Nogger's Blog

Chicago Ends Mostly Lower

15/06/12 -- Soybeans: Jul 12 Soybeans closed at USD13.76, down 10 cents; Nov 12 Soybeans closed at USD13.14, up 5 1/4 cents; Jul 12 Soybean Meal closed at USD410.10, down USD6.40; Jul 12 Soybean Oil closed at 48.44, up 44 points. For the week Jul 12 beans were 50 1/4 cents lower, with Nov 12 down 18 1/2 cents, Jul 12 meal lost USD19.70 and Jul 12 oil shed 102 points. For the latter this was the lowest close on the weekly chart since October 2010. Funds were said to have sold 3,000 soybean contracts on the day in risk-off mode ahead of the weekend elections in Greece. USDA announced the sale of 120 TMT old crop US beans sold to unknown, 262 TMT of new crop sold to China and the cancellation of 147 TMT of old crop beans sold to China. Informa Economics estimated 2012 US soybean plantings at 76 million acres, more than 2 million more than the USDA's March planting intentions number. Heavy and much needed rain is in the forecast for the northern corn belt this weekend.

Corn: Jul 12 Corn closed at USD5.79 1/2, down 22 cents; Dec 12 Corn closed at USD5.06, down 10 cents. For the week Jul 12 corn fell 18 1/2 cents and Dec 12 lost 38 cents. New crop Dec 12 came within a cent of closing at it's lowest levels on the weekly chart since 2010. Informa also raised their corn planting estimate for the 2012 US harvest to 96.8 million acres which is 900,000 more than the post-war record area that the USDA estimated in March. Where are all these extra acres coming from? Well, excessive flooding in some states last year saw large areas go unsown with growers instead claiming on their "prevent plant" insurance. This has not been the case this season. In addition high prices have brought more acres out of the CRP program, which is effectively what we in Europe would call set-aside. The early wheat harvest will also see some increased instances of double cropping this year. Funds were said to have been net sellers of around 10,000 corn contracts on the day, taking some money off the table ahead of the weekend Greek elections and forecast rains in northern states.

Wheat: Jul 12 CBOT Wheat closed at USD6.09 1/2, down 14 cents; Jul 12 KCBT Wheat closed at USD6.30, down 16 cents; Jul 12 MGEX Wheat closed at USD7.87 1/2, down 6 3/4 cents. For the week Chicago wheat was 20 3/4 cents lower, Kansas down 26 cents and Minneapolis up 18 1/4 cents. Informa pegged the US spring wheat area at 13.476 million acres, 1.5 million more than the USDA said in March. The forecast weekend rains should further aid spring wheat production potential. The crop is already in great shape at 75% good/excellent. Informa projects the durum wheat area at 2.425 million acres compared with the USDA's 2.223 million. The Buenos Aires Grains Exchange say that Argentine farmers will plant only 3.8 million hectares of wheat for the 2012/13 harvest, a 17% reduction on last year due to farmer dissatisfaction with government intervention in the grain markets. Plantings are said to be around 25% complete. China's CNGOIC cut its 2012 wheat production estimate by 2.3 MMT to 118 MMT - a crop broadly similar in size to last year.

EU Wheat Ends Mostly Lower Ahead Of Greek Elections

15/06/12 -- EU grains closed mostly lower with only Jul 12 London wheat bucking the trend and finishing GBP0.25/tonne higher at GBP175.00/tonne. Nov 12 London wheat fell GBP1.80/tonne to GBP154.00/tonne. Even inactive Aug 12 Paris wheat fell EUR2.25/tonne to EUR203.00/tonne, whilst Nov 12 was also down EUR2.25/tonne at EUR203.75/tonne.

For the week as a whole Jul 12 London wheat was up GBP3.50/tonne, whilst Nov 12 was GBP3.00/tonne lower. Across the Channel Aug 12 Paris wheat fell EUR5.00/tonne and Nov 12 lost EUR5.75/tonne.

The market is nervous ahead of the Greek elections this weekend, against a backdrop of spiralling borrowing rates for for the likes of Spain and Italy.

The widespread rains across western Europe that prompted Strategie Grains to raise their EU-27 wheat, barley and corn production forecasts yesterday (and indicate that further increases could be expected) have spread eastwards, taking in Poland and Romania and now Ukraine.

These rains may have come too late to help winter barley in Ukraine, the harvesting of which began at the beginning of the week in the south of the country, but will surely be of benefit to wheat as well as spring barley and corn.

The Ukraine state statistical service reports that June 1st grain stocks were 79% higher than year ago levels at 10.9 MMT thanks to minimal sales in Q1 of 2011/12 when an export ban was still in place.

Algeria said that it's 2012 grain harvest will come in 38% higher than last year at 5.8 MMT, and that it won't need to import any more durum wheat or barley for the remainder of the year.

Brussels announced that they have decided to extend the temporary suspension of duties on feed wheat imports from outside the Union, due to expire at the end of the month, until the end of the year.

