were said to have bought back around 7,000 of the 17,000 contracts that they sold yesterday.
Wheat: Dec 11 CBOT Wheat closed at USD6.54 1/4, up 15 1/2 cents; Dec 11 KCBT Wheat closed at USD7.40, up 13 1/4 cents; Dec 11 MGEX Wheat closed at USD8.95 1/2, up 34 1/4 cents. Minneapolis wheat again was the leader on expectations that the USDA will lower it's spring wheat production estimate tomorrow. Only minor changes are expected for winter wheat output but spring wheat production is seen falling from 522 million in August to 498 million bushels this time round. All wheat stocks are estimated at 2.046 billion bushels. Weekly export sales were below trade estimates at 428,900 MT with the trade no doubt conscious once again that Egypt bought Russian/Kazakh wheat today.
EU Wheat Close
29/09/11 -- EU grains finished mostly lower again with Nov London wheat down GBP0.85/tonne to GBP156.40/tonne and Nov Paris wheat falling EUR0.25/tonne at EUR190.75/tonne.
The German parliament approved the expansion of the EU bailout fund by a large majority, the bill needs ratifying by the upper house tomorrow. As one problem gets resolved another one inconveniently pops up. A letter from the ECB sent to Italian PM Berlusconi in August calling for "pressing action" to introduce swingeing austerity measures by the end of the month, ie tomorrow, has been leaked to the press there.
A EUR6.9 billion auction of ten year Italian bonds today saw yields increase from 5.22% last month to a pretty unsustainable 5.86% this time round.
Egypt bought 120,000 MT each of Russian and Kazakh wheat in today's tender. The latter has announced that it aims to export 1 MMT of grains per month for the remainder of the 2011/12 season.
The HGCA say that the UK wheat harvest is 98% complete and that yields have averaged 7.5-7.7 MT/ha, implying a crop of 15.0-15.4 MMT off a planted area of 2 million hectares, up 0.2-0.6 MMT on last year.
Winter barley has averaged 6.1-6.2 MT/ha and spring barley 5.3 MT/ha, they say. That implies a UK barley crop of around 5.2 MMT this year, similar to last season.
With the OSR harvest averaging a hefty 3.7-3.8 MT/ha UK farmers may have brought in a crop as high as 2.7 MMT using Coceral's planted area estimate of 720,000 ha, potentially beating last season's record crop by almost half a million tonnes.
All three totals beat the current USDA estimates which are 14.8 MMT, 5.0 MMT and 2.4 MMT respectively.
Looking ahead to next year an estimated 30-40% of winter wheat has been drilled and 20-25% of winter barley, the HGCA add.
Nogger On Tour (Again)
28/09/11 -- Continuing my whirlwind world (but mostly UK) tour I'm off to Shrewsbury today, for the second time this year no less, to talk to a gang of poultry producers - the Midland Free Range Discussion Group. So there'll only be minimal blogging activity over the next couple of days. They probably spend ages discussing all sorts of chickeny things, so if I find out whilst I'm there exactly why the chicken DID cross the road then I'll be sure to pass the information on when I get back, don't you worry about that. I wonder what's for tea....
Chicago Close
27/09/11 -- Soybeans: Nov 11 Soybeans closed at USD12.63, up 3 1/4 cents; Jan 12 Soybeans closed at USD12.75, up 3 3/4 cents; Oct 11 Soybean Meal closed at USD326.60, up USD0.40; Oct 11 Soybean Oil closed at 52.57, up 35 points. The complex finished firmer but well off session highs as a bit more caution over a cure-all for Europe crept back in. Another reason for caution is Friday's upcoming USDA quarterly stocks report which is expected to show US inventories of 225 million bushels, unchanged from last month's estimate but an increase on year ago levels of 151 million bushels.
Corn: Dec 11 Corn closed at USD6.52 1/4, up 4 1/4 cents; Mar 12 Corn closed at USD6.65 3/4, up 4 1/2 cents. As with the soy complex early gains were trimmed later in the session in what could be seen by the bulls as a disappointing rally attempt. Friday's Sept 1st stocks number is expected to come in at 964 million bushels versus 1.708 billion last year. Firmer crude and other outside markets helped today, as too did a weaker US dollar for once. There's still a bit of optimism of some positive action to sort out European sovereign debt, but we've been here before. Corn harvesting should have progressed well this week.
