The Morning Wire

14/08/12 -- There's only a very modest sign of a Turnaround Tuesday type scenario so far this morning. Wheat was in positive territory but has now slipped into the red, with corn 2-3 cents higher and soybeans up 15 cents on about to expire August and generally 5-7 cents firmer on the rest.

Aug 12 soybeans, meal and oil all go off the board today.

Sep 12 CBOT wheat closed at it's lowest level in exactly a month last night, yet Nov 12 London wheat finished within GBP2.35/tonne of the life of contract closing high. Nov 12 Paris wheat incidentally ended last night EUR12.50/tonne off the life of contract closing high.

Versus the late-November lows Chicago Dec 12 wheat is up 33%, Nov 12 London wheat up 42% and Nov 12 Paris wheat up 50%.

Based on very early harvest results here in the UK it's looking like a wheat crop of 14.0-14.5 MMT is on the cards versus 15.3 MMT last year and the USDA's current 15.5 MMT prediction.

Also based on what's been cut so far the proportion of feed to milling wheat is likely to be much higher than it was last year. Indeed, I'd go as far as to say that even if total output is down around a million tonnes on last year, we'll have a larger feed wheat crop than we did in 2011.

Heavy rain has fallen in Ukraine across the last 24 hours, with Agritel reporting 48mm in the capital Kiev. Agritel are calling this rain event "the most important since the beginning of agricultural work in the spring," which should be good news for recently planted new crop rapeseed and the still developing corn and sunseed crops. According to the Ministry at least the 2012 wheat, barley and rapeseed harvest is just about finished.

After buying 120,000 MT of Russian wheat over the weekend, Egypt immediately issued a second tender for more wheat last night with the results expected later this afternoon.

"Canadian wheat looks generally promising for a favourable harvest. The USDA August wheat estimate was bumped up to 27 MMT on Friday, the biggest harvest in 3 years, increasing export potential to 19.50 MMT (up 2 MMT from 2011/12)," say Martell Crop Projections.

Elsewhere: "China is expecting a record corn harvest this season. Growing conditions have been very favourable with abundant rainfall and non-threatening temperatures on the Manchurian Plain, the key growing area.

"The projected 200 MMT of corn production, the USDA's new estimate, would be the 9th consecutive record harvest and 4% higher than last season. The national corn yield would also set a record at 92.9 bushels per acre. China's corn yields have been climbing at a steady rate of 1 bushel per acre, per year with improving technology for 15 years.

"However, China corn productivity will still fall well short of the United States. US corn productivity this season, while severely depressed by drought, is still well above China's 93 bushels per acre pegged at 123.4 bushels per acre," they add.

Fresh from having sold 190,000 MT of wheat last week (and 240,000 MT in July), one of India's state-run grain houses is back in the market offering 125,000 MT for tender again this week. Asian buyers are probably the most likely takers for that.

Both  Australia's and Japan's weather bureaus say that a switch from the La Nina weather pattern into El Nino is underway. El Nino would typically bring drier than normal conditions to India, amongst others, where monsoon rains are currently 17 percent below normal so far this year.

Drier than normal conditions are also generally observed in Eastern Australia in an El Nino year, with rainfall typically increasing in South America - just in time for record soybean plantings in Brazil and Argentina. Indeed, one contact in Brazil emailed me yesterday to say "our weather down here seems to be finally turning.  After about 18 months of drought in the south, some rains are appearing which we hope will enable us to plant better later in the year."