Chicago Close - Thursday

14/06/12 -- Soybeans: Jul 12 Soybeans closed at USD13.86, down 22 1/4 cents; Nov 12 Soybeans closed at USD13.08 3/4, down 11 cents; Jul 12 Soybean Meal closed at USD416.50, down USD5.50; Jul 12 Soybean Oil closed at 48.00, down 110 points. Beans fell back on fund long liquidation ahead of the Greek elections this weekend, they were estimated as being net sellers of around 6,000 soybean contracts on the day. Weekly soybean export sales were strong at 425,100 MT for old crop and 580,000 MT for new crop compared to the combined 500-750 TMT expected. The NOPA May US soybean crush came in at 138.27 million bushels versus 134.7 million in April and 120.3 million in May 2011.

Corn: Jul 12 Corn closed at USD6.01 1/2, up 9 cents; Dec 12 Corn closed at USD5.16, up 5 1/2 cents. Funds were said to have been net buyers of around 10,000 corn contracts on the day. Yet weekly export sales were very poor at 92,100 MT of old crop - a marketing-year low - and 77,700 MT of new crop versus trade ideas of combined sales of 400-600 TMT. Weather forecasts for the week ahead are conflicting, with some offering good rainfall chances, particularly in the western Corn Belt. Others are concentrating on a drier outlook for the west. Domestic corn demand remains strong - this week’s ethanol production was a four month high.

Wheat: Jul 12 CBOT Wheat closed at USD6.23 1/2, up 7 1/2 cents; Jul 12 KCBT Wheat closed at USD6.46, up 5 1/2 cents; Jul 12 MGEX Wheat closed at USD7.94 1/4, up 20 3/4 cents. Wheat weekly export sales were better than expected at 432,900 MT versus forecasts of 250-350 TMT. In addition the USDA also reported the sale of 110,000 MT of wheat to China for 2012/13 delivery under the daily reporting system. Strategie Grains upped their EU-27 2012 soft wheat crop estimate by 1.5 MMT to 124.2 MMT citing "good to very good weather conditions" in western Europe. Decent rains in the northern Plains will favour spring wheat production.

EU Grains Close

14/06/12 -- EU grains finished mixed with Jul 12 London wheat ending up GBP0.85/tonne to GBP174.75/tonne, and new crop Nov 12 ending GBP0.30/tonne higher to close at GBP155.80/tonne. Aug 12 Paris wheat - in which there is only a thimble full of open interest - was unchanged at EUR205.25/tonne, whilst Nov 12 was also unchanged at EUR206.00/tonne. Other new crop months were between EUR0.25-1.25/tonne lower.

Strategie Grains increased their forecast for the 2012 EU-27 soft wheat crop by 1.5 MMT to 124.2 MMT, citing improved crop conditions, particularly in Western Europe.

France had it's crop increased by 0.9 MMT and Germany's was upped 0.5 MMT. With EU-27 durum output also seen 0.3 MMT higher than last month at 7.9 MMT, that gives us an EU-27 2012/13 all wheat crop of 132.1 MMT, which is 1.1 MMT more than the USDA projected on Tuesday.

The early durum harvest in Spain and Italy has produced some good quality wheat, they said.

Wheat export potential was increased by 2 MMT from last month to 13.5 MMT, but despite that the extra production and reduced feed usage means that 2012/13 ending stocks were also raised slightly.

The improved European weather conditions are also responsible for a barley production increase of 0.5 MMT to 53.2 MMT and corn output being forecast 0.4 MMT higher to 66 MMT versus May projections.

Further production upgrades could also be on the cards if favourable weather conditions continue, they added.

With only two weeks to go to the end of the 2011/12 marketing year Brussels issued 117 TMT of soft wheat export licences this past week, bringing the year-to-date total to 12.3 MMT, almost a third lower than last season.

FranceAgriMer keep edging up their 2011/12 French grain stocks estimates as their exports remain more sluggish than expected.

The euro held up rather well today in the light of yields on Spanish 10-year bonds jumping to a Euro-era high of 7% and yields on Italian 3-year bonds also sharply higher than they were a month ago. The next hurdle is the Greek elections on Sunday.

Spain had it's credit rating cut to only one notch above junk status by Moody's last night, whilst Cyprus had theirs flushed even further down the lavatory.

US Weather Latest

14/06/12 -- The latest weather forecast from the US appears to be showing more rain pushing a bit further east in the 5-day forecast compared with yesterday. You can click the map to enlarge it, with yesterday's 5-day forecast on the left an this afternoon's latest on the right.

Below that there are maps of the main corn and soybean producing areas. This looks like a better forecast than yesterday from my perspective, but what do I know?

Not as much as my expert weather chum Gail Martell at Martell Crop Projections. Gail's take on it is this:

"Scattered strong thunderstorms occurred overnight in North and South Dakota and Minnesota, improving field moisture in the spring wheat belt. Major corn and soybean farms missed out on rainfall. However a very stormy period is shaping up over the next several days in the Upper Midwest and Central Plains.

"The forecast is very wet in the western Corn Belt in southern Minnesota, Iowa, southeast Nebraska and Kansas. Over 3 inches of rain is possible in broad swath that would affect all of Iowa.

"Extremely heavy rain is anticipated in the Western Corn Belt along a stalled cool front . The rain outlook is wetter than yesterday in Iowa, the top corn state, but drier in Nebraska, the number 3 leading corn producer. The forecast remains threatening for Eastern Midwest corn and soybeans, where a strong ridge of high pressure is expected to hold sway.

