What Time Do The Fireworks Start?
05/11/11 -- It's Bommy Night as we used to call it when I was a kid. It should have been Bonny Night I suppose but it wasn't it was Bommy Night. I remember setting fire to the contents of the bin one year when me Mum & Dad's backs were turned just to see what would happen. I don't know what I thought would happen, apart from everything would burn which it sure did. It's not easy putting a fire out without anybody noticing it when you're only six.
It clearly isn't proving too easy to put a fire out with the combined might of the G20, the ECB, the IMF and the eurozone is it, so what chance did I have?
It was Harold Wilson who said that a week is a long time on politics as I recall, and this has certainly been a long week. In fact as I write this at 11am on Saturday morning the weekend is already shaping up like being a long one itself.
I'm speaking at a conference in the Midlands on Monday and my presentation is far from finished, it's been such a busy week with lots of distractions. Already this morning though a series of other things keep grabbing my attention.
One of them being yields on Italian 10-year bonds setting a fresh euro-era high of 6.4% yesterday. Anything above 6% is generally regarded as being unsustainable and has prompted other eurozone countries to come cap in hand for a bailout.
Italian PM Berlusconi says he doesn't think Italy needs a loan from the IMF. That's what Greece, Portugal and Ireland said too wasn't it? And let's face it, can you trust a man who reckons he slept with eight women on the same night?
The Greek PM got his vote of confidence by a squeak I see, with 153 "oh go on then" votes out of 300. That should add a bit of calm to the markets a little on Monday in theory.
What won't however is a CME announcement after the close on Friday night that it is to substantially increase margin calls on all futures and options. This will be the first time they have ever done this across the board on all commodities at the same time I gather.
The move is obviously prompted by the fallout from the demise of MF Global, and could have major implications for those who find that they can't stump up the extra required funding at the drop of a hat to keep their positions open.
For more info on this story go here, and pay particular attention to the last paragraph: CME increases margin call; markets will be under pressure.
There's never a dull moment is there?
Chicago Closing Comments
04/11/11 -- Soybeans: Nov 11 Soybeans closed at USD12.12 1/2, down 6 3/4 cents; Jan 12 Soybeans closed at USD12.21, down 6 1/4 cents; Dec 11 Soybean Meal closed at USD315.40, up USD0.90; Dec 11 Soybean Oil closed at 51.87, down 16 points. On the week as a whole there's not a lot of change with Nov 11 beans 4 1/2 cents lower, Dec meal USD2.10 easier and oil up ten pips. Export sales were very disappointing yesterday as rumours of Chinese buying remain unconfirmed. The trade is cautious ahead of the Greek vote of confidence and next week's USDA reports. The fallout from the demise of MF Global is also weighing on the market.
Corn: Dec 11 Corn closed at USD6.55 3/4, up 2 1/4 cents; Mar 12 Corn closed at USD6.66 1/4, up 2 1/2 cents. On the week Dec corn was 3/4 cent higher. Funds were estimated to be net buyers of 3,000 corn contracts on the day. The market is treading water awaiting further news from Europe and cautious ahead of next week's USDA reports. The average trade guess for US corn production is seen falling from 12.433 billion bushels in October to 12.381 this time round, with one estimate as low as 12.049 billion. As we know however, second guessing the USDA is a fools game.
Wheat: Dec 11 CBOT Wheat closed at USD6.36 3/4, up 3/4 cent; Dec 11 KCBT Wheat closed at USD7.18, down 2 cents; Dec 11 MGEX Wheat closed at USD9.23 3/4, up 6 3/4 cents. Chicago wheat dropped 7 3/4 cents, with Kansas down 20 cents and Minneapolis up 3 1/4 cents on the week. The weekly commitment of traders report shows managed money increasing their Chicago short on the week. Weekend rain for the southern Plains would be beneficial if they arrive. Export interest remains sluggish with plenty of competition for what enquiries there are out there.
London Wheat Falls As Paris Wheat Gains
04/11/11 -- EU grains finished mixed with Nov 11 London wheat down GBP0.50/tonne to GBP150.50/tonne and Nov 11 Paris wheat rising EUR1.75/tonne to EUR195.50/tonne.
On the week as a whole that places London wheat GBP2.50/tonne lower and Paris wheat EUR8.75/tonne higher.
Nov 11 Paris wheat is now an EUR8.50/tonne premium to Jan 12, which in turn is a further EUR2.25/tonne premium to Mar 12 and May 12. I wish I could easily explain that but I can't.
Despite the inverse, volume offers of nearby physical wheat are scarce in France, according to FC Stone. If the front month premium looks bizarre to us then it has also to others, the nearby longs are stronger than the nearby shorts is another explanation I've heard.
Brussels granted 525 TMT of EU soft wheat exports this past week, bringing the marketing year total to date to a shade over 5 MMT. Despite that being the largest weekly total of the 2011/12 campaign it is still 40% down on where we were a year ago.
Nothing too concrete appears to have emerged from the G20 summit in Cannes. Yet again we have a lot of talk of "cohesion" and "determination" to sort the global economy out, but the devil is supposed to be in the detail and in this case once more we don't appear to have any detail.
