Chicago Closing Comments
07/10/11 -- Soybeans: Nov 11 Soybeans closed at USD11.58 1/4, down 5 1/2 cents; Jan 12 Soybeans closed at USD11.70, down 5 3/4 cents; Oct 11 Soybean Meal closed at USD300.10, up USD0.40; Oct 11 Soybean Oil closed at 49.07, up 15 points. On the week as a whole Nov beans fell 20 3/4 cents, with Oct meal down USD4.60 and Oct oil 88 points lower. Funds were said to have sold around 3,000 soybean contracts on the day, spurred on by harvest pressure and credit downgrades for Italy and Spain. The Commitment of Traders (COT) Report shows index funds decreasing their net soybean longs by 13,000 contracts from the previous week, with large funds dumping almost 17,000 lots in the week through to Tuesday. Warm and dry conditions for much of the Midwest should see the soybean harvest reach the halfway point by the end of the weekend traders expect.
Corn: Dec 11 Corn closed at USD6.00, down 5 1/2 cents; Mar 12 Corn closed at USD6.12 3/4, down 5 1/2 cents. On the week overall Dec corn managed to close 7 1/2 cents higher with Mar up 7 cents. Funds were said to have sold 5,000 contracts on the day with the COT Report showing large funds shedding over 44,000 lots of their length on the week through to Tuesday and index traders exiting a further 10,000 contracts. Even so the latter are still long to the tune of more than 332,000 lots (in excess of 42 MMT) with the former also sitting on 115,000 (14.6 MMT). Coming up on Wednesday we have the October WASDE report from the USDA where the trade expects corn production to come in at 12.479 billion bushels, with an average yield estimate of 148.73 bu/acre.
Wheat: Dec 11 CBOT Wheat closed at USD6.07 1/2, down 8 1/2 cents; Dec 11 KCBT Wheat closed at USD6.84 1/2, down 13 1/4 cents; Dec 11 MGEX Wheat closed at USD9.19 1/2, up 24 1/2 cents. On the week as a whole Dec Chicago wheat was 1 3/4 cents lower with Kansas down 19 1/2 cents and Minneapolis climbing 27 1/4 cents. Funds were said to have sold 3,000 CBOT contracts on the day. The COT report shows a net fund short of more than 42,000 contracts, around 7,500 less than the previous week. Ukraine cancelling their export duty on wheat is bearish, as too might be heavy weekend rains if they materialise. "Northern Oklahoma may get 8 inches of rainfall based on the current GFS model forecast. Normal rainfall September-November is 7.3 inches, thus, if the forecast verifies, drought would be completely cured," say Martell Crop Projections.
EU Wheat Close
07/10/11 -- EU grains closed with Nov11 London wheat down GBP3.40/tonne at GBP146.75/tonne and Nov11 Paris wheat EUR3.25/tonne lower at EUR183.50/tonne.
Whilst these were not the lowest closes of the week they represent the lowest close for a front month on the weekly chart since July 2010. On the week as a whole Nov11 London wheat fell GBP3.90/tonne whilst Nov11 Paris wheat was unchanged.
News of a ratings downgrade for the RBS, Lloyds and Nationwide from Moody's sent their shares tumbling, raising fears that they may both need more government cash to keep afloat. Late in the day the Fitch agency also downgraded Italian and Spanish debt citing the "intensification" of the eurozone crisis.
BoE governor Mervyn King added to the gloom by saying that the current financial crisis could be the worst the UK has ever seen.
On the fundamental front there wasn't too much bullish news about either. Ukraine's parliament voted to abolish the existing duty on exports of corn and wheat with immediate effect. The will now join Russia and Kazakhstan to form a voracious grain exporting triumvirate.
Elsewhere the French Ministry upgraded their estimate for this season's soft wheat crop by 600,000 MT to 34.1 MMT. With a durum crop of around 2 MMT that gives us an all wheat production number of 36.1 MMT, 1.1 MMT higher than the USDA's current estimate.
In addition they increased their 2011 corn crop forecast by 800,000 MT to 14.9 MMT, which is now 700,000 more than the USDA said last month.
Across the pond a much-needed rain event is on the cards for the weekend. "Very heavy rain from recurring showers could bring 3-4 inches in portions of Oklahoma and Kansas," say Martell Crop Projections.
That would provide a major boost for winter wheat plantings and early crop development there.
Early Call On Chicago
07/10/11 -- The overnight grains finished lower with wheat down 7-9 cents, corn down 8-9 cents and beans 10-12 cents weaker.
After the Globex market closed news came out that the US economy added 103,000 jobs in September, better than expectations, which may add some support to grains this afternoon.
What won't add support however is the news that the Ukraine parliament has voted to end the export duty on wheat and corn with immediate effect. They will now be in a position to compete aggressively with Russia and Kazakhstan, and are likely to ramp up sales and exports quicker than you can say George Gershwin to make up for lost time having largely sat out of the first three months of the marketing year.
You will recall that Ukraine wheat undercut Russia in last week's Egyptian tender even with the export duty (9% with a minimum of EUR17.00/tonne) in place.
The USDA have reported 106,000 MT of soybeans sold to China under the daily reporting system.
The weather remains conducive for harvesting in many parts of the Midwest whilst hard red winter wheat is expecting "very heavy rain from recurring showers tomorrow and Saturday, 3-4 inches in portions of Oklahoma and Kansas," say Martell Crop Projections.
If they arrive these should be very beneficial for newly planted winter wheat and also encourage an increase in planting progress which has lagged as farmers have sat on their hands awaiting their arrival.