"The cool front is expected to stall on a slant from Wisconsin to Kansas, due to a blocking ridge of high pressure in eastern United States. This ridge is expected to weaken Saturday night along its northern flank, allowing showers to penetrate northern Illinois and southeastern Wisconsin. Also, northern Indiana and Michigan may get useful rain. The GFS model suggests that high pressure may re-strengthen next week."

The Lunchtime News

14/06/12 -- The USDA have reported a mixed bag of weekly export sales, with wheat coming in better than expected at 432,900 MT versus forecasts of 250-350 TMT. Soybean sales were 425,100 MT for old crop and 580,000 MT for new crop compared to the combined 500-750 TMT expected. Corn sales however were only 92,100 MT of old crop - a marketing-year low - and 77,700 MT of new crop versus trade ideas of combined sales of 400-600 TMT.

Maybe the old crop corn sales were so low because there's so little left? That doesn't explain the poor showing from the new crop though.

Once again the stand out number for me is the large volume of old crop soybeans that keeps making regular weekly appearances. Where is all that going to come from? As you might expect China took the lion's share booking 261,500 MT of the old crop and 470,000 MT of the new crop.

It may be starting to sound like a bit of a broken record but the upside potential on soybeans looks like it could still be explosive one day in the not too distant future.

The Chinese only sold less than 18 TMT of the 600 TMT on offer in this week's government soybean auction.

China's Ag Ministry estimate June soybean imports at 6.56 MMT versus their previous estimate of 5.16 MMT

The NOPA May US soybean crush came in at 138.27 million bushels versus the 134.7 million in April and 120.3 million in May 2011

The USDA have also reported the sale of 110,000 MT of wheat to China for 2012/13 delivery under the daily reporting system. Japan bought 147,118 MT of mostly US wheat in it's usual weekly tender. Taiwan has bought 47,050 MT of US spring wheat for July/Aug shipment

Some weather forecasters have taken some of the rain out of the US forecast.

The electronic market is trading higher but European jitters look set to cap gains tonight. Spain is now having to pay 7% yields on 10-year bonds, and Italy's yields on three-year bonds have jumped from 3.9% a month ago to 5.1% today. Just in case you need reminding we also have the Greek elections coming up on Sunday.

Septic Peg Gets Her Runes Out

14/06/12 -- Septic Peg, my spirit guide from beyond the grave, flushed with the success of accurately predicting a bearish USDA report for corn on Tuesday has been in touch again this morning.

She says that she's had her runes out, and believe me it's been a while since they've seen the light of day, and they are telling her that whilst the left-wing anti-austerity Syriza Party will do very well in Sunday's Greek elections they will not beat the established centre-right New Democracy Party to first place.

The Morning Paper

14/06/12 -- Spain's borrowing costs have hit new euro-era highs, with yields on 10-year bonds rising to the widely regarded as unsustainable 7.0% mark from 6.72% yesterday after Moody's cut their credit rating by by three notches to only one above junk status, say the BBC this morning.

An Italian bond auction later may add to the European debt woes ahead of the Greek elections over the weekend.

Strategie Grains this morning have upped their EU-27 2012 soft wheat crop estimate by 1.5 MMT to 124.2 MMT citing "good to very good weather conditions" in western Europe.

Export potential was raised 2 MMT to 13.5 MMT, although that's still around 17% lower than this season. Even so 2012/13 wheat ending stocks were increased slightly due to the increased production and lower feed usage.

Durum wheat production potential was also raised by 0.3 MMT to 7.9 MMT, giving us an EU-27 all wheat crop of 132.1 MMT, which is 1.1 MMT more than the USDA projected on Tuesday.

Barley production is increased 0.5 MMT to 53.2 MMT and corn output is forecast 0.4 MMT higher to 66 MMT.

A day after issuing a surprisingly low wheat crop estimate for 2012/13, ABARES today say that "widespread rainfall was recorded across most of south west Western Australia this week, providing timely moisture for recently sown winter crops and pastures."

"Further rainfall is forecast across southern Australia in the coming week which should assist the growth of winter crops," they add.

The USDA attache in Moscow says that Russia will harvest 88 MMT of grains this year, around 6 MMT, or 6%, down on last year. That will include 54 MMT of wheat (the USDA said 53 MMT on Tuesday), 16 MMT of barley and 6.5 MMT of corn.

Russia's 2012/13 grain exports will fall to 19 MMT, including 16 MMT of wheat, he adds. That would be 5 MMT less than they are expected to export in 2011/12.

The world cereal production will rise 3.2% to a record 2.42 billion MT this year, according to the FAO. “The bulk of the increase is expected to originate from just one crop in one country - maize in the US," they say.

Nov 12 London wheat has opened GBP0.75/tonne lower in early trade.

Chicago Close - Wednesday

13/06/12 -- Soybeans: Jul 12 Soybeans closed at USD14.08 1/4, down 26 3/4 cents; Nov 12 Soybeans closed at USD13.19 3/4, down 17 1/4 cents; Jul 12 Soybean Meal closed at USD422.00, down USD11.00; Jul 12 Soybean Oil closed at 49.10, down 62 points. Funds were said to have sold 6,000 soybean contracts on the day in nervousness ahead of the Greek elections at the weekend, taking profits on some of their long position. Rising Italian and Spanish borrowing costs also indicate the the European debt crisis is still very much with us despite last weekend's Spanish bank bailout. US weather forecasts are looking more promising in both the 5-day and 6-10 day period, and there is still time for soybeans to make a very good crop if summer weather plays ball. Estimates for tomorrow's weekly export sales report for soybeans are 500-750 TMT.

