Nogger's Blog

13/08/12 -- At 2pm London time the electronic market trades with wheat down 19-20 cents, corn 14-15 cents lower and soybeans 25-30 cents easier to start the week on profit-taking and chart weakness.

US crude is up the best part of a dollar, and close to it's best levels since May on reports that Israel is considering a strike against Iran over its nuclear program.

Egypt bought two cargoes of Russian wheat in a weekend tender - it's first since April - at considerably cheaper levels than US or French wheat was offered at, drought or no drought.

Asian buyers are looking at cheaper alternatives to US corn such as feed wheat from Australia and India, or Brazilian corn at around a USD35/tonne discount to US origin material.

Trade talk suggests that Friday's revised USDA corn abandonment rate of 9.3% is too low for a drought year as severe as this, and that final harvested acreage will come in significantly lower than the 87.4 million acres that the USDA now predict.

Rusagrotragrotrans say that Russia will export around 3.0 MMT of grains in August, 3.2-3.5 MMT in September and a further 3.7 MMT in October. Add in 2.1 MMT already exported in July and there's this year's projected 12 MMT of shipments gone already.

Public awareness of the magnitude of the US drought is growing. So too are calls for an at least temporary removal of the ethanol mandate. Expert opinion is divided over exactly how much impact that would have on US corn demand, with some arguing not very much at all. It is perhaps more important as far as the market is concerned to consider what the funds' perception of the impact would be. A stampede for the exit door might be the most likely scenario. They aren't of course buying corn because they need it or have an end use for it. Being involved in a game where the rules change halfway through isn't their idea of fun.