Nogger's Blog

Chicago: Off The Highs But Still Posts Strong Weekly Gains

22/06/12 -- Soybeans: Jul 12 Soybeans closed at USD14.42 1/2, up 4 cents; Nov 12 Soybeans closed at USD13.75 1/2, up 4 1/4 cents; Jul 12 Soybean Meal closed at USD422.00, down USD7.00; Jul 12 Soybean Oil closed at 49.74, down 7 points. For the week old crop Jul 12 beans were up 66 1/2 cents, or 5%, whilst new crop Nov 12 added 61 1/2 cents. Jul 12 meal gained USD11.90 and Jul 12 oil added 130 points. The electronic market had beans posting strong gains running into the opening of the daytime open outcry session, but most of those were given up in pre-weekend profit-taking. This is often the case in this kind of weather market, where weekend events and alterations to the latest forecasts can sometimes make things look a whole lot different on a Monday morning than they did on Friday. Funds were said to have had a quiet day and were probably about even on beans and light sellers of meal and oil - hence the lower closes on the latter two products. High prices mean that most of the 2011/12 South American crop is already sold. Indeed, Rabobank say Brazilian farmers have now sold 29% of their 2012/13 soybean crop already - and they don't start planting that until late September at the earliest!

Corn: Jul 12 Corn closed at USD5.91, up 4 1/2 cents; Dec 12 Corn closed at USD5.54, up 4 cents. For the week old crop Jul 12 was up 11 1/2 cents, with Dec 12 adding a much more impressive 48 cents, or 9.5%. As with soybeans, most of the early double digit gains were given up by the close of play - Dec 12 was 17 1/2 cents higher at one stage. Funds were estimated to have been net buyers of around 10,000 corn contracts on the day - a fair volume that you would have thought would have led to a better close than 4 cents higher. Next week has plenty of potential to provide some dramatic trade. Monday's action is likely to be dictated by weekend weather events in the US and the latest forecasts for the week ahead. Monday night we get the latest crop condition ratings from the USDA. Corn and soybeans rated good/excellent will probably see declines of 2-4 percentage points each. Then on Friday we have the USDA's June acreage and quarterly stocks reports. Most traders expect an increase in both corn and soybean planted area from the USDA's March estimates.

Wheat: Jul 12 CBOT Wheat closed at USD6.73 1/4, up 11 1/2 cents; Jul 12 KCBT Wheat closed at USD6.86, up 3 cents; Jul 12 MGEX Wheat closed at USD8.59, up 15 1/4 cents. For the week Jul 12 Chicago wheat was up 63 3/4 cents, or 10.5%, with Kansas wheat gaining 56 cents and Minneapolis adding 71 1/2 cents. So wheat was the star of the week, posting better gains than either corn or soybeans, despite the lack of a really good bullish storyline. Jul 12 Chicago wheat held on to more of it's gains than either of those two managed to do, although Dec 12 finished 6 1/2 cents higher on the day it was more than 10 cents off the intra day highs. Funds were said to have been net buyers of around 4,000 Chicago wheat contracts on the day. Reduced Russian output this year is certainly supportive, bumper crops there last year were responsible for depressing world prices last summer and autumn. Ukraine will also have a much smaller wheat crop this year, but could harvest a record corn crop. Offers of cheap Black Sea corn for new crop positions are already threatening to undermine wheat prices in Europe where wheat production estimates are now rising following plentiful spring rains.

EU Grains Close - Friday

22/06/12 -- EU grains finished higher with Jul 12 London wheat ending up GBP3.25/tonne to GBP183.00/tonne, and new crop Nov 12 ending GBP1.80/tonne higher to close at GBP161.55/tonne. Aug 12 Paris wheat was EUR2.25/tonne higher at EUR214.25/tonne, whilst Nov 12 was EUR2.25/tonne firmer at EUR216.50/tonne.

For the week, Jul 12 London wheat was up GBP8.00/tonne and Nov 12 gained GBP7.55/tonne. Aug 12 Paris wheat rose EUR11.25/tonne and Nov 12 EUR12.75/tonne.

At home, old crop is being supported by ideas that the harvest is likely to be 2-3 weeks behind normal following another week of widespread heavy rain. What we do have left from the 2011 harvest is therefore going to have to last a bit longer than expected.

Potential yields and bushel weights look very promising after the crop has enjoyed abundant moisture availability in the past couple of months. It's quality that is now the main concern.

Harvesting a large crop of high moisture wheat that needs to go through the dryer first to only wind up making feed grade is what everybody is worried about now.

Across the Channel French and German wheat has enjoyed plenty of recent moisture too, except they've also had their rainfall events interspersed with more sunshine than we have seen here in the UK.

Toepfer raised their forecast on German wheat production by more than 1.2 MMT today, from 21.49 MMT to 21.71 MMT, citing beneficial spring rains.

FranceAgriMer rate 73% of the wheat crop there as being in good/excellent condition, a year ago it was only 27%. They also reduced their forecast for 2011/12 soft wheat exports by 200,000 MT to 15.7 MMT citing a lack of competitiveness into its traditional homes in North Africa - particularly Egypt.

The main French port of Rouen only handled 60 TMT of grain for export this week, down by more than a third on last week. Of that total 45 TMT was wheat with Cameroon the top destination.

With one week left to go to bring the 2011/12 marketing year to a close Brussels issued 144 TMT of soft wheat export licences this week, bringing the year to date total to 12.4 MMT, 32% lower than the 18.2 MMT that had been granted at this time a year ago.

Early yield results out of Ukraine and Russia are poor, although it is likely that the worst of the crops are being harvested first. Barley yields in the Crimea region of Ukraine are said to only be coming in at around 2 MT/ha compared with the national average of 3.7 MT/ha last year.

Agritel forecast that the barley crop there will struggle to make 8.0 MMT, and will probably only muster 7.7 MMT versus 9.1 MMT a year ago, although that is still 200,000 MT more than the USDA's latest estimate.

EU Rapemeal Prices

22/06/12 -- Rapemeal prices on the continent are mixed today. Widespread wet & dull weather across Europe is seen delaying the harvest and may be starting to harm yield potential.

Guide prices, basis FOB Lower Rhine in euros/metric tonne, with change from previous session:

The Lunchtime Bite

22/06/12 -- The electronic grains are up across the board, with the exception of soyoil. For the week so far, including overnight action, we see old crop Jul 12 