Corn: Jul 12 Corn closed at USD5.92 1/2, up 8 1/2 cents; Dec 12 Corn closed at USD5.10 1/2, down 12 cents. Old crop gained whilst new crop fell. A very tight old crop physical supply-line supported the nearby Jul 12 contract. Further forward increased chances of good rains across three of the top four US corn states of Iowa, Nebraska and Minnesota had new crop under pressure. The Eastern Corn Belt still looks dry though. There will also be increased competition from Brazil and Ukraine on the export front in the latter half of 2012 and into 2013 which will see US ending stocks more than double next season. Estimates for tomorrow's weekly export sales report are 400-600 TMT.

Wheat: Jul 12 CBOT Wheat closed unchanged at USD6.16; Jul 12 KCBT Wheat closed at USD6.40 1/2, down 1/4 cent; Jul 12 MGEX Wheat closed at USD7.73 1/2, up 9 1/4 cents. ABARES forecast for a Australian wheat crop of 24.1 MMT was friendly, it's almost 2 MMT below the USDA's Tuesday estimate and may also impinge on their export hopes for 2012/13 - the USDA currently has them as the second largest exporter in the world in the season ahead. Even so they still have plenty of wheat left over from the previous harvest. Despite a strong export programme the IGC estimated Australia’s Sept ending stocks at 9.4 MMT - similar to a year ago. Estimates for tomorrow's weekly export sales report are 250-350 TMT.

EU Wheat Closing Comments - Wednesday

13/06/12 -- EU grains closed mixed with Jul 12 London wheat up GBP1.25/tonne to GBP173.90/tonne and Nov 12 GBP1.50/tonne firmer at GBP155.50/tonne. Inactive Aug 12 Paris wheat was unchanged at EUR205.25/tonne, whilst Nov 12 was also unchanged at EUR206.00/tonne.

ABARES forecast the Australian wheat crop at 24.1 MMT this year, 7.3% down on its March estimate and 18% below last year's record output.

Dryness in Western Australia and a switch out of wheat to potentially more profitable rapeseed production was behind the reduction. 2012/13 Australian wheat exports were estimated at 20.5 MMT vs. 2011/12 exports of 22.3 MMT.

FranceAgriMer said that French 2011/12 non-EU soft wheat exports would total 8.5 MMT, down 0.2 MMT from their previous estimate of 8.7 M and 34% below the 12.9 MMT exported in 2010/11.

The also pegged 2011/12 soft wheat exports to fellow EU members at 7.12 MMT, up slightly on their previous estimate of 7.1 MMT.

French 2011/12 soft wheat ending stocks are estimated at 2.51 MMT from their previous estimate of 2.36 MMT. These carryout forecasts have been creeping up steadily in recent months as exports to non-EU destinations have fallen away as other origin wheat has made inroads into traditional French homes in North Africa.

The German Farm Cooperatives (DRV) downgraded Germany’s 2012 wheat crop to 21.38 MMT versus their previous estimate of 22.0 MMT, and 0.5 MMT below yesterday's USDA forecast, citing significantly higher levels of winterkill than had been expected.

German barley production however will rise 3.2% to 9.0 MMT and rapeseed output will jump 18% to 4.52 MMT, they said.

Ukraine's Ag Ministry said that the country will export 26 MMT of grains in 2012/13, an increase of 13% on this season, despite a fall in production of almost 17%. High carryover stocks from the current season and no export restrictions are the reason for the disparity, they say.

Anecdotal reports reveal that the winter barley harvest began yesterday in the Crimea area of Ukraine.

The European debt crisis continues to keep market participants nervous with the Greek elections looming at the weekend. Yields on Italian one year bonds jumped from 2.34% a month ago to 3.972% today. That's bad news as tomorrow they will attempt to auction off longer-term debt tomorrow.

Meanwhile Spanish 10-year yields are now at 6.72% and the German press is apparently reporting that Greece could be in need of a third bailout soon.

Lunchtime News

13/06/12 -- The latest 5-day weather forecast from the NOAA (National Oceanic and Atmospheric Administration) shows potentially very decent rains for the Western Corn Belt (click map to enlarge).

Rains are concentrated over the top US corn state of Iowa, with the third and fourth top producing states of Nebraska and Minnesota also in line for a decent soaking.

The same three states are ranked joint top, fifth and third (in that order) as soybean producers too.

Dryness however looks set to continue further east into Illinois, Indiana and Ohio.

In the electronic market corn and soybeans are lower on the news, dragging wheat down with them.

Wheat was 6 cents higher earlier on news that ABARES has pegged the 2012/13 Australian wheat crop at 24.1 MMT, down 18% on last year.

Further forward there is some talk of a strengthening El Nino in the Pacific leading to cooler and wetter conditions to prevail later in the summer.

Meanwhile the European debt crisis rumbles on with the Greek elections looming on Sunday. Yields on Italian one year bonds have jumped from 2.34% a month ago to 3.972% today. That's bad ahead of them auctioning longer-term 2015, 2019 and 2020 debt tomorrow.

Spanish 10-year yields are at 6.72% and the German press is apparently reporting that Greece could be in need of a third bailout soon.