Wheat: Dec 11 CBOT Wheat closed at USD6.58 1/4, up 10 cents; Dec 11 KCBT Wheat closed at USD7.53, up 9 cents; Dec 11 MGEX Wheat closed at USD8.69 1/4, down 3/4 cent. The trade is expecting Friday's all wheat stocks number to come in at around 2.04 billion bushels. Unlike corn and beans the USDA will also report on wheat production numbers for 2011/12, which coincidentally are also expected to come in at 2.04 billion bushels. Dryness in the southern Plains continues to see winter wheat plantings continue to running behind schedule at 26% done, down 9 points from the five year average.
EU Wheat Closing Comments
27/09/11 -- EU grains added to yesterday's modest gains with Nov London wheat closing up GBP2.00/tonne at GBP159.00/tonne and Nov Paris wheat rising EUR2.25/tonne to EUR194.50/tonne.
Global stocks rose on optimism that eurozone leaders, the IMF and anybody else that fancies joining in will extract the digit and finally do something proactive to sort out the debt crisis.
London's FTSE100 was up 4% at the close of play, with the Paris and German stock markets up by more than 5%. WTI crude oil was almost four dollars firmer by the time that Liffe/Euronext closed, adding to the friendly tone.
When you look at it like that increases in wheat of only around two pounds/euros were actually pretty disappointing.
Defra made a few tweaks to 2010/11 wheat ending stocks by virtue of higher estimates for carryout from 2008/09 and 2009/10, increasing wheat availability by 117,000 MT to 17.9 MMT. Slightly lower usage from the feed sector also reduces domestic consumption in 2010/11.
Harvesting in Russia, Ukraine and Kazakhstan is progressing well, with all three in line for a very substantial rebound in production from last season.
The world wheat area for the 2012 harvest could rise almost 4 million hectares, according to the IGC. The European wheat area is seen broadly unchanged, although sowings may increase in Germany as rains hampered rapeseed plantings during August and early September, they added.
Meanwhile Informa Economics forecast US all wheat plantings at 56.6 million acres, up 2.2 million from the current season.
Disaster Averted?
27/09/11 -- The market seems to think that everything in the garden is once again rosy this morning.
For one, rumours are rife that there's something in the wind from the EU/ECB/IMF that is going to sort out the European debt crisis. Nobody really seems sure what format it's going to take, where the money is going to come from or who is going to be left swinging but a deal is on the way that's for sure. Possibly.
And for two, the US Senate approved a resolution to keep the government there funded until Nov 18th. The deal now needs House approval. "We've averted a disaster, until the next one," Democratic Senator Ben Nelson told Reuters.
I somehow sense that neither problem has gone away for good. Or even for very long.
Germany are set to vote on Thursday on whether it's a good idea to keep on buying bonds from the likes of Greece, Italy and Spain. The ECB and IMF are due in Greece this week to see how they are getting on cutting their budget deficit in order to comply with the rules for getting their next tranche of bailout money that they urgently need.
The grain fundamentals are bullish though, aren't they?? Not really...
Kazakhstan are on target to bring in their bumper 25 MMT grain harvest, having cut 20.2 MMT so far off 79% of the planted area.
Ukraine has harvested 38.4 MMT of grain so far, also off 79% of the planted area. The corn harvest is now up and running under what Agritel say are "strongly favourable weather conditions."
Russia has harvested 84.7 MMT of grains so far off 83% of the planted area, leaving it well on track to beat the official target of 90 MMT. The Urals district is traditionally the last to bring in the harvest. Here 58% of the crop has been cut with yields averaging 69% more than last year and 43% higher than in 2009.
There's 20-50mm of rain in the forecast in the next couple of days for much of eastern Australia's wheat belt whilst conditions in Western Australia are said to be very promising for a bumper harvest there.