Wheat and corn are higher on the week so far, with beans weaker. All three are expected to open in negative territory this afternoon ahead of the weekend, with early calls: corn down 6-8 cents, wheat down 7-9 cents, beans down 10-12 cents.
Guess Who
07/10/11 -- Checking out the price of prilled urea FOB the Black Sea this morning I note that it's down USD37/tonne on last week. A hefty fall, and one sparked no doubt by the recent slump in the price of wheat.
According to my records urea FOB the Black Sea is now at it's lowest levels since early June, although still USD140/tonne above the 2011 lows set in April.
So who recently wrote "it's only a matter of time before that market starts to fall out of bed IMHO" as opposed to others saying, in the words of Yazoo, that the only way is up?
The Morning Rant
07/10/11 -- Moody's have cottoned onto what we already knew and downgraded a dozen different UK financial firms including Lloyds TSB, RBS and Nationwide this morning.
Meanwhile shares in troubled French/Belgian bank Dexia fell 17% before trading in them was suspended yesterday.
Sales of shoe boxes however have rocketed as investors look for a safe place to keep their money.
In America (where else?) one of the two blokes accused of driving around with their dead pal on the back seat of their car taking him to various bars and a strip club says that he thought that the guy had simply passed out.
It's an easy mistake to make. It was about a month before I realised that MrsN#1 had died in her sleep. That's right, you've heard it already, the sex was the same as normal but the washing & ironing was starting to mount up.
On a brighter note, I'm looking forward to cashing in on what I am reliably informed is a certainty when Wayne Rooney gets sent off for headbutting the ref in the 64th minute of tonight's game against Montenegro.
Chicago Close
06/10/11 -- Soybeans: Nov 11 Soybeans closed unchanged at USD11.63 3/4; Jan 12 Soybeans closed at USD11.75 3/4, up 1/4 cent; Oct 11 Soybean Meal closed at USD299.70, down USD1.80; Oct 11 Soybean Oil closed at 48.92, down 8 points. It was a poor close for the bulls trying to get a significant rally going, with early gains being largely eradicated by the close. Funds were said to be net light sellers of beans on the day despite weekly export sales coming in towards the high end of expectations at 741,800 MT. In addition China bought 115,000 MT of US beans under the daily reporting system.
Corn: Dec 11 Corn closed unchanged at USD6.05 1/2, whilst Mar 12 Corn was also unchanged at USD6.18 1/4. Again a feeble rally attempt soon faltered despite weekly export sales of almost 1.3 MMT. China was confirmed as buying one cargo out of the weekly total, maybe that was a disappointment. Argentina is said to be working on a deal with China to potentially supply some of it's requirements in 2012. Still, funds bought an estimated 4,000 contracts on the day after being heavy net sellers over the past few weeks.
Wheat: Dec 11 CBOT Wheat closed at USD6.16, down 9 1/4 cents; Dec 11 KCBT Wheat closed at USD6.97 3/4, down 2 cents; Dec 11 MGEX Wheat closed at USD8.95, up 18 1/2 cents. Weekly export sales were 431,200 MT, bang in the middle of expectations of 350 to 550 thousand MT. Tunisia bought 75,000 MT of optional origin milling wheat, which will probably end up coming out of the Black Sea. Ukraine says it is working on adjustments to it's existing export tariffs in order to make it's grain more competitive on the export market.
EU Wheat Close
06/10/11 -- EU grains finished higher for a second day with Nov London wheat up GBP1.65/tonne to GBP150.15/tonne and Nov Paris wheat climbing EUR1.50/tonne to EUR186.75/tonne.
We aren't trading the fundamentals any more, we are following the stock market which is reacting to the unfolding European debt crisis. Let's just say that as far as the latter is concerned nothing bad happened today, so the market went up.
If you want fundamentals then the word out of today's HGCA event was that the UK wheat crop this year was 15.4 MMT, a 3.5% increase on last year despite everything that the dry spring could throw at it.
In addition this year's rapeseed crop came in at 2.78 MMT off 705,000 ha, a record volume off a record area,according to Defra.
Coceral meanwhile gave us a 5.7 MMT increase in EU-27 corn production to a record 62.95 MMT. Soft wheat production was pegged at 128.39 MMT, almost 3 MMT up on last month, whilst durum output was broadly unchanged at 7.81 MMT for an all wheat crop of 136.2 MMT - virtually unchanged on last season and far better than what was expected in the early summer.
Coceral also raised it's EU-27 rapeseed production estimate by almost half a million tonnes to just under 19 MMT.
The pound dropped below 1.15 against the euro as the Bank of England announced an increase of GBP75 billion in QE. Both the BoE and the ECB left interest rates on hold at 0.5% and 1.5% respectively. There had been some calls/expectation that the ECB might lower rates there.
Early Call On Chicago
06/10/11 -- The overnight grains extended yesterday's upward momentum closing with wheat around 5-7 cents firmer, corn up 3-5 cents and beans 10-12 cents higher.
Weekly export sales from the USDA were 431,200 MT for wheat, bang in the middle of expectations of 350 to 550 thousand MT. They were 741,800 MT for beans, in line with trade estimates of 550 to 850 thousand MT, and almost 1.3 MMT for corn - above trade guesses of 750 TMT to 1 MMT. China took one cargo of the corn.
Elsewhere we've had the USDA announce the sale of 115,000 MT of soybeans to China.
Coceral have raised their estimate for EU-27 soft wheat production by almost 2 MMT and also increased their corn output forecast by almost 6 MMT.
Outside markets are firmer with NYMEX crude up almost a dollar and EU stock markets rising, although both are off earlier highs.
The ECB surprised/frustrated some by leaving interest rates in the eurozone unchanged, the BOE startled nobody by doing likewise. The latter did however increase QE by GBP75 billion.