The Morning Paper

13/06/12 -- Fresh news is pretty thin on the ground this morning. Many UK traders and farmers will be attending the first day of Cereals 2012, so it looks set to be a quiet day.

The electronic market sees wheat staging a little partial recovery from last night's losses - currently 4-6 cents higher. Corn and beans are also mostly a tad firmer and the dollar is a bit weaker.

ABARES are out this morning with their latest estimates on 2012 crop production Down Under. They've come in a bit lower than expected on wheat at 24.1 MMT, a drop of 18% on last season's bin busting crop. Barley production is forecast to fall by 15% to around 7.3 MMT and rapeseed production is forecast to rise by 4% to around 2.9 MMT, they add.

There could be some upside potential in all of those due to recent rains in Western Australia in particular. Yesterday's USDA report suggested a wheat crop of 26 MMT, barley production at 8 MMT and rapeseed output at  3.25 MMT.

The same report pegged Australia as the world's second largest wheat exporter in 2012/13.

With anticipated 2011/12 wheat ending stocks of around 8-8.5 MMT - and a domestic consumption of only 7 MMT - there will still be plenty of Australian wheat available for export in 2012/13.

Kazakhstan says that it has exported a record 11 MMT of grain, including wheat flour, so far in 2011/12 - beating yesterday's USDA forecast of 10 MMT for the marketing year.

Ukraine's grain exports in 2011/12 currently stand at 20.7 MMT, according to the Ag Ministry there. That includes 13 MMT of corn, 5 MMT of wheat and 2.4 MMT of barley. Grain carryover at the end of 2011/12 is expected to total 11 MMT, of which 7 MMT will be wheat and 2.5 MMT corn, they add.

There's talk of heavy rains for some of the Midwest's top corn producing states such as Iowa, Nebraska and Minnesota over the next few days.

In addition to that, Agrimoney report that the European weather model "continues to show a major pattern change coming for the Midwest in the six-to-10 day outlook....the model shows a tremendous amount of rain coming for the entire Midwest."

That would certainly be bearish should it materialise, although it has to be noted that in recent weeks many widely-touted Midwest rain events have disappointed big time.

Chicago Closing Comments

12/06/12 -- Soybeans: Jul 12 Soybeans closed at USD14.35, up 10 1/4 cents; Nov 12 Soybeans closed at USD13.37, up 5 3/4 cents; Jul 12 Soybean Meal closed at USD433.00, up USD5.00; Jul 12 Soybean Oil closed at 49.72, down 2 points. The USDA gave us a bullish S&D report as far as soybeans were concerned, who's gains may well have been more if it wasn't for weakness in corn. US old crop carryout was cut from 210 million bushels to 175 million, versus the 197 million expected. New crop ending stocks are pegged even tighter at 140 million bushels, which represents a stocks to usage ratio of just 4.3%. Considering that this particular scenario uses a 2012 yield estimate of 43.9 bu/acre and that current good/excellent crop conditions are 60% versus 67% a year ago when yields ultimately came in at only 41.5 bu/acre, then it would seem that this particular number could get a whole lot tighter yet.

Corn: Jul 12 Corn closed at USD5.84, down 8 cents; Dec 12 Corn closed at USD5.22 1/2, down 11 1/2 cents. For corn the USDA report was entirely different, at least on paper. Neither old nor new crop US ending stocks were reduced as the trade expected, both being left unchanged instead at 0.851 and 1.881 billion bushels respectively. In addition 2011/12 world ending stocks were raised more than anticipated to 129.2 MMT and 2012/13 global carryout was increased to 155.7 MMT when a reduction to 149.75 MMT was expected. Projected 2012 US yields were left at an ambitious looking 166 bu/acre, a figure generally expected to prove too high - it is noted that the USDA have a track record of not lowering yield estimates in the June S&D report, usually waiting until July to do this. Weather forecasts seem to be adopting a cooler and wetter look for the Midwest a week from now. Funds were said to have been net sellers of around 12,000 corn contracts on the day.

Wheat: Jul 12 CBOT Wheat closed at USD6.16, down 14 1/2 cents; Jul 12 KCBT Wheat closed at USD6.40 3/4, down 12 1/4 cents; Jul 12 MGEX Wheat closed at USD7.64 1/4, down 15 1/2 cents. For wheat the USDA report was actually a bit friendly, but weakness in corn spilled over into wheat dragging it lower too. World production in 2012/13 was lowered 5.5 MMT to 672 MMT. That included Europe's wheat crop being cut by 1 MMT to 131 MMT and Russia's reduced 3 MMT to 53 MMT. US wheat carryout for both old and new crop was cut by a bit more than anticipated and world wheat ending stocks were trimmed 2.4 MMT to 185.8 MMT. US all wheat production in 2012 was estimated at 2.234 billion bushels, down slightly from 2.245 billion last month but marginally above the average trade guess of 2.222 billion. US 2012/13 wheat ending stocks were pegged at 694 million bushels, 34 million lower than in 2011/12, but that still equates to an ample stocks to usage ratio of 29.1%.

EU Grains Close Lower Following USDA Report

12/06/12 -- EU grains closed lower Tuesday with Jul 12 London wheat down GBP0.35/tonne to GBP172.65/tonne and Nov 12 falling GBP2.80/tonne to GBP154.00/tonne. Even inactive Aug 12 Paris wheat fell EUR2.75/tonne to EUR205.75/tonne, whilst Nov 12 was down EUR3.75/tonne at EUR206.00/tonne.