The Greek government is tonight facing a vote of confidence over its handling of the debt crisis. Many are now saying that Papandreou's referendum idea was no more than a way of forcing the opposition into sharing the political burden of passing the bailout deal.
Who knows what Monday brings, a weekend is a long time in politics.
The Idiots Guide To The G20 Summit
04/11/11 -- The G20 summit in Cannes is over. Here's the gist of it:
a) don't panic, we have a plan and everything is going to be alright.
b) details of the plan can't be revealed right now, but there is one for sure, don't you worry your pretty little head about that.
c) we may be in a position to give you some more details in February, but don't let that fool you into thinking that we haven't got a plan now, we have, we just need to get it typed up and the typist is away on maternity leave.
d) we all agree on all the things we all agreed on last time, so what's your problem? Everything has been alright since then, apart from the odd little hiccup, relax.
e) security, transparency, commitment, financial stability, reinvigoration of economic growth, creation of jobs. They all sound like a good things don't they? So we've written them down, quite close to the top of our plan actually.
f) Mexico are in charge from Dec 1st, that's good, it's sunny there.
g) that Argie woman is quite fit isn't she? Fernandez. She'll look good in a bikini in Acapulco. Does anyone know what room she's in?
EU Rapemeal Prices
04/11/11 -- Latest guide prices for EU rapemeal today, basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:
| Nov11 | 168.00 | unch |
| Dec11/Jan12 | 171.00 | +2.00 |
| Feb/Apr12 | 172.00 | +3.00 |
| May/Jul12 | 171.00 | +1.00 |
| Aug/Oct12 | 152.00 | +1.00 |
| Nov12/Jan13 | 159.00 | +1.00 |
The Morning Rant
04/11/11 -- As some of you will doubtless know I am for my sins an Everton supporter, so as you will guess I'm not exactly in it for the glory. Well the current Greek tragedy reminds me of a match I went to once.
It was probably late 80's in the cup, which one I can't remember, it certainly wasn't the FA Cup it was one of the lesser ones. Back in those days there was the SIMOD Cup, the Inter-toto Cup, the Pop Down The Shops For A Pint Of Milk Cup, there were all sorts of them.
Well we were away at Oldham, Boundry Park, plastic pitch, midweek, probably November or December, open stand, lashing it down with rain and I mean lashing. We were behind what turned out to be the goal Everton were defending in the second half. It was 1-1 I think with about 10 or 15 minutes to go. We were all soaked and thoroughly miserable. And extra time was looming.
Then something happened that had never happened before, Oldham were starting an attack down the left and we all started cheering, willing the winger to whip in a teasing cross that their striker would rise like a salmon to meet and send a perfect header crashing past Big Nev in goal. Come on, stick it in. And he did, and we all started clapping. OK we didn't go exactly wild, but I've never seen an opposition goal greeted with such a sense of "great, well done Oldham, Everton don't you dare run down the other end and equalise, can we all please go home now."
And that is exactly how I feel about the European debt crisis, Papandreou, Merkel, Sarkozy, Berlusconi (it's starting to sound like a decent midfield that, the latter arrived from Lazio in some mysterious deal that no doubt lined the pockets of him & his agent even though he couldn't hit a barn door with a banjo) and the whole bloody lot of them. Sod off.
Chicago Closing Comments
03/11/11 -- Soybeans: Nov 11 Soybeans closed at USD12.19 1/4, up 25 3/4 cents; Jan 12 Soybeans closed at USD12.27 1/4, up 24 1/2 cents; Dec 11 Soybean Meal closed at USD314.50, up USD4.00; Dec 11 Soybean Oil closed at 52.03, up 118 points. Beans closed higher despite a very poor weekly export sales number of just 209,700 MT versus trade guesses of 450-750 TMT. The latter did little to support recent rumours of Chinese buying. After a real yo-yo day in terms if European developments the market is buoyed by latest news that Greece will not resort to a referendum on the latest bailout proposals after all. However, after a day like today anything is possible tomorrow.
Corn: Dec 11 Corn closed at USD6.53 1/2, up 8 1/2 cents; Mar 12 Corn closed at USD6.63 3/4, up 7 3/4 cents. Funds bought an estimated 9,000 contracts on the day on a slight easing of tension surrounding Greek debt concerns. Weekly export sales were a bit better than expected at 622,600 MT and also included one cargo switched from unknown to China. Even so US corn exports are running well behind the level needed to match USDA projections for 2011/12. Ukraine remain aggressive competition and the USDA's attaché in Brazil upped their 2011/12 crop estimate by 9 MMT to 64 MMT. Demand from the ethanol sector remains strong - for now - ahead of the removal of the blenders' tax credit at the end of the year.
Wheat: Dec 11 CBOT Wheat closed at USD6.36, up 12 1/2 cents; Dec 11 KCBT Wheat closed at USD7.20, up 7 cents; Dec 11 MGEX Wheat closed at USD9.17, up 6 3/4 cents. Wheat export sales were below expectations at 320,100 MT as the Black Sea continues to dominate. There's a bit of rain in the forecast for the Southern Plains which should help winter wheat there. Spillover strength from corn added support as did a slight easing of European tensions. Funds remain significant short-holders of CBOT wheat even if they have trimmed their positions somewhat of late. That may support the futures market although it might do little to help the physicals as US wheat remains largely uncompetitive on the world export stage.