The market is expected to open higher, but bulls might lack the confidence buy into their own rhetoric given the recent pasting that they have taken.
Early calls: corn up 4-6 cents, wheat up 6-8 cents, beans up 10-12 cents.
Everythings Coming Up Roses
06/10/11 -- The overnight grains are firmer, with Globex wheat up 12 cents, corn up 8-9 cents and beans 17-18 cents firmer. European markets have joined in the fun with Nov11 London wheat GBP2.50 firmer in early trade, now back up above the GBP150/tonne mark.
NYMEX crude, which gained USD4/barrel yesterday, has added more than a dollar this morning with stocks rising to on yet another bout of optimism that Eurozone leaders, like Baldrick, have a cunning plan.
I think that personally I'd actually have more faith if Baldrick himself was at the helm to be honest with you. How long has this Greek thing been rumbling on now? If they haven't managed to sort the job out by now then I don't see why things should be any different this time round.
Meanwhile we've got the whole Italian Job about to kick off.
For today though we've got the BoE possibly set to announce more QE later this afternoon. The market seems to think that this is a good idea and will no doubt rise if it does unveil a widely-touted extra GBP50 billion "stimulus package". The others have failed, so why should this one which at GBP50 billion would be the smallest of the three, do anything different?
The BBC say that "reports that European banks will be recapitalised, and also that they will face more thorough stress tests, helped restore some confidence to markets."
Why that should give anyone confidence is beyond me. Solving debt by creating more debt, hmmmm? And the more stringent that the stress tests are then more likely they are to fail them I'd have thought.
The ECB are also due to pontificate today, with many now calling for a reduction in interest rates in the eurozone, as if that is going to make a deal of difference either.
The financial markets are so desperate for a quick fix that they want to believe it can and will happen if you ask me. Unfortunately I don't however.
Grains will continue to be dictated to by and mirror these outside markets for some time yet I feel.
It's Official
06/10/11 -- Beer is cheaper up north, according to this report today from the BBC: It's grim down south. Which obviously explains why I chose to live in the north as the more you drink, the more you save.
By "beer" they mean bitter, stuff with funny names and bits floating in it that looks like it's been strained through a tramp's undercrackers, not the proper lager that Northern gentlemen of discernment such as myself imbibe.
I was in a local hostelry the other day as it happens and a pint of lager "up here" was just GBP1.87. It was rubbish lager mind, but that's not the point, the point is it was GBP1.87 a pint. If this is what they mean by a north south divide then I'm all for it.
You southern softies can sup your half of Tramp Nadger, wearing your stupid tweed jackets with the leather elbow pads and your frayed-at-the-knees corduroy trousers huddled round the fire "because it's only 67F outside old bean". We're tough up here in Lagerland, you only have to look at footage of the crowd from any Newcastle home game to see that. These lads are stripped to the waist when it's minus ten in the middle of December with seventeen pints of lager down their necks before the game. And that's for the early kick-offs. Women up here love a mans man like that, not a "I've had two halves so I better go, I'm driving to Esher next week" pansy like you. Hanging, the birch and conscription - in that order - that's what you lot need.
Chicago Close
05/10/11 -- Soybeans: Nov 11 Soybeans closed at USD11.63 3/4, up 3 3/4 cents; Jan 12 Soybeans closed at USD11.75 1/2, up 3 3/4 cents; Oct 11 Soybean Meal closed at USD301.50, up USD3.20; Oct 11 Soybean Oil closed at 49.00, up 21 points. Beans scrambled higher with funds buying an estimated 8,000 contracts on the day. Sharply higher crude oil and an air of calm in the outside markets helped. Informa fell into line with the USDA's September estimate pegging US yields at 41.8 bu/acre this year, a bushel/acre lower than FCStone said earlier in the week. Trade estimates for tomorrow’s weekly export sales report range from 550 to 850 thousand MT.
Corn: Dec 11 Corn closed at USD6.05 1/2, up 17 3/4 cents; Mar 12 Corn closed at USD6.18 1/4, up 17 1/2 cents. Optimism that the EU will finally sort out a deal for Greece helped firm outside markets, which buoyed corn, although we've been down this road before only to find that it's a dead end. Funds bought 15,000 contracts on the day. Informa came out with a corn yield estimate of 149 bu/acre, which is 1.5 bu/acre lower than their September estimate although still higher than what the USDA said last month. Informa's number puts production at 12.519 billion bushels, slightly higher than the USDA. Trade estimates for tomorrow’s weekly export sales report range from 750 TMT to 1 MMT.
Wheat: Dec 11 CBOT Wheat closed at USD6.25 1/4, up 21 1/4 cents; Dec 11 KCBT Wheat closed at USD6.99 3/4, up 13 1/4 cents; Dec 11 MGEX Wheat closed at USD8.76 1/2, up 13 3/4 cents. Funds bought 3,000 CBOT contracts on the day according to market chatter, but still remain heavily short leaving the market vulnerable to further upside correction. Outside markets were supportive for once, but all that can change at the drop of a hat. Growers on the Plains will be keeping their fingers crossed that the weekend rain event delivers what the forecasters predict: widespread 1-3 inch totals. Trade estimates for tomorrow’s weekly export sales report range from 350 to 550 thousand MT.
EU Wheat Close
05/10/11 -- EU grains finished higher for a change with Nov London wheat up GBP2.40/tonne to GBP148.50/tonne and Nov Paris wheat climbing EUR3.00/tonne at EUR185.25/tonne.
The euro was firmer, despite a credit rating downgrade for Italy, with the pound slipping below 1.16 against the single currency.