The long awaited USDA report came in bearish for corn, slightly friendly for wheat and bullish for soybeans. The question was could wheat post gains whilst corn slumped? The answer was no, at least not today anyway.

For corn there wasn't a bullish number in sight. So despite the usual trade scepticism over the accuracy of the data, Chicago corn futures - which opened a couple of hours early to accommodate the release of the report - came in lower and quickly dragged wheat with it.

For corn, we got unchanged US old and new crop ending stocks, contrary to expectations for reductions in both. We also got a larger than expected increase in Brazilian output this season, a lower than anticipated cut to Argentine production and an extra 2 MMT added to China's 2012 harvest to boot.

The net result of that was a 2012/13 world record 950 MMT corn crop, more than 4 MMT up on last month's estimate and global ending stocks for the coming season 6 MMT more than expected.

The EU-27 wheat crop was cut to a lowish-looking 131 MMT, and Russia's production reduced from 56 MMT last month to 53 MMT this time round. World wheat ending stocks for 2012/13 were trimmed 2.4 MMT to 185.8 MMT, although this was a smaller cut than expected and represents more than ample stocks to usage.

America's wheat crop was reduced slightly from last month, although at 60.8 MMT it's still an increase of nearly 12% on last year.

Soybeans continue to look the strongest leg of the three, with US old and new crop ending stocks cut more than anticipated and Chinese imports for 2011/12 raised 1 MMT to 57 MMT and those of 2012/13 pegged at a record 60 MMT.

Attention is already starting to re-focus on Europe with the Greek elections coming up this weekend and Spanish and Italian borrowing costs back on the rise today following yesterday's short-lived, and misplaced, euphoria.

At home, the HGCA say that winter cereals are close to or slightly behind average development. "Crops currently have good yield potential, but disease pressure is high," they add.

"In France, 72% of the winter wheat crop was rated good to excellent on 4 June, considerably higher than the 24% at the same stage last year," they note.

They also say that recent rains in Germany and Poland have helped to improve crop conditions there.

Elsewhere, UkrAgroConsult said that despite the lower grain output anticipated there this year they see Ukraine's 2012/13 total grain exports rising 20% to 24.3 MMT due to that fact that export restrictions heavily curtailed shipments during the first half of the current season.

USDA Report Reaction

12/06/12 -- Well, Septic Peg called it correctly - the USDA numbers are bearish for corn. Neither old nor new crop US ending stocks were reduced as the trade expected, both being left unchanged instead at 0.851 and 1.881 billion bushels respectively.

In addition 2011/12 world ending stocks were raised more than anticipated to 129.2 MMT and 2012/13 global carryout was increased to 155.7 MMT when a reduction to 149.75 MMT was expected.

Brazil's corn crop was increased to 69.0 MMT, 2 MMT up on last month and 1.4 MMT above expectations. Argentina's meanwhile was lowered less than thought to 21.0 MMT, 0.6 MMT above trade ideas.

China's 2012/13 corn crop was raised 2 MMT to 195 MMT. China's import requirements for 2012/13 were unchanged at 7 MMT. The world corn crop for the season ahead was seen over 4 MMT higher at just under 950 MMT - easily a record.

For wheat, world production in 2012/13 was lowered 5.5 MMT to 672 MMT, although consumption was also reduced by 4.6 MMT to 681.9 MMT.

Europe's wheat crop was cut by 1 MMT to 131 MMT and Russia's reduced 3 MMT to 53 MMT in 2012/13.

World wheat ending stocks were trimmed 2.4 MMT to 185.8 MMT, although this was less than expected. US wheat carryout for both old and new crop was cut by a bit more than anticipated.

For soybeans we had US old crop carryout cut from 210 million bushels to 175 million, and new crop ending stocks were reduced from 145 million to 140 million - both by a wider margin than expected.

Brazil's 2011/12 soybean crop was raised 0.5 MMT to 65.5 MMT, in line with expectations. Argentina's was cut by 1 MMT to 41.5 MMT, versus the anticipated 1.8 MMT cut to 40.7 MMT.

China's 2011/12 soybean imports were increased 1 MMT to 57 MMT and those for 2012/13 left unchanged at 61.0 MMT.

It looks bullish soybeans, bearish corn and neutral on wheat to me.

The USDA Numbers#3

12/06/12 -- The USDA's eagerly awaited raft of important numbers are out, here's some of them:

South American 2011/12 Crop Production (MMT):

The USDA Numbers#2

12/06/12 -- The USDA's eagerly awaited raft of important numbers are out, here's some of them:

USDA 2012/13 World Ending Stocks Estimates (MMT):

The USDA Numbers#1

12/06/12 -- The USDA's eagerly awaited raft of important numbers are out, here's some of them:

USDA 2012/13 US Ending Stocks Estimates (billion bushels):

Septic Peg

12/06/12 -- Septic Peg, my spirit guide from beyond the grave, has been in touch to tell me that this afternoon's USDA report will be bearish for corn. Thanks your Royal Septicness. BTW we're going to hang onto the DOE for a few more weeks yet if that's OK? Let's hope it's not a cold winter though.