EU Wheat Close
03/11/11 -- EU grains finished higher with Nov London wheat climbing GBP2.10/tonne to GBP151.00/tonne and Nov Paris wheat gaining EUR4.25/tonne to EUR193.75/tonne. This was the highest close on Nov Paris wheat since late September.
Stealing the limelight from the G20 summit was a lot of rumour and counter rumour coming out of Athens. The BBC and Dow Jones at one stage apparently reported that PM George Papandreou was on his way to see the President to resign. Reuters and Bloomberg said that he wasn't.
For now it seems that the later is true, although things can change very quickly with this story and who knows what tomorrow might bring. The latest news we have now is that he remains as PM but is said to be ready to drop his proposed referendum idea.
The market at least finds the later piece of news supportive as it makes default less likely, but this twisting and turning storyline is far from over yet.
The Beeb also told us that the National Institute for Economic and Social Research reckon that there's a "strong chance" of a UK recession in 2012.
In other news the ECB cut interest rates by a quarter to 1.25%, reversing what it did as recently as July.
There wasn't a great deal of fundamental grain news once again as matters in the eurozone continue to dominate.
The FAO pegged world cereal output at a record 2.325 billion tonnes this year adding that world food prices were at an 11-month low.
Ukraine said that it's grain production this season had reached 50.9 MMT as the corn harvest reaches its final stages.
Early Call On CBOT: Firmer On More Europhoria
03/11/11 -- The overnight grains rebounded with beans ending 20-22 cents firmer, corn up 6-8 cents and wheat up 5-7 cents. Crude oil is around a dollar higher.
The BBC are reporting that the Greek PM will to offer his resignation "within the next half-hour" which could shelve referendum plans, an idea that the market seems to like.
If he does go then it would seem that we may be in for our second bout of Thursday europhoria in a row. Although we all know what subsequently happened to last week's rally so don't go getting too carried away just yet. Meanwhile, a potential Italian default would make the Greek Farce look like a walk in the park.
The ECB have cut eurozone interest rates by a quarter point to 1.25%. That's about as much use as a chocolate fireguard.
The USDA weekly export sales were a bit better than expected for corn at 622,600 MT and also included one cargo switched from unknown to China. Wheat sales were below expectations at 320,100 MT and soybean sales were uglier than Mrs N#1 at 209,700 MT versus trade guesses of 450-750 TMT.
The latter makes the China has been buying US beans lately rumours look all the more dubious.
Early calls for this afternoon's CBOT session: beans up 15-20 cents, wheat and corn 5-7 cents firmer.
EU Rapemeal Prices
03/11/11 -- Guide prices for EU rapemeal, basis FOB Lower Rhine in euros/metric tonne, with change from previous day:
| Nov11 | 168.00 | -2.00 |
| Dec11/Jan12 | 169.00 | -2.00 |
| Feb/Apr12 | 169.00 | -2.00 |
| May/Jul12 | 170.00 | unch |
| Aug/Oct12 | 151.00 | unch |
| Nov12/Jan13 | 1589.00 | -1.00 |
Possible Red Hot Breaking News
03/11/11 (10.45 GMT) -- This is what's fun about being on Twitter. Unconfirmed reports are sweeping t'interweb suggesting that Greek PM George Papandreou has resigned.
A Greek cabinet meeting began at 10.00 am London time. Papandreou has apparently lost support of three more MP's this morning meaning that his ruling PASOK party has lost it's majority in the Greek Parliament.
All will no doubt become clear sometime soon. The overnight grains seem to have got a whiff, with beans now up 24-25 cents, corn up 9-10 cents and wheat up 6-7 cents. His exit would be a good thing as it makes a Greek default/exit from eurozone less likely - at least that's the way the market sees it. No Papandreou = no referendum = europhoria (again).
It seems like we may have turned the clocks back a week not an hour. It's like the Christmas Day episode of EastEnders this isn't it? And somebody always gets killed in that.
Is This The Future?
03/11/11 -- Is it a park, is it a farm, is it a supermarket? It's all of the above. An ambitious and futuristic plan by Dutch architects to grow fruit, vegetables, rice and even fish all native to a different variety of climates all in one 4,000-acre plot of disused land in Holland's largest metropolitan area.
It's the farm shop on a gigantic scale. A very interesting concept, and one that puts me in mind of the big out of town shopping malls closing down the High Street!
Like it? Or Loathe it? And Where's the car park going to go?
Early News
03/11/11 -- The Greek finance minister has apparently "broken ranks" overnight with the PM and said that the decision whether or not to accept the bailout package should not be put to a public vote.
Erm, surely the finance minister is part of the Greek cabinet? The same cabinet that gave the PM their unanimous backing to referendum just yesterday? Confused, I know I am. Said referendum is being pencilled in for Dec 4th apparently, so that gives us yet another month of dithering. Great. They can't even ask Jim to fix this one any more.