Some kind of a correction seemed in order after recent declines, and outside influences such as crude oil and stock markets posted decent gains. European debt problems have certainly not gone away however.
FSU crops keep getting bigger with Russia now saying it expects a 95 MMT grain harvest, with wheat accounting for 60 MMT of that - a 45% increase on last season. Russia also said that it exported 3.4 MMT of grain during the Sept 1st-28th period, bringing cumulative exports for the marketing year to date to 9.2 MMT.
Neighbouring Kazakhstan has now produced 23.3 MMT of grains off 88.3% of the planted area, suggesting a final crop in excess of the government's target of 25 MMT.
Ukraine has a big crop of it's own too and is itching to get it's name accepted again by the world's largest wheat buyer - Egypt. They actually undercut Russia in last week's Egyptian tender, but the north African nation are still mulling their credentials as a supplier.
US futures came in sharply higher in afternoon trade, which lent some support to EU grains, although the bulls have had an enormous volume of wind taken out of their sails of late and are very cautious of getting too carried away.
There's a long weekend coming up in the US and next Wednesday we have the release of the October WASDE report from the USDA which may include upward revisions for US corn and soybean production if recent private estimates are anything to go by.
Early Call On Chicago
05/10/11 -- The overnight grains finished firmer for once, mirroring rises in global stock markets and crude oil in a modest rebound from recent steep losses. Corn closed the Globex session around 8-9 cents firmer, with wheat up 9-11 cents and soybeans climbing 12 cents or so.
NYMEX crude is up the best part of two dollars at USD77.60/barrel. European stock markets are up around 2-3% despite a three notch downgrade from Moody's for Italy.
There's widespread talk that China will need to import more corn than the USDA's current 2011/12 estimate of 2 MMT with production falling well short of the USDA's 178 MMT estimate. There's no guaranteeing if they do need to import 5-10 MMT, as the US Grains Council suggest, that they won't turn to South America for much of it though.
For all the talk that current prices will stimulate demand, Taiwan have today passed on a tender to import 60,000 MT of US corn.
With the Russian Grain Union earlier in the week saying that this season's grain crop there could rise to 93 MMT, PM Vladimir Putin has upped the ante further today announcing an anticipated crop of 95 MMT (up 56% on last year), with wheat accounting for 60 MMT of that (a 45% increase on 2010).
The latter is 4 MMT higher than the USDA's current projection and almost 20 MMT higher than domestic consumption.
On the weather front harvesting in the Midwest should be moving on under favourable conditions. The US Plains are expected to receive widespread rains Fri-Mon, which could do wonders for newly sown winter wheat and also aid further plantings.
Informa are due out mid-session with their latest yield/crop production estimates ahead of next Wednesday's numbers from the USDA. Some seem to think that an upwards revision may be on the cards from Informa, in line with FCStone's slant on things earlier in the week.
For now today looks like an overdue up day with early calls: corn up 7-9 cents, wheat up 9-11 cents and beans up 10-12 cents.
Doing Business In Ukraine
05/9/11 -- Stumbled across this interesting, if somewhat lengthy, article on Bloomberg this morning on the vagaries of attempting to farm in Ukraine.
The line: "A lot of people here don’t want a job for the salary. They want it to be able to steal something, or for some preference or way to get ahead" echoed exactly what I was told when I was over there a few months back.
Morgan Stanley Bet Farm in Ukraine Before Bailout
Also of interest is the reference to Transparency International’s 2010 corruption perceptions index, which I'd never heard of. Ukraine ties with Nigeria, Sierra Leone and Zimbabwe amongst others as one of the most corrupt places in the world. You can view the entire table here:
Bent as an Arab's dagger
Denmark, New Zealand and Singapore come top of the list of countries to do business with if you're interested, with the UK attaining a respectable 20th slot. Although how we can be one behind Qatar who recently bribed their way to the right to host the World Cup in 2022 is beyond me.
UK Profits Up Despite Sales Down At Tesco
05/10/11 -- Tesco has reported a 4.5% rise in half-year profits in the UK to GBP1.3 billion despite a 0.5% fall in sales here. How did they manage that? Discuss.
UK conditions are "challenging" (we've got you sussed) they said but highlighted "excellent growth" (they haven't got you sussed yet) in Europe and Asia generating Group sales up 8.8% year-on-year and profits up 12.1%.
The Italian Jobbie
05/10/11 -- As the risk of European contagion (a posh word for dominoes) grows, Italy have had their credit rating downgraded three notches by Moody's I see. Other EU countries are likely to see similar reductions, they warn.
The downgrade will make it even harder for Italy to borrow money than it already is, and it seems pretty clear that even the EU/ECB haven't got deep enough pockets to bail them out if they're struggling to finance relative economic minnows like Greece.
The markets seem strangely unmoved by the news with the FTSE100 rising back up above the 5,000 mark.
The Morning Rant
05/10/11 -- There's not a great deal of fresh fundamental news around this morning, in fact there's bugger all in the way of grain info out there that wasn't already in the market yesterday. So we appear to be witnessing a modest little rebound from what the newswires call "oversold" conditions.
Although you could argue that they only look oversold due to the enormous amount of hype and overbought conditions that pushed London wheat up above GBP200.00/tonne just a few months ago.
"Is there any news on Ensus re-opening, that'll turn this market around" is a question I'm getting asked a lot at the moment. Particularly by those that would like to see the grain market considerably higher than where it is now.
The answer to that is no, I haven't heard anything (which doesn't mean that it isn't going to happen of course). I am not aware of them re-entering the market to buy wheat, which clearly they would need to do before recommencing operations. Have market conditions improved enough to allow them to operate profitably now, I mean London wheat is fifty quid lower than when they shut down, so the sums must stack up now surely?
