Nogger's Blog

04/09/12 -- The overnight electronic market is sharply higher, with soybeans closing in on the USD18/bushel mark for the first time ever. Front month Sep 12 has reached USD17.94 3/4 in overnight trade, and currently stands 21 1/2 cents higher at USD17.86/bu. Corn and wheat are both around 7-10 cents higher.

Beans still look like the one with the most upside to me. News out of Brazil is that they only shipped less than 2 MMT of soybeans out in the first four weeks of August, less than half the volume exported in July. Logistics might have something to do with it, but the trade is thinking that this is a clear sign that soybean supplies in South America are already running low.

There's been very little evidence thus far of USD17 beans rationing demand. The USDA's weekly export sales report continues to show robust volumes being sold, at least for soybeans. CNGOIC said today that China's August soybean imports were probably around 4.7 MMT, which is a bit more than the 4.5 MMT previously forecast. That would bring China's imports for the calendar year to date to 33.7 MMT.

Soybean imports this month and next may decline to less than a combined 7 MMT however on poor domestic crush margins, they add. We shall see. The government are doing their best to keep a lid on prices by auctioning off 400 TMT of soybeans every two weeks, with the last two auctions both fully subscribed. It also remains to be seen how long they can keep that up for, and what the quality of the beans on offer is like.

Wheat is up overnight, unperturbed by the revelation that US wheat was USD40/tonne outpriced in Egypt's weekend tender. The feeling there is clearly "let Russia sell all it's cheaper wheat, the more they sell now the quicker they will be out of the market." Not unsound reasoning, there's a hell of a long way to the 2013 crop.

From a UK perspective, if we are going to see wheat go significantly higher from where it is now then it's likely to be in the Apr/Jun 2013 period.  UK on-farm wheat stocks going into 2012/13 were the lowest since 1999/2000, according to the HGCA. Production this year looks like being little more than 14 MMT, Ensus have re-opened and Vivergo should also be operational by then, so stocks should be pretty tight come the last quarter of 2012/13.

Kazakhstan has harvested 6.4 MMT of grain off 55% of the planted area, with yields almost half that of a year ago at just 0.75 MT/ha. That doesn't make things in the UK sound quite so bad after all does it?

In the southern hemisphere, Australian wheat areas picked up only light showers across the weekend, with coverage of around 25%. Only further light relief is in the forecast for the rest of the week and first half of next week. Meanwhile Argentine farmers have planted their smallest wheat area in at least 50 years, according to the Bahia Blanca Cereals Exchange.