Merkel and Sarkozy have said that Greece can whistle for it's next EUR8 billion in aid until this one gets sorted. Quite right too. Those two seem to be spending a lot of time together these days don't they? Late night meetings. One thing leads to another. Imagine what the offspring of that copulation would look like. Urgh.
Moving on, the BBC this morning say that: "The US administration has made it clear in recent weeks that it wants the eurozone to put its house in order urgently." The cheeky buggers. Pot, kettle, surely Mr Obama.
The G20 meeting gets underway in Cannes today. We can expect more hot air but will we get any cohesive action? Probably not. I blame the parents.
The Beeb also tell us that the National Institute for Economic and Social Research reckon that there's a "strong chance" of a UK recession in 2012. You don't say, and there we were thinking that everything was rosy.
The overnight grain markets are mixed, with beans around 4-5 cents higher and with corn and wheat a cent or so either side of unchanged. NYMEX crude is a dollar lower at USD91.50/barrel. European stocks have opened lower.
Chicago Closing Comments
02/11/11 -- Soybeans: Nov 11 Soybeans closed at USD11.93 1/2, up 1 1/4 cents; Jan 12 Soybeans closed at USD12.02 3/4, up 1/4 cent; Dec 11 Soybean Meal closed at USD310.50, down USD0.20; Dec 11 Soybean Oil closed at 50.85, up 5 points. Beans closed up but well off session highs with funds buying an estimated 2,000 contracts on the day. Informa Economics left it's US soybean yield and production estimates broadly unchanged from last month and marginally above the USDA's October numbers. Brazil's soybean production estimate was raised 2 MMT however. Weekly export sales for tomorrow range from 450 to 750 thousand MT.
Corn: Dec 11 Corn closed at USD6.45, down 9 1/4 cents; Mar 12 Corn closed at USD6.56, down 9 1/4 cents. Corn started higher but soon faded as funds sold an estimated 7,000 contracts on the day after Informa Economics raised it's US production estimate to 12,549 billion bushels, up from the October estimate of 12.519 billion and above last month's USDA figure of 12.433 billion. The European story also continues to weigh on the market as did news that the Fed wasn't up for launching QE3 just yet. Estimates for the weekly export sales report range from 400 to 600 thousand MT, not too impressive for this time of year. US sales are missing out to cheaper supplies from Ukraine and also better priced feed wheat out of Australia.
Wheat: Dec 11 CBOT Wheat closed at USD6.23 1/2, down 6 1/2 cents; Dec 11 KCBT Wheat closed at USD7.13, down 5 1/2 cents; Dec 11 MGEX Wheat closed at USD9.10 1/4, up 4 1/2 cents. CBOT wheat was again a follower of corn, and today that meant going lower on the back of Informa's raise in production estimates for corn. Rain and snow for the Southern Plains could be a little negative too although the lack of US competitiveness abroad should be of more concern. Trade estimates for tomorrow's weekly export sales report range from 350 to 450 thousand MT. With world ending stocks projected at a ten year high, a strong dollar and an abundance of much cheaper Black Sea wheat on the market US wheat has it's work cut out in 2011/12.
EU Wheat Rangebound
02/11/11 -- EU grains ended mixed with Nov London wheat up GBP1.15/tonne to GBP148.90/tonne and Nov Paris wheat climbing EUR1.76/tonne to EUR189.50/tonne.
There was a dearth of fresh fundamental news and the market seems to be stuck in a narrow sideways mode. Front month London wheat has traded within the range of GBP146-153/tonne for the last twenty four trading sessions. Nov 11 Paris wheat has been stuck in the EUR185-192/tonne range for a similar length of time, and an even narrower EUR185-190/tonne range for the last sixteen sessions.
The weak euro is supporting Paris wheat, even though there has been little recent evidence of it boosting exports significantly - if at all.
Extreme nervousness and caution over the European debt issue remains.
Greek PM George Papandreou is to meet with French President Nicolas Sarkozy and German Chancellor Angela Merkel today ahead of the start of tomorrow's two day G20 summit in Cannes. Both were said to have been shocked at Greece's sudden announcement that they would put the acceptance of last week's bailout terms to a public vote.
The storm clouds are also gathering over Italy who's central bank is said to be launching an emergency operation to swap bonds held by the nation's banks for ones with a longer maturity.
The Italian cabinet is said to be holding an emergency meeting tonight to discuss it's own spiralling borrowing costs. They're being asked to pay seventeen times more on one year loans than Germany at the moment and have shown little real enthusiasm for pushing through their own austerity measures.
US corn futures turned lower in late afternoon trade after analytical firm Informa Economics increased slightly their estimate for this season's US corn crop to 12.549 billion bushels using a yield of 149.5 bu/acre. In round figures that places the crop some 3 MMT higher than the USDA's October forecast.
Recently planted winter wheat in Western and Central Europe are looking in pretty good shape by and large, and rain moving in from the west in the next ten days should help alleviate pockets of dryness in some areas. Eastern Europe and Ukraine though could desperately do with a drink.
Early Call On Chicago
02/11/11 -- The overnight grains are mostly firmer with beans up 10-12 cents, corn up 2-3 cents and wheat around 1-2 cents higher nearby.