If we look at NYMEX crude around the end of April when the decision to take some downtime was probably made then in percentage terms, maybe surprisingly, crude has actually fallen more than London wheat. By 33% as opposed to 29% if you're interested.
That doesn't necessarily mean of course that the price of all-singing, all-dancing, it ticks a lot of boxes, environmentally friendly (in some eyes) bioethanol has come down 33% in the same period as well. It probably hasn't, but unfortunately I don't know the answer to that one, hopefully someone reading this will email me to tell me.
There are, I understand, potential changes in legislation in the wings for 2012 which will make it more difficult for cheaper foreign ethanol to enter the EU. So if the sums don't still don't stack up now then they may well do in the new year.
(The logic behind an industry that can only survive with government mandates that it must exist coupled with legislation that prevents us importing the same thing from places than can produce it cheaper than we can still eludes me, incidentally).
Would that be a game changer for UK wheat? Well, IF they were to run at full tilt for the whole of the first half of 2012 starting on the 1st of January then it would add half a million tonnes worth of extra demand to the UK balance sheet. How likely do you think that is? Not very I'd wager.
With UK wheat exports already well behind those of twelve months ago, as and when Ensus does re-open then it doesn't look like much of a game changer as far as the 2011/12 crop is concerned from my perspective.
Chicago Closing Comments
04/10/11 -- Soybeans: Nov 11 Soybeans closed at USD11.60, down 17 1/2 cents; Jan 12 Soybeans closed at USD11.71 3/4, down 17 cents; Oct 11 Soybean Meal finished at YSD298.30, down USD4.90;
Oct 11 Soybean Oil closed at 48.79, down 97 points. Funds were estimated to have sold 10,000 soybean contracts on the day as their appetite to stick with the "golden child" that agri-commodities have become gets tested to the limit. In addition to the omnipresent threat of a Greek debt default we now how Fed chairman Ben Bernanke saying that the US economy too is close to faltering. It certainly is, and Greece could quite easily push it over the edge. Harvest pressure added to the bearish tone.
Corn: Dec 11 Corn closed at USD5.8473/4, down 4 3/4 cents; Mar 12 Corn closed at USD6.00 3/4, down 5 1/4 cents. Funds were reckoned to have sold around 12,000 contracts on the day as bullish enthusiasm took another kicking. The US Grains Council did their best to support the market, playing the old favourite "Chinese demand" trump card, but even that failed to get the market into positive territory. They said that corn production in China this year will only amount to 167 MMT, which is 11 MMT less than the USDA currently estimate. That will leave them needing to import 5-10 MMT of corn in 2011/12, the USGC added.
Wheat: Dec 11 CBOT Wheat closed at USD6.04, down 15 1/2 cents; Dec 11 KCBT Wheat closed at USD6.86 1/2, down 15 1/2 cents; Dec 11 MGEX Wheat was down 22 1/2 cents at USD8.62 3/4. Funds were estimated to have added a further 5,000 CBOT contracts to their existing net short position today. Spillover weakness from corn, a firm US dollar and falling crude oil all added to the bearish tone. Decent weekend rains are on the forecast for parched winter wheat areas on the southern Plains. Final harvest estimates out of Russia keep increasing, as too does their export potential.
EU Wheat Close
04/10/11 -- EU grains closed with Nov11 London down GBP2.15/tonne at GBP146.10/tonne and Nov11 Paris wheat EUR3.00/tonne lower at EUR182.25/tonne. Paris corn, rapeseed and malting barley all closed around EUR4.00-5.00/tonne lower too as the meltdown continues.
This was a new 14-month low front month close for both London and Paris wheat, neither of which seem to be able to buy a rally at the moment. London has finished down on fifteen of the last twenty trading sessions as the trend remains unquestionably lower.
Greek debt woes are to the forefront with London, French and German stocks closing around 2.5-3.0% lower.
Elsewhere, FSU crops keep getting bigger. The Russian grain harvest now stands at 89.5 MMT with 12% of the planted area still left to cut. The corn harvest in Ukraine is now well underway at 28% complete, producing 5.5 MMT so far. That implies a crop of 19.6 MMT versus the USDA projection of 18 MMT.
The Russian Grain Union pretty much say that the only limit on grain exports this season is down to logistics. Meanwhile Kazakhstan are about to bring in a record grain crop of their own and are eager to find buyers before prices fall further.
Egypt says that it is to increase the quality criteria of it's wheat imports, faced with a barrage of cheap high protein FSU wheat. It is still mulling the reliability of supplies out of Ukraine.
Winter grain plantings in Ukraine have reached 62% of the planned area, with wheat sowings at 69%, Only 5-10% of the crops have sprouted so far due to recent dryness but heavy rain is forecast for the end of the week which should alleviate the situation.
StatsCanada peg all wheat production there this year at 24.16 MMT, 1 MMT up on a year ago and slightly higher than their previous estimate and the latest USDA figure.
Early Call On Chicago
04/10/11 -- The meltdown in grains continues with the overnight Globex market closing 12-14 cents lower on beans, 10-12 cents lower on corn and down 8-10 cents on wheat. Crude is down almost two dollars at USD75.68/barrel.
Risk aversion is the buzz phrase once again, with the usual suspect of Greece the main cause for concern after EU finance ministers put off a decision on handing over the next slug of bailout cash.
It would seem that we've now got to wait another month to see IF Greece does get the funding to stop it defaulting in November. That's a long time in the grain markets. If we were to see the falls of the past month mirrored in the one that lies ahead then we'd be looking at corn at four dollars a bushel and soybeans at nine dollars a bushel by the end of October!