News Snippets

12/06/12 -- UkrAgroConsult say that Ukraine will harvest 45.5 MMT of grain this summer (from their previous estimate of 46.3 MMT and 56.7 MMT in 2011), including 21.25 MMT of corn (22.7 MMT in 2011), 14.2 MMT of wheat (22.3 MMT in 2011) and 7.32 MMT of barley (9.1 MMT in 2011).

Despite the lower output this year they see Ukraine's total grain exports rising 20% to 24.3 MMT on the strength of there being no export restrictions in place in 2012/13.

Brazil exported a record 7.3 MMT of soybeans in May, according to customs data. Celeres report that old crop soybean sales are currently running at 89%, compared to 70% normally. New crop 2012/13 sales are already 29% committed, normally at this early juncture forward sales would be negligible, they say.

India says that it has shipped 1.2 MMT of it's mountain of surplus wheat stocks since a government ban on exports was lifted in September.

Safras e Mercado peg the 2011/12 Brazilian soybean crop at 66.331 MMT, with Argentine production estimated at 41.0 MMT.

The Argentine farmers strike is scheduled to end at midnight local time tonight.

NYMEX crude is down again today, currently standing at USD82.17/barrel, 23% down since 1st May.

The Early Vibe

12/06/12 -- Yesterday's Spanish bank bailout news buoyed the markets for all of a couple of hours before the realisation set in that all they were doing was saddling themselves with even more debt for a temporary quick fix that the next government in can attempt to sort out.

Crude oil soon reversed early gains to close lower, with NYMEX settling at it's lowest since October, and falling further since this morning.

If grains are going to rally from here then it looks like they may have to go it alone. That's not entirely out of the question, particularly for soybeans.

All eyes are now on the USDA, with a raft of data due out at 13.30 BST this afternoon. In what is quickly starting to resemble the Sky TV Premier League sponsorship deal where football matches now kick off at all times of the day & night, Friday's, Saturday lunchtime, tea-time, Sunday's, Monday's etc. The CME Group, in it's infinite wisdom, has now decided to open the daytime open outcry session early on days when a major USDA crop report is out.

That means that today's session will begin at 13.20 BST for the first time in history. That's twenty past seven in the morning if you are a floor trader over there, so let's hope that they've all set their alarms for nice & early.

The reason for this is that floor traders don't miss out because the electronic market is open for business the minute that the USDA report comes out, and that otherwise the open outcry lads would have to sit on their hands for two hours waiting for their market to open.

After that we will revert to the usual 15.30 BST opening times for the rest of the month.

Is this the start of the ultimate death of the open outcry session all together? I think it may be.

Chicago Closing Comments

11/06/12 -- Soybeans: Jul 12 Soybeans closed at USD14.24 3/4, down 1 1/2 cents; Nov 12 Soybeans closed at USD13.31 1/4, down 1 1/4 cents; Jul 12 Soybean Meal closed at USD428.0, down USD1.80; Jul 12 Soybean Oil closed at 49.70, up 24 points. Funds sold an estimated 3,000 soybean contracts on the day, reducing their length a little heading into tomorrow's USDA report. Not that it is expected to be bearish for soybeans, US 2011/12 soybean ending stocks are expected to be cut from 210 million bushels to around 190 million and 2012/13 carryout trimmed even tighter to 143 million. For Argentine bean production the average trade estimate is 40.7 MMT vs. 42.5 MMT last month. For Brazil it's 65.6 MMT against last month's estimate of 65.0 MMT. Early optimism over the weekend deal for Greek banks quickly waned on ideas that Cyprus will swiftly follow looking for a bailout. Crude oil prices fell to their lowest in eight months settling down 1.7%, or USD1.40, at USD82.70 a barrel, completely erasing early gains and then some. After the close the USDA cut good/excellent soybean crop ratings by five percentage points to 60%. Emergence is 90% compared to 67% normally. Plantings are almost done at 97%.

Corn: Jul 12 Corn closed at USD5.92, down 6 cents; Dec 12 Corn closed at USD5.34, down 10 cents. Funds were said to have sold around 10,000 corn contracts on the day. US weather forecasts were a bit more favourable, citing cooler temperatures and more rain chances. Weekly export inspections were poor at 17.0 million bushels compared to 27.4 million last week and 35.4 million for the same week last year. Tomorrow's 2011/12 US corn carryout is estimated at 828 million bushels versus the May USDA report figure of 851 million. For 2012/13 the trade is forecasting ending stocks of 1.740 billion bushels versus the May USDA estimate of 1.881 billion. For Argentine corn production the average estimate is 20.4 MMT compared to the May USDA report estimate of 21.5 MMT. Brazil's corn crop is seen at 67.6 MMT versus the May USDA report estimate of 67.0 MMT. Old crop 2011/12 world ending stocks are seen little changed at 127.6 MMT, with those of 2012/13 coming in at 149.7 MMT. After the close the USDA cut US corn ratings from 72% good/excellent to 66%, with poor/very poor rising from 5% to 8%.

