Lunchtime News
07/12/12 -- The overnight electronic market sees beans 4-6 cents firmer, with corn and wheat both down around 2-3 cents.
The soycomplex is the strongest following another week of monster export sales. For the week so far we have beans up 57 1/4 cents including the overnight session, with meal up USD16 and soyoil gaining 154 points. Corn meanwhile is 3 cents lower on the week so far, with wheat unchanged.
We have the tug-of-war between rampant US sales of not just beans, but meal and oil as well against the spectre of large South American crops to come.
The former seem to be winning the price direction war this week. As mentioned earlier we are only seven weeks off hitting the USDA's full season export target for beans based on this week's sales, and for soyoil the 2012/13 projection has already been passed. All this only 13 weeks into the marketing year.
Soymeal sales aren't looking too shabby either. Yesterday's sales for meal were nearly 10 times what is needed on a weekly basis to meet the USDA’s 2012/13 expectations.
For wheat there are a few supportive factors around too. Ukraine are done exporting wheat, and Russia are now only likely to feature in a cameo role.
After an unusually warm and dry autumn, wheat in Russia's southern district is said to be poorly established and lacking in a protective snow covering to face up to what a report on Bloomberg yesterday said could be the coldest winter in 20 years there.
Meanwhile a report on Reuters yesterday suggested that 25% of US winter wheat might be abandoned. There are only two years in the last sixty where abandonment has been that high, 1988/89 and 2001/02. US wheat is heading into winter with a lower good/excellent crop rating than either of those two years.
Gail Martell at Martell Crop Projections continues to see signs of a La Nina signal emerging. "Drought has worsened in the Southern Great Plains where La Nina produces a dry signal. Rainfall has increased sharply in the Pacific Northwest and northern California, both symptomatic of an emerging La Nina," she says.
"The ENSO signal is measured as a 3-month anomaly because it is a climate fluctuation that takes several weeks to evolve. Once established, it may persist for several weeks and even months. The ENSO signal typically is the strongest in the December-February period.
"The worst harvests in United States hard red winter wheat occur with La Nina, because of the drought it induces in the Southern Great Plains. If the La Nina signal emerges in fall, drought is even worse. Such was the case this season as wheat planting rains amounted to only 3 inches, on average, compared to 53% normally. For wheat to significantly improve, very heavy rain would be required. One inch would not be enough, as fields are dry through a very deep layer. Wheat roots are shallow from inadequate planting rains. A portion of the crop has not even germinated."
Corn meanwhile looks the poor relation of the three. Weekly US exports figures continue to disappoint. They need to average 435,000 MT/week for the rest of the season to hit USDA projections. They've only managed to beat that three times in the last 16 weeks.
Brazil may be sold out of soybeans, but it still has corn to shift. Taiwan bought 60 TMT of Brazilian corn overnight at levels said to be around USD25/tonne cheaper than US origin material.
South American logistical problems are the main weapon that the US has in it's armoury to reach the USDA's corn export targets.