Chicago Close - Monday
26/09/11 -- Soybeans: Nov 11 Soybeans closed at USD12.59 3/4, up 1 3/4 cents; Jan 12 Soybeans closed at USD12.71 1/4, up 2 1/4 cents; Oct 11 Soybean Meal closed at USD326.20, up USD0.20; Oct 11 Soybean Oil closed at 52.22, down 18 points. Nov beans recovered from an 11-month low of USD12.26 in overnight Globex trade, yet also finished off session highs. Export Inspections of 7.418 million bushels were disappointing. The USDA pegged crop conditions as 53% good/excellent, unchanged from a week ago. Harvesting is only 5% complete, versus 15% a year ago and 11% normally.
Corn: Dec 11 Corn closed at USD6.48, up 9 1/2 cents; Mar 12 Corn closed at USD6.61 1/4, up 9 1/4 cents. As with beans corn recovered from overnight lows but also closed off the day session highs. In Globex trade prices reached their lowest level since July 2010. Export Inspections of 34.282 million bushels were above expectations and there was a bit of optimism that ailing European banks might get shored up by the IMF/EU. After the close the USDA raised good/excellent crop conditions one point to 52%, with harvest progress running at 15%. Funds bought 9,000 contracts on the day.
Wheat: Dec 11 CBOT Wheat closed at USD6.48 1/4, up 7 1/2 cents; Dec 11 KCBT Wheat closed at USD7.44, up 12 3/4 cents; Dec 11 MGEX Wheat closed at USD8.70, up 19 cents. Minneapolis wheat led, although it too also closed well off session highs, on tight supplies and ideas that the USDA will reflect that in Friday's numbers. Dryness on the southern Plains continues to hamper planting progress which is seen as 26% done versus 35% normally at this time. Export Inspections of 21.605 million bushels were in line with trade estimates of 18-27 million.
EU Wheat Close
26/09/11 -- EU grains finished mostly a tad higher with Nov London wheat up GBP0.50/tonne to GBP157.00/tonne and Nov Paris wheat climbing EUR0.75/tonne to EUR192.75/tonne.
This was a very modest recovery attempt after a couple of weeks of significant losses. US grains quickly turned stronger than expected in afternoon trade, providing the catalyst for EU futures to also move higher.
There's a degree of hope around that some sort of concerted effort is on the cards to revive the fortunes of Greece and European banks this week. That may put a halt to the recent risk aversion plunge that's seen London wheat fall GBP17.75/tonne since the turn of the month.
US weather conditions remain too dry in the southern Plains to speed up winter wheat plantings. Meanwhile the spring wheat harvest is seen falling when that finally wraps up shortly.
Media chatter also suggests that dryness in the Ukraine, Argentina and Australia and is against wheat planting in the case of the former and wheat development in the case of the latter two.
Russia has harvested 84.7 MMT of grains so far off 83% of the planted area, already up 39% on last year's final total and suggesting that official estimates of a final crop of 90 MMT may be a bit on the low side.
Server Problems
26/09/11 -- My expensive 1nd1 server is down this afternoon, which explains how a lot of the images on here have suddenly gone AWOL. It also explains why the price feeds aren't working, and judging by the number of other websites that I frequent which also seem to have disappeared from t'interweb this afternoon I'm not the only one - "millions" of websites are down, according to some reports. I apologise to those people taking content from me, 1and1 say via Twitter that: "We're currently experiencing an issue with some servers and internal systems like the control panel. We're trying to fix this ASAP!"
Update 15.55 BST: server problems now sorted, fingers crossed. All in they've been down for about an hour and a half this afternoon I reckon, I guess that's not too bad in 2 years worth of using them?
Early Call On Chicago
26/09/11 -- The overnight grains finished mixed with soybeans 8-10 cents lower, corn 3-6 cents firmer and wheat up 2-3 cents. All those were much better than the session lows which saw beans down more than 30 cents at one point, with corn down 8 cents and wheat down 16 cents. Dec beans traded down to USD12.26/bu overnight - the lowest for a front month since last November.
There's a bit of fragile optimism that something will finally get done to sort out the Greek debt crisis in the form of a 50% debt write-down, even though the Greek finance minister is quoted as saying that an orderly default has not been discussed.
There's also talk of a eurozone interest rate reduction, although I don't see that coming down from 1.5% to 1% is going to make a whole deal of difference myself.