Crude is a bit higher and the dollar a bit weaker, both adding modest support.
Unlike yesterday nothing too bad has happened in the outside markets. Yet.
Fresh news is very thin on the ground, it's almost as if we've got used to outside influences driving the market now.
There's talk of bargain-hunting emerging with beans having fallen to three week lows last night, but are these the same bulls who drove the market up last Thursday in a very short-lived wave of europhoria?
The market doesn't seem to want to go lower, but lacks the conviction to move higher either given the quagmire of debt engulfing Europe. The latter isn't going to go away any time soon though.
Early calls for this afternoon's CBOT session: beans up 10-12 cents, wheat up 1-3 cents, corn up 2-4 cents.
EU Rapemeal Prices
02/11/11 -- Latest guide prices for EU rapemeal today, basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:
| Nov11 | 170.00 | unch |
| Dec11/Jan12 | 171.00 | -2.00 |
| Feb/Apr12 | 171.00 | -2.00 |
| May/Jul12 | 170.00 | -1.00 |
| Aug/Oct12 | 151.00 | -1.00 |
| Nov12/Jan13 | 159.00 | -1.00 |
Morning Markets
02/11/11 -- The overnight grains were all a bit firmer early doors, led by beans, although all are off earlier session highs now with wheat and corn slipping into the red. European grains are mostly in positive territory although there is a definite air of nervousness.
The Greek PM surprisingly got the unanimous backing of his cabinet to press ahead with his referendum idea. Today he is due to meet up with Merkel & Sarkozy ahead of tomorrow's G-20 summit. Who wouldn't like to be a fly on the wall at that one?
An Italian newspaper is reporting that the central bank there is to launch an emergency operation to swap bonds held by the nation's banks for ones with a longer maturity.
Considering the mayhem that the potential of a Greek default has caused imagine the pandemonium that a potential Italian one would bring. Think it couldn't happen? Think again and stand well away from the fan, somewhere like Mars should be just about far enough away I should think.
By the way, the country who's banks are most exposed to Greek debt is France with a mere USD56 billion is on the line. Guess who's at the front of the queue in exposure to Italy. That's right, it's our garlic munching chums again. Want to guess how much they are in for on that one?
It's a little bit more than Greece at....USD416 billion!
German exposure if you are interested is "only" USD21 billion for Greece and USD162 billion for Italy. Remember this is only bank exposure and doesn't include private/public sector exposure.
Meanwhile France and German banks are into Spain for a combined USD328 billion.
All these numbers were as at the end of June by the way.
What time is the next flight to Mars?
Chicago Closing Comments
01/11/11 -- Soybeans: Nov 11 Soybeans closed at USD11.92 1/4, down 15 1/4 cents; Jan 12 Soybeans closed at USD12.02 1/2, down 14 3/4 cents; Dec 11 Soybean Meal closed at USD310.70, down USD5.40, Dec 11 Soybean Oil closed at 50.80, down 37 points. For Nov 11 beans this was the first close below USD12.00 in three weeks with it proving once again to be noticeably the weakest leg of the trio of beans, corn and wheat. The Greek PM surprised the market by announcing a public referendum on complying with the conditions of last week's supposedly agreed bailout. After the close FC Stone estimated this season's US soybean crop at 3.109 billion bushels, down from it's previous estimate but slightly above the 3.06 billion that the USDA said last month.
Corn: Dec 11 Corn closed at USD6.54 1/4, up 7 1/4 cents; Mar 12 Corn closed at USD6.65 1/4, up 6 1/4 cents. Corn rebounded from a lower opening to close in positive territory with funds buying an estimated 6,000 contracts late in the day. As with beans FC Stone reduced their US corn crop estimate from last month but at 12.457 billion bushels it is still above the USDA's October number. The bulls will point to the tight US balance sheet and strong demand from the ethanol sector. The bears will say that world ending stocks aren't as tight as they were, US corn is losing out to cheaper foreign feed wheat in Asia and that demand from ethanol manufacturers is being artificially exaggerated ahead of the removal of the blenders' tax credit on Dec 31st.
Wheat: Dec 11 CBOT Wheat closed at USD6.30, up 1 3/4 cents; Dec 11 KCBT Wheat closed at USD7.18 1/2, down 6 1/2 cents; Dec 11 MGEX Wheat closed at USD9.05 3/4, down 3 cents. Wheat garnered support from a late rally in corn and the continued oversold nature of CBOT futures. That doesn't necessarily mean that the physical market is any firmer though with Egypt once again seeking solace in Russian and Ukraine wheat. Argentina actually undercut them both but missed out due to freight differentials. Australia will soon have more wheat to market in a single year than it's ever had. That doesn't make US export prospects look overly great heading towards the second half of the marketing year, especially given recent dollar strength.
London Wheat Falls As Greek Woes Hit Euro
01/11/11 -- EU grains finished mixed with Nov London wheat down GBP3.25/tonne to GBP147.75/tonne and Nov Paris wheat rising EUR0.75/tonne to EUR187.75/tonne.