Wheat: Jul 12 CBOT Wheat closed at USD6.30 1/2, up 1/4 cent; Jul 12 KCBT Wheat closed at USD6.53, down 3 cents; Jul 12 MGEX Wheat closed at USD7.79 3/4, up 10 1/2 cents. Tomorrow's USDA report is expected to show 2012/13 US all wheat production at 2.222 billion bushels, from within a range of estimates of 2.112 – 2.310 billion and versus the May USDA report estimate of 2.245 billion and 2011/12 production of 1.999 billion. Old crop 2011/12 carryout is seen at 757 million bushels versus the May USDA report estimate of 768 million. New crop 2012/13 ending stocks are also seen being trimmed slightly at 728 million versus the May USDA report estimate of 735 million. World wheat ending stocks for 2011/12 are seen broadly unchanged at 197 MMT and 2012/13 carryout pegged at 184.8 MMT versus 188.1 MMT last time. The bottom line being that US and world wheat stocks are still at very comfortable levels. After the close the USDA said that the US winter wheat harvest was now 35% done compared to just 9% normally. Spring wheat crop conditions fell slightly in the good/excellent category but to a still very respectable 75%.

EU Grains Close

11/06/12 -- EU grains finished mixed with Jul 12 London wheat ending up GBP1.50/tonne to GBP173.00/tonne, and new crop Nov 12 ending down GBP0.20/tonne to close at GBP156.80/tonne. Aug 12 Paris wheat was unchanged at EUR208.00/tonne, whilst Nov 12 was EUR0.25/tonne firmer at EUR209.75/tonne.

Early euphoria that Spanish banks had secured a bailout over the weekend quickly subsided as it was soon realised that the European debt crisis is far from over. Attention now is starting to fix on Greece and it's upcoming elections this weekend. The possibility of an anti-austerity victory and a possible eurozone exit, and the subsequent contagion that would cause, would bring far more chaos and misery than advancing Spanish banks EUR100 billion would.

The French Ministry said that winter barley production there will slide 10% to 5.7 MMT, despite a rise in yields 058 5.5% due to the harvested area dropping 15% due to winter kill. In contrast the spring barley planted area has soared more than 80% to almost equal that of the winter barley harvest, they added.

Corn sowing this year is also expected to increase, up 5.7% to 1.68 million hectares. The winter rapeseed harvested area will decline almost 10% to 4.84 million hectares due to similar problems that afflicted winter barley, they added.

There was no word on French winter wheat production potential, but we do know that they exported 13.8 MMT of soft wheat from July – April down 17% from a year ago.

The USDA's June supply and demand and crop production report comes out tomorrow afternoon. For wheat there aren't too many significant changes anticipated, with small reductions to US wheat production and ending stocks.

Following that we have Australia's ABARES releasing their crop production report on Wednesday, with most trade estimates for wheat production there in 2012/13 lining up around 1 MMT below last month's forecast of 26 MMT.

EU Rapemeal Prices

11/06/12 -- Rapemeal prices on the continent are little changed today, succumbing to the general mood of apathy that seems to be engulfing the rest of the market.

Latest guide prices for EU rapemeal today, basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:

The Morning Paper

11/06/12 -- "Spain bailout cheers markets" is the first headline to catch the eye this morning, with shares in Europe up around 2% in early trade. Crude is up more than a dollar/barrel, the euro is firmer and the dollar is weaker. Soybeans are 15-17 cents higher on the electronic market, wheat is 3-5 higher and corn up 4 to down 5 cents.

Surely I am not he only one thinking "well, we've seen this all before?" The Spanish government may have done a nifty sidestep by saying "it's not US that needs a bailout, it's out banks" but it's still "up to" a billion euros that has to be found from somewhere. The exact amount isn't known at this stage, and who is to say that it won't be higher? I mean, up until Friday the government had been publicly denying the need for any bailout at all.

The eurozone is now "up to" EUR100 billion poorer than it was on Friday, that's the way I see it. The eurozone has lent "up to" EUR100 billion to banks, which if they were private businesses would be in liquidation by now due to their irresponsible trading activities. That doesn't seem like something to rejoice at if you ask me, quite the opposite.

A wet weekend across the UK, France, Germany and Poland will be followed by a wet week across the UK, France, Germany and Poland. My weather guru who was last week forecasting a welcome return to drier, warmer and more settled conditions for the last third of the month os now sadly calling for the remainder of June to continue to be wet.

Is anyone starting to get 2008 déjà vu here, because I am. Rain makes grain, they say. Too much rain makes too much shitty grain, just as it did in 2008. I've a feeling that DON may be making an unwelcome return in 2012.

You will also of course likely remember that the UK finished up with a wheat crop in excess of 17 MMT for the first time ever in 2008, some of which was still being combined in October.

Could it be that the 2012 harvest sees bumper yields but a dearth of quality grain?

In other news China imported 5.28 MMT of soybeans in May, up 16% on May 2011 and 8% more than in April 2012. Their Jan/May imports stand at 23.43 MMT, a 20.7% increase on the same period in 2011.

Prices being around a dollar a bushel higher than twelve months ago clearly haven't put them off. The government there will attempt to auction off the same 600,000 MT of crappy four year old soybeans again this week that met with a tepid response last week.

Taking into account continued strong demand from China (eg Friday's purchase of 410,000 MT of US soybeans) and the lack of offers out of South America, soybeans are still the one with the most upside potential this summer to my mind.

Tonight's USDA crop condition ratings will be interesting. Last week the trade was expecting around 70% good/excellent in the first soybean ratings of 2012, but got only 65% in the top two categories.