Nogger's Blog

16/10/12 -- The overnight grains are firmer in Turnaround Tuesday style, with nearby Nov 12 beans back up above USD15/bu, although only just at USD15.03 for a 10 1/2 cent gain. Corn is up 4-5 cents and wheat up 3-6 cents.

The market seems a little bemused that prices have capitulated to the recent extent. Front month beans are down almost 16% from the early September highs, with corn down more than 11% since mid-August and wheat down 10% from the mid-July highs.

That's the power of fund selling I guess, pitted against what most in the trade view as strongly underlying bullish fundamentals.

So what's eating the funds at the moment? Well, there's Europe for a kick off. They may have won the Nobel Peace Prize, but they couldn't organise a piss up in a brewery when it comes to fiscal management.

The Spanish government are preparing a bailout request, according to the FT. Greece may or may not get it's next tranche of bailout money, it doesn't appear to want to jump through any more hoops though, and if it doesn't there will be brown smelly stuff all over Europe. Meanwhile, Portugal has just unveiled another wave of austerity measures that have proven to be about as popular as piles. Then there's Ireland, and Italy, and Merkel playing hardball...all the same old stuff really.

From the fundamental viewpoint we also have record wall-to-wall South American soybean plantings and potential production, if the weather co-operates. In addition US corn sales have been limping along for a few months now. Last week's sales of 14,000 MT were extremely poor once again, the previous week's fairly modest sales of 326,900 MT were in fact the highest in 20 weeks.

News broke yesterday that the Bunge-Ergon ethanol plant in Vicksburg, Mississippi will suspend operations next month due to poor margins. This is not the first recent ethanol plant closure.

Japan have just announced the purchase of 250 TMT of Ukraine corn overnight. The USDA's estimate that the latter will harvest 21 MMT of corn this year is probably too high, with 19 MMT probably nearer the mark, even so they will remain an aggressive exporter in 2012/13.

The Kazakh Ministry say that they will have a 14 MMT in bunker weight, 12 MMT in clean weight, grain harvest this year. Bunker weight output in 2011 was nearly 29.7 MMT. Even so "we will maintain last year's growth of exports," says the Kazakh PM.

That may be a tall order, although last year's exports were suppressed due to difficulties gaining access to the Black Sea ports due to Russia and Ukraine's own export ambitions.