Once again the Greek debt issue took centre stage sending the euro reeling, hence the disparity in performance between Paris and London wheat. The pound got within sight of 1.17 against the single currency as the Greek stock market fell 7.7%, with the French CAC and German DAX posting falls in excess of 5% on the day.
The differential between the cost of borrowing in Italy as opposed to Germany reached a fresh euro-era high today despite the ECB's best efforts in emerging as the sole buyer Italian bonds.
In addition to a severe dose of Greek and Italian jitters the market also remains badly spooked by the fallout from US brokerage firm MF Global filing for Chapter 11 bankruptcy yesterday. News today now suggests that the company broke the rules by not keeping it's customers cash separate from it's own, report the BBC.
How deep is this rabbit hole and what's at the bottom of it? Also could other financial institutions be in similar holes the market may be wondering.
Egypt snubbed French offers again today booking two cargoes of Russian and one of Ukraine wheat for January delivery.
The UK trade remains subdued with hand-to-mouth buying the only feature traders say. EU soft wheat exports meanwhile are currently running 44% down on year ago levels, far more than the 30% reduction that the USDA is predicting for 2011/12.
Early Call On Chicago: Greece Is The Word
01/11/11 -- The overnights ended sharply lower with beans down 20-22 cents, and corn & wheat both around 12-14 cents easier. Crude oil is more than three and a half bucks easier, crashing below USD90/barrel.
Greece is the word. One that is rapidly turning into an expletive after the Greek PM chucked the market the curve ball of a referendum on the bailout issue. In what is becoming an embarrassing farce no date has been set for said referendum, but it looks highly unlikely to be this side of 2012.
There are now calls for Papandreou to step down ahead of what should be an interesting parliamentary vote of confidence on Friday.
Ideas that China might be prepared to dig deep and contribute towards the EU bailout fund are looking less likely, and why would they want to pay to watch this circus?
World stock markets have reacted badly to the news, falling between 2-7% depending on how close you are to the epicentre. French and German stocks are both around 5% lower, with the FTSE100 manging a bit better at 3% down whilst US stocks are 2-2.5% weaker.
Egypt's GASC has just bought 120,000 of Russian and 60,000 MT of Ukraine wheat in a tender today, highlighting once again how difficult it is for European, US and other origins to compete.
The harvesting campaign in Russia, Ukraine and Kazakhstan is almost over and all three have been blessed with varying degrees of abundance with their grain crops this year. That will keep at least two of them as aggressive sellers for the remainder of 2011/12.
US corn demand from the ethanol sector remains strong ahead of the looming removal of the blenders' tax credit at the end of the year.
Early calls for this afternoon's CBOT session: beans down 20-25 cents, corn down 10-15 cents, wheat 10-12 cents lower.
A Few Wheat Market Fundamentals
01/11/11 -- Whilst I fully expect the gathering storm clouds over Greece to continue to dominate events for the remainder of 2011 and quite likely beyond, I thought that a résumé of a few of the market fundamentals might not go amiss, just in case we forget their relevance.
With the harvest just about over in the FSU now, we should have a pretty good handle on how big the crops are out of that region this year. The answer to that is pretty bloody big.
The Russian grain harvest is 97% complete at 96 MMT in bunker weight or 90 MMT in clean weight. That's an increase of 48% on last year. Wheat accounted for 68% of the crop last year, but 65% could maybe be closer to the mark this time round leaving us with production of maybe 58.5 MMT or so - some 41% higher than in 2010.
Kazakhstan had just brought in a grain crop of 29.5 MMT in bunker weight, knock off 10% for cleaning and work on approximately 85% of that being wheat and we have a post-Soviet era record grain crop of 26.5 MMT and a wheat crop of around 22.5 MMT, up more than 130%.
In Ukraine harvesting is 93% done producing 50.1 MMT of grain, 25% up on last year and suggesting that the Ministry's recently revised forecast of final output of 54 MMT is spot on. Corn harvesting is 70% complete at 14.6 MMT, suggesting a final crop of around 21 MMT. Their wheat crop this year is likely to be around 22.7 MMT, up 35% on last year.
That's the cheap sellers all nicely stocked up for Christmas then, so what about everybody else?
Well here in Europe we have a wheat crop similar in size to last season, probably marginally higher, yet our exports are currently running 44% down on year ago levels, far more than the 30% reduction that the USDA is currently predicting. The French have made no sales to the world's biggest buyer Egypt at all this marketing year and neither have the US, Australia, Canada or Argentina.
Australia are just about to start their harvest which is forecast anywhere between 25MMT and 27 MMT, in line with last year's record output yet the substantial volume of unsold wheat left over from last season guarantees that they will have a record amount of wheat to sell this year. They've managed to make some inroads into Asia with this lately, selling cheap feed wheat to replace US corn.
Step forward India, they got plenty of wheat in store too, so much so that although they aren't normally an exporter they've been making sales themselves recently. A late finish to the monsoon season means that soil moisture levels here are better than normal, leading some analysts to forecast a record crop of 87-90 MMT for next season's harvest in March/April. Planting of that crop is expected to be completed in about three weeks time.