There are also rumours around that the ECB will discuss further bond purchases next week.
German business sentiment meanwhile has fallen for the third month in a row it has been reported today.
Informa said on Friday that US farmers will plant a post-WWII record 94.3 million acres of corn in 2012, up 2.5 million on this year. The soybean area will also increase 800,000 to 75.8 million and all wheat by 2.2 million to 56.6 million acres. Cotton sowings will decline 2.8 million to 12.0 million acres, they added.
There's a long way to go before we get there of course. For now market direction this week will likely be governed by whether fund money decides that it needs to further decrease exposure to grains, and that will probably be tied to tangible signs of concerted action on the European debt issue.
There wasn't much rain relief over the weekend for dry areas of the southern Plains hoping to plant winter wheat. The USDA will report on crop conditions and harvest progress for other crops after the close tonight.
Early calls for this afternoon's CBOT session: corn up 3-5 cents, wheat up 1-3 cents, beans down 6-8 cents.
EU Rapemeal Prices
26/09/11 -- Latest guide prices for EU rapemeal today, basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:
| Sep11 | unq | n/a |
| Oct11 | 181.00 | +1.00 |
| Nov11/Jan12 | 178.00 | +3.00 |
| Feb/Apr12 | 177.00 | +3.00 |
| May/Jul12 | 175.00 | +2.00 |
| Aug/Oct12 | 155.00 | +2.00 |
| Nov12/Jan13 | 165.00 | +2.00 |
Greek Finance Minster Pawns xBox To Stave Off Default
26/09/11 -- Greek finance minister Evangelos Venizelosopadopalosados is understood to have pawned his beloved xBox over the weekend in an effort throw a bit of extra cash into the kitty to help stave off an impending Greek debt default.
"I got a very good price, it had lots of games with it including Grand Theft Auto and Call of Duty," he said.
When asked what he would do if the EU/IMF was to approve a 50% Greek debt write-off, he said that he'd probably buy a Playstation 3 and FIFA 2012.
Tesco Cuts Price On Staples
26/09/11 -- Imagine my delight upon hearing that everybody's favourite dictatorship is to cut the price on staples. I mean the old stationery cupboard has a bit of room in it, so why not take the opportunity to stock up I thought.
Sadly, those aren't the kind of staples that they have in mind. It seems that, concerned about their falling market share, they're slashing the price of milk, bread, apples, potatoes, carrots etc in an attempt to woo back some custom.
In fact they say that they are knocking 30% off around 3,000 everyday items.
It remains to be seen who really foots the bill for what the media are calling a GBP500 million "price cutting offensive."
Richard Brasher, Tesco's UK chief executive, says in the Independent that: "there would be some negotiation with suppliers over price cuts, but he would expect most to welcome the move as it will boost volume."
I bet that has put everybody's mind at rest then.
The Morning Vibe
26/09/11 -- Greece and it's wretched debt continues to dominate proceedings. The EU/IMF are now talking about writing down 50% of it's debts and increasing the eurozone bailout fund to 2 trillion euros, according the the BBC this morning.
The plan however could take (rolls eyes) "five to six weeks" to implement.
EU stock markets have opened around 1-2% lower, but turned 1% or so higher in early trade.
The IMF also warned over the weekend that it may not have deep enough pockets to rescue larger EU countries than Greece.
Whilst the Greek tragedy continues to make the headlines, the US debt ceiling issue also has yet to be resolved. Just a week away from a possible US government shutdown the Democrat-controlled Senate blocked a Republican House bill to provide stopgap federal funding on Friday.
These are the main issues that will drive the grain markets over the coming weeks. I'm sorry that they don't really have anything to do with grain market fundamentals but that's they way it is these days.
The pound is up to 1.15 (is that all??) against the euro this morning, Globex soybeans are around 13-15 cents lower, with nearby wheat 2-3 cents weaker and corn a cent or so higher. WTI crude oil is a dollar lower at USD78.81/barrel.
Ukraine has done a deal with Bangladesh to supply it with 1 MMT of wheat in 2011/12.
The USDA are out tonight with their crop condition/harvest progress report and on Friday they issue their quarterly grain stocks numbers.