On the fundamental front we've got Russia's grain harvest now standing at 89.5 MMT, with 12% of the planted area still left to cut. Wheat accounts for 55.8 MMT of what has been harvested so far and barley 17.1 MMT - the latter being 1.6 MMT higher than the USDA's current estimate.
The corn harvest in Ukraine is now in full swing at 28% complete, producing 5.5 MMT so far - implying a crop of 19.6 MMT versus the USDA projection of 18 MMT.
Australia is seen having a record volume of wheat to shift in 2011/12 by virtue of heavy carryover stocks from last season. A lot of those stocks are feed wheat. Early harvest results out of Queensland are said to be a bit disappointing, which may mean those feed wheat stocks will be getting added to this year, which would be bearish for corn.
StatsCanada peg all wheat production there this year at 24.16 MMT, 1 MMT up on a year ago and slightly higher than their previous estimate and the latest USDA figure.
FCStone are bullish on US corn and soybean production prospects pegging this season's corn yield at 148.7 bu/acre, up 2.4 bu/acre from their previous estimate. Their soybean yield figure is now 42.8 bu/acre, 1.75 bu/acre up on a month ago. Both numbers are also higher than last month's USDA estimates.
Early calls for this afternoon's CBOT session: corn down 10-12 cents, wheat down 8-10 cents, beans down 12-14 cents.
Morning Ramblings
04/10/11 -- Eurozone finance ministers have decided to delay the decision on whether to hand over the next EUR8 billion of bailout funds to debt-stricken Greece. Whether that is tied to the announcement over the weekend that the Greeks will noy hit their deficit target at the end of the year is unclear.
What is clear though is that this whole circus is now going to be allowed to rumble on into November. Greece had initially said that it needed the money in October to avoid a default. Now it appears to be indicating that due to some cash generated from a car boot sale it may be able to get through to November, but it really does need the money then what with Christmas coming and everything.
European stock markets are understandably unimpressed with the FSTE100 down more than 2% below the 5,000 mark for the first time since yesterday! The well-named French CAC40 is down 2.3% and the German DAX down 2.75%.
London wheat has is trading easier again, down GBP2.25/tonne on front month Nov and GBP1.25 lower on Nov12. Paris wheat is EUR1.25-2.00/tonne weaker and Paris rapeseed falls EUR3.50-5.75/tonne in early trade. The overnight Globex market sees wheat, corn and beans all down around 5-7 cents.
The Russian Grain Union sees wheat production there this season at 55 MMT (up 33%), with barley output at 16-17 MMT (around double the 8.3 MMT produced in 2010) and the corn crop also twice last year's total at 6 MMT.
Wheat availability in Australia for 2011/12 will be record large due to the high volume of carry-in from the 2010/11 marketing year, according to Emerald Group Australia. They currently estimate the crop at 24.5 MMT, although other forecasts are as high as 27 MMT which would peg their exportable surplus even higher. Domestic consumption there is normally only around 7 MMT.
My mate Mike Lee in Ukraine says that: "Weather is good, bit dry but that has helped with getting all the winter crops in the ground and if you didn't over cultivate and kept some moisture in the soil then your crops are growing away nicely. There is too much recreational cultivation in Ukraine which breaks the structure and dries the soil out.
"Winter OSR has been slow to get underway but seems to be catching up now. Sunflower harvest well underway and maize just about got going this week, forecast cats and dogs from next week so might yet be a difficult maize harvest." The rain may not be good news for the corn harvest, but it won't do any harm at all for winter wheat and OSR.
Talking of corn, the harvest in France is seeing "excellent" yields, according to Agritel.
FCStone last night came out with their October US corn and soybean yield/production estimates pegging both significantly higher than last month and the USDA. See the numbers here on Agrimoney.com.
Chicago Close
03/10/11 -- Soybeans: Nov 11 Soybeans closed at USD11.77 1/2, down 1 1/2 cents; Jan 12 Soybeans closed at USD11.88 3/4, down 3/4 cent; Oct 11 Soybean Meal closed at USD303.20, down USD1.50; Oct 11 Soybean Oil closed at 49.76, down 19 points. Prices recovered from overnight lows which saw beans trading with double digit losses, however they also slumped from intra-day highs which saw them post double digit gains at one point too. Greek debt worries continue to add pressure. The USDA upped the good/excellent rating after the close by one point to 54%, with harvesting 19% complete. FCStone increased their US crop production estimate to 3.157 billion bushels using a yield of 42.8 bushels/acre, up 72 million and a bushel/acre on the USDA's September numbers.
Corn: Dec 11 Corn closed unchanged at USD5.92 1/2; Mar 12 Corn closed at USD6.06, up 1/4 cent. As with beans corn traded both sides, but an unchanged close hardly represents a major reversal. Bulls remain shocked by the sudden about turn in the market having bought into the "incredibly tight stocks" story for months now. It would seem that last year's production numbers were probably underestimated by the USDA leaving us with more stocks now than the market realised. Lower corn usage, yet flat wheat consumption, across the summer may be partially explained by increased utilisation of DDGS. The USDA left good/excellent crop conditions unchanged at 52%, with the harvest said to be 21% complete.
Wheat: Dec 11 CBOT Wheat closed at USD6.19 1/2, up 10 1/4 cents; Dec 11 KCBT Wheat closed at USD7.04 3/4, up 3/4 cent; Dec 11 MGEX Wheat closed at USD8.83 1/2, down 8 3/4 cents. There was a correction in the Chicago/Minneapolis spread following strong gains by the latter last week. Funds were said to have bought 5,000 Chicago contracts on the day, although they still hold a significant short position. Winter wheat plantings were placed at 42% done, 11 points behind normal. Growers will be hoping that the widespread soaking rains in the 7-15 day forecasts do indeed turn up. Russia will harvest 93 MMT of grain, 3 MMT more than the government target, according to the head of the Grain Union there.
EU Wheat Close
03/10/11 -- EU closed with Nov London wheat down GBP2.40/tonne at GBP148.25/tonne and Nov Paris wheat rising EUR1.75/tonne to EUR185.25/tonne.
It was a bit of a mixed bag sort of a day with wheat both sides of the Channel sharply lower mid-morning. Nov London wheat fell as low as GBP144.55/tonne - the lowest for a front month since the late July 2010.
Nov Paris wheat slumped as low as EUR178.50/tonne, also the lowest for a front month since late July 2010, before staging a late recovery as US grains improved on their overnight showing and the euro went down the tubes.
The pound was threatening to hit 1.17 against the euro by the close of play, a level it hasn't closed above since March, after Greece announced over the weekend that it wasn't going to get it's budget deficit down to the 7.6% of GDP target by the end of the year. That casts into doubt the likelihood of them getting their next tranche of EU/IMF bailout money.
Market fundamentals are starting to look a little bearish too, as well as outside influences. US weather on the southern Plains is seen as getting "the most significant rain this area has seen in months" say WxRisk.
Russia's grain crop is now forecast at 93 MMT by the head of the Russian Grain Union, who also sees export potential climbing to 25 MMT this season. The Kazakh harvest meanwhile stands at 22.2 MMT so far, 86% up on last year's final total with 13% of the planted area still to be cut.
Spot UK ex-farm feed wheat levels are now down to around GBP140.00/tonne, with new crop Aug12 prices sub-GBP130.00/tonne. Farmer selling will be light to say the least at these levels.
Early Call On Chicago
03/10/11 -- The overnight grains finished with corn down 10-14 cents, beans 10-11 cents lower and wheat 2-4 cents weaker. NYMEX crude is down a dollar and a half as more Greek worries emerge after they announced that they were set to miss deficit targets at the end of the year.
Money continues to pour out of commodities, including grains. ANZ Bank say that spec money reduced their longs in US agrimarkets by almost half in the week to Sept 27th.
The head of the Russian Grain Union now says that the country will harvest 93 MMT of grains this year, pegging export potential at around 25 MMT of the 30 MMT surplus that they have for sale.
The Kazakh harvest meanwhile stands at 22.2 MMT so far, 86% up on last year's final total with 13% of the planted area still to be cut.
The hangover from Friday's bearish USDA report continues, with corn falling to 9 1/2 month lows having apparently endured it's largest one month fall in fifteen years in September.
Prospects look promising for the southern Plains winter wheat planting and early growth with "the most significant rain this area has seen in months" in the forecast a week from now, with a secondary dose showing up in the 11-15 day prognosis, according to WxRisk.
Early calls for this afternoon's CBOT session: corn down 12-14 cents, beans down 10-12 cents and wheat 2-4 cents lower.
EU Rapemeal Prices
03/10/11 -- Latest guide prices for EU rapemeal today, basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session. Not exactly following the soya market these are they:
| Oct11 | 180.00 | -2.00 |
| Nov11 | 179.00 | unch |
| Dec11/Jan12 | 178.00 | unch |
| Feb/Apr12 | 178.00 | unch |
| May/Jul12 | 177.00 | unch |
| Aug/Oct12 | 157.00 | unch |
| Nov12/Jan13 | 167.00 | unch |
London Wheat Falls To Lowest Since July 2010
03/10/11 -- Nov London wheat continues with its spectacular decline trading down to GBP145.00/tonne in early trade Monday - the lowest for a front month since the last day of July 2010.
Nov12 is down GBP3.95/tonne to GBP139.05/tonne, some GBP33.95/tonne below it's May high.
Greek woes continue to dog the markets in general, with the FSTE100, German DAX and Paris CAC40 all down in the region of 2-2.5%, with the London benchmark having fallen below 5,000 at one stage.
There's no sign of "new month, new money" to get us going, although talking of the latter, given the current malaise, the BoE may be more inclined to get the printing press out again and authorise a further round of QE at this week's MPC meeting.
Whether they do, and if it will provide anything other than a short-term fillip remains to be seen.
UK ex farm feed wheat levels are now down to around GBP140.00/tonne, with new crop Aug12 prices sub-GBP130.00/tonne. That sure makes nitrogen look expensive, with prices thus far resolutely refusing to follow the global wheat market lower. It's only a matter of time before that market starts to fall out of bed IMHO. Cue "the only way is up" and "we've only got one load left to sell and we're done" comments from the big boys. If you fall for that one again you want certifying.
Talking of fertiliser, one Yorkshire farmer I know emailed me last week to say: "Having made the decision to abandon Solstice and milling varieties after many years because I couldn't achieve more than about 12.5% protein no matter how much nitrogen I poured on it, the sample results for my four bins have come back around 13.5% for this harvest. The first year I didn't apply any late N as the crop didn't look good enough!"
Next time the fertiliser rep comes round send him packing. "Nogger said it's an expensive f***ing luxury that I don't need," normally suffices under such circumstances I find. Sometimes accustomed with an invitation as to what to do with "the last load left" prill by prill.
If you're an arable farmer about the only strategy left open to you on a market like this is "if you don't like the price then don't sell." That's assuming that you can afford not to sell of course. OSR still looks like offering a decent return at around GBP340-345/tonne ex farm with bonus potential on top of that if you need cash.
The bad news is that I still see the market going lower, and it looks like we may be going to hit my arbitrary floor price of GBP125.00/tonne sooner than I anticipated. I don't know why that should be a surprise, as the markets do seem to have a habit of reacting faster than you might expect to both the upside and the downside.