This is all starting to look like unless you want to compete with the cheap sellers than you're going to have to be prepared to sit and wait. That means much larger 2011/12 ending stocks for most of the major exporters outside of the Black Sea than current numbers suggest.
Throw the unfolding Greek tragedy into the mix and it looks like things are going to get worse before they get better.
Australia Latest
01/11/11 -- Harvesting of wheat in NSW is expected to begin this week, according to the state's Department of Primary Industries.
"Timely rain in the last week of September and further rain through October has consolidated the NSW winter crop," they say. This has led to an increase in yield prospects from the 2.29 MT/ha forecast in September to 2.42 MT/ha now, they say. Even so this pegs wheat output for the state at 7.1 MMT, 19.8% down on last season's bumper crop.
Barley output is seen at 1.75 MMT, 25.4% down on last year, with rapeseed production forecast at 6.5 MMT, an increase of 2.4% and early indications are for good oil contents, they add.
In contrast, near perfect growing conditions in Western Australia this year could see wheat production there double to 9.5 MMT, potentially the second largest wheat crop in the state's history.
Well above average yields are being reported in early harvested wheat in the northern wheat belt of the state, my spies tell me.
If anything the crop here has maybe had too much rain in September/October which may lower protein levels however.
EU Rapemeal Prices
01/11/11 -- Guide prices for EU rapemeal, basis FOB Lower Rhine in euros/metric tonne, with change from previous day:
| Nov11 | 170.00 | -5.00 |
| Dec11/Jan12 | 173.00 | -2.00 |
| Feb/Apr12 | 173.00 | -1.00 |
| May/Jul12 | 171.00 | -2.00 |
| Aug/Oct12 | 152.00 | -2.00 |
| Nov12/Jan13 | 160.00 | -1.00 |
The Morning Rant
01/11/11 -- I'm a bit late with my rant this morning due to unforeseen email problems, which for once possibly weren't down to Virgin Media's inadequacies.
The overnight markets are once again a sea of red with CBOT wheat down 10-12 cents, corn down 8-11 cents and beans falling 16-17 cents. The dollar is sharply firmer. The pound hit 1.6164 yesterday but is down to 1.5940 this morning. The euro is as sick as a parrot.
The announcement after the stock markets closed last night that Greece would hold a referendum on accepting the criteria surrounding last week's proposed aid package sees the FTSE100 down 2.5% this morning, with the German DAX and French CAC approaching 4% down.
The pace at which last Thursday's europhoria has melted away is pretty shocking.
There are some suggestions that the Greek move is the start of a way out of the eurozone for them.
Meanwhile the difference in yields between German and Italian bonds is at its highest ever since the euro was created.
Throw into the mix the sudden demise of MF Global, which appeared to be doing perfectly fine thank you very much just a week ago, and the market has to be thinking who's next?
Crude is a couple of dollars weaker, and this morning there are reports of a slowdown in economic growth in China.
I've got this far down the page without even mentioning any grain market fundamentals, but that is because these economic factors are a more important driver to grain prices than anything else in my opinion.
Coming soon, the fundamentals....
Chicago Markets Decline
31/10/11 -- Soybeans: Nov 11 Soybeans closed at USD12.07 1/2, down 9 1/2 cents; Jan 12 Soybeans closed at USD12.17 1/4, down 8 3/4 cents; Dec 11 Soybean Meal closed at USD316.10, down USD1.40; Dec 11 Soybean Oil closed at 51.17, down 60 points. The market was under pressure for most of the day on a series of bearish outside influences including the Bank of Japan aggressively buying US dollars. Reports of major US clearing firm MF Global filing for bankruptcy, saddled down by it's exposure to European debt, was also maybe a sign of things to come. Export inspections came in at 48.5 million bushels, better than expected but year-to-date inspections are still running behind last year’s pace. After the close the USDA reported harvest progress at 87% complete, up 8% from the five year average.
Corn: Dec 11 Corn closed at USD6.47, down 8 cents; Mar 12 Corn closed at USD6.59, down 8 cents. Corn was lower but well off session lows. The USDA export inspections report came in at 27.7 million bushels, towards the low end of expectations and year-to-date inspections here are also running behind last year’s pace. Funds sold an estimated 9,000 contracts on the day, weighed down by a combination of European debt worries, falling crude oil, a firmer dollar and the MF Global news. After the close the USDA pegged harvest progress at 78%, well ahead of the 62% normally at this time of year.
Wheat: Dec 11 CBOT Wheat closed at USD6.28 1/4, down 16 1/4 cents; Dec 11 KCBT Wheat closed at USD7.25, down 13 cents; Dec 11 MGEX Wheat closed at USD9.08 3/4, down 11 3/4 cents. Egypt bought Ukraine wheat over the weekend, which undercut even Russian offers. No US wheat was even put up in this latest tender, not for the first time recently. The USDA export inspections report today was 20.82 million bushels, in line with what was expected. The USDA crop progress report showed winter wheat planted at 89%, in line with normal. Crop conditions were 46% good/excellent, also in line with normal.
EU Wheat Slides On More European Debt Concerns
31/10/11 -- EU grains finished mixed but mostly lower with Nov London wheat falling GBP2.00/tonne to GBP151.00/tonne and Nov Paris wheat up EUR0.25/tonne to EUR187.00/tonne.
Widening market scepticism over the implementation of last week's European debt agreement saw yields on Italian and Spanish bonds jump, further increasing their borrowing costs.
The euro slumped close to 1.16 against the pound from a Friday close of below 1.14 which enabled Paris wheat to fare somewhat better than its London counterpart.
European stocks fell around 3% as market confidence evaporated.
US brokerage firm MF Global filed for bankruptcy protection, potentially one of the top ten largest ever bankruptcies in US history, adding to market jitters.
Market fundamentals have taken a bearish slant too, with Ukraine winning this weekend's Egyptian wheat tender.
In fact so far this season they have bought almost exclusively Black Sea wheat with the exception of 180,000 MT from Romania. In 2010/11 they took over 5.5 MMT of wheat from the likes of France, Canada, Australia, Argentina and the US. None of those sellers has had a look in so far in 2011/12.
Ukraine's Ag Ministry meanwhile upped their forecast for this year's grain harvest to a record 54 MMT, and sellers there are busy sharpening their pencils looking for orders now that export duties have been lifted on wheat and corn.
Early Call On Chicago
31/10/11 -- The overnight grains are, appropriately enough for Hollowe'en, looking a bit spooked today. Relief over last week's European debt "solution" appears to have given way to doubt as traders took time out over the weekend to take a look at the small print, only to find that there wasn't any!
Indeed, the details of the rescue plan are so sketchy that they could fit quite comfortably onto the back of a packet of Benson & Hedges with room to spare.
There's also doubt that even if they could come up with a trillion euros to resolve the problem then even that would ne nowhere near enough.
Breaking news today thrusts US brokerage firm MF Global into an unwanted spotlight after the Federal Reserve said that it had suspended the company from conducting business with the bank.
As well as reporting a surprise USD17.9 million quarterly loss last week the company also revealed it has USD6.3 billion in exposure to short-term European sovereign debt.
They have applied for Chapter 11 bankruptcy protection this morning, according to Reuters. That would make them the highest profile yet US casualty to the European debt crisis, highlighting that you don't just have to be in Europe to be exposed to this disaster (still) waiting to happen.
This could certainly encourage some more risk-off activity when Chicago opens this afternoon. I'm surprised that the very early calls only see wheat and corn 6-8 cents lower and beans down 10-12 cents.
The dollar is higher on the usual flight to safety, crude is more than a dollar and a half lower, also bearish factors for US grains.
In other news Ukraine's Ministry have upped their forecast for this year's grain harvest to a record 54 MMT. The corn harvest now stands at 14.1 MMT off 68% of the planted area.
Recent corn sales to the Far East, an unusual customer for Ukraine, highlight how aggressive they are now likely to be this season now that export duties have been lifted. They also swept aside even Russia in a weekend tender for wheat from Egypt too.
EU Rapemeal Prices
31/10/11 -- Latest guide prices for EU rapemeal today, basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:
| Nov11 | 175.00 | unch |
| Dec11/Jan12 | 175.00 | +1.00 |
| Feb/Apr12 | 174.00 | unch |
| May/Jul12 | 173.00 | +1.00 |
| Aug/Oct12 | 154.00 | +1.00 |
| Nov12/Jan13 | 161.00 | +1.00 |
The Morning Rant
31/10/11 -- Back from a week away to find that nothing much has changed. The long-awaited summit of EU leaders hasn't altered things very much at all from my perspective. It appears to be just another smoke and mirrors job to me.
The gist of it seems to be this: let's say we're going to do x, y and z, it doesn't matter if we are or even can do x, y and z as long as the market believes that we can. Confidence is restored meaning that we don't actually have to do very much at all (as long as nobody notices).
They say that EUR440 million bailout fund, of which around two thirds is already committed, is to be increased to EUR1 trillion. What they don't say though where the extra money is coming from, or indeed if it really exists short of firing up the printing presses.
They did agree however that private bondholders should lose 50% on their Greek debt. Will that be the end of it or just the start though? Some pundits think that at the end of the day a 90% write-down will be needed on Greek debt. And what happens to Portuguese, Irish, Spanish and Italian debt now that this precedent has been set?
Thursday/Friday's brief period of europhoria as I now call it already seems to be over with the markets a sea of red this morning.
Ukraine made it's first wheat sales to Egypt since 2008 over the weekend with GASC taking two cargoes for January shipment priced around USD10/tonne cheaper than Russian wheat. What they will make of the quality when it gets there is anybody's guess, but as it won't be arriving this side of the New Year that surely means that other sales will be made in the meantime.
Rain is slowing early harvesting attempts in Western Australia. That may hit quality there, although yield potential is said to be "outstanding" by many. Most market pundits are forecasting a wheat crop a little under last year's levels at 25-26 MMT, although I've got a sneaky feeling that they might beat last season's record 26.3 MMT myself.
Nov11 Paris rapeseed goes off the board today, making the new front month Feb12 from tomorrow. Feb12 was a hefty EUR26.50/tonne discount to Nov11 at Friday's close.