The good news however is that the faster we reach the bottom, the closer we are to a new upside. And personally I see us reaching new heights there that have never been seen before, GBP250.00/tonne or maybe even higher. Although that may be a couple of years away yet.
Extreme volatility is what my vision of the future holds, as many of you will know from the various talks I've been doing around the country for the last six to eight months, and with that comes opportunity.
The opportunity to lose your shirt or make a fortune. Which is why I'm going to have some more limited edition Nogger shirts made up in time for Christmas! So if you lose yours you can buy another, and if you make a fortune you can buy two! Mugs. Now there's an idea as well...the limited edition "is it half empty or is it half full" magic Nogger coffee mug.
I might some posters done up too, with me in a Kitchener-like pose saying "Fertiliser reps - do one will you" instead of "Your country needs you" to fix to your farm gate - they'd sell by the bucketload. Year planners: Day one - market down, moan; Day two - market down, moan: Day three - market down, moan; Day four - market up, but only slightly, moan....
The Morning Vibe
03/10/11 -- The overnight grain markets are mostly lower again in follow-through trade from Friday night's capitulation. Corn currently stands around 10 cents lower with beans down 10-12 cents and wheat 1-3 cents lower nearby.
The word out of Greece over the weekend, where IMF/EU/ECB inspectors are in-situ trying to decide if enough has been done to warrant them releasing the next EUR8 billion bailout installment, isn't encouraging.
Greece say that they will fall short of their target to have their budget deficit down to 7.6% of GDP by the end of the year. Instead they project that it will only come in at 8.5%. Bearing in mind that this is slippery Greek politicians that we are dealing with here there's a pretty fair chance that they are being over optimistic with that assessment of the situation too.
European stocks are lower in early trade as more money wants out. NYMEX crude is USD1.72/barrel lower and is now under USD77.50/barrel
Looks like we can expect European grains to extend last week's losses then when things get going here shortly. The pound is up to 1.1650 against an under pressure euro, which may weigh a little on London wheat too.
A largely dry weekend across much of the US will have helped harvest progress but done little to encourage winter wheat planting/crop development in the southern Plains.
The cavalry may be on the way though, and just in the nick of time. WxRisk say that a strong deep trough coming out of the Rockies "will see good rains develop October 8-9 over eastern Colorado, all of the TX Panhandle, all of western half of OK and KS and the western half of Nebraska with 70% coverage of 1 to 3 inches! This to be the most significant rain this area has seen in months. In fact the European model develops a band of 4 inches are rain or greater over the eastern Texas panhandle into the eastern portions of the Oklahoma panhandle and far Southwestern Kansas."
"In the 11-15 day (forecast) the models show another strong trough moving into the West coast and Rockies Oct 11-12... which moves into the Plains and Midwest by OCT 13-14. Right now the models are showing this trough three fairly strong and if that is correct -- IF -- this could bring another round of decent rainfall to the dry areas of the lower Plains," they add.
Just a passing thought here. I wonder if Egypt have thought about defaulting on their recent Russian wheat purchases yet? Think how much money that would save...at least 50 million dollars, maybe more, at a guess without working it out.
Chicago Closing Comments
30/09/11 -- Soybeans: Nov 11 Soybeans closed at USD11.79, down 51 cents; Jan 12 Soybeans closed at USD11.89 1/2, down 51 3/4 cents; Oct 11 Soybean Meal closed at USD304.70, down USD12.20; Oct 11 Soybean Oil closed at 49.95, down 168 points. On the week Nov beans were down 79 cents, with Oct meal falling USD21.30 and Oct oil losing 245 points. These are the the lowest front month levels on beans and meal since last October, and the first time oil has been under USD50 since last November. Front month December crude slumped below USD79/barrel for the lowest close on the weekly chart since July 2010. Funds sold an estimated 15,000 soybean contracts as the smart money continues to exit commodities, spurred on by spillover weakness from corn. The USDA report was actually modestly supportive for beans, with Sept 1st stocks coming in 10 million below trade estimates at 215 million bushels. Lord knows what would have happened to beans if it had been bearish!
Corn: Dec 11 Corn closed at USD5.92 1/2, down the new 40 cents limit, Mar 12 Corn closed at USD6.05 3/4, also down 40 cents. Dec corn was 46 cents lower on the week and USD1.65 easier on the month. The last time we saw a front month begin with a five was before last Christmas. Funds expunged themselves of an estimated 30,000 contracts on the day as the USDA pegged September 1st stocks at 1.128 billion bushels, 164 million higher than what was expected and 208 million up on their August 2010/11 carryout estimate. The USDA numbers appear to confirm that prices in the USD7-8.00/bu region did induce some demand rationing across the summer. Weakness in crude added to the bearish tone for corn in particular.
Wheat: Dec 11 CBOT Wheat closed at USD6.09 1/4, down 45 cents; Dec 11 KCBT Wheat closed at USD7.04, down 36 cents; Dec 11 MGEX Wheat closed at USD8.92 1/4, down 3 1/4 cents. Minneapolis wheat held up well as the USDA pegged the HRS crop at 405 million bushels. CBOT Dec wheat fell 31 1/2 cents on the week, with Dec Kansas wheat down 27 1/2 cents and Dec Minneapolis up 41 1/4 cents. Funds were said to have sold 8,000 Chicago contracts on the day on spillover weakness from corn. The USDA pegged Sept 1st all wheat stocks a bit higher than trade estimates at 2.15 billion bushels. June-August disappearance was down 2% from last year at 720 million bushels. That's a surprise, as you would think that reduced corn usage across the summer would mean increased demand for wheat from the feed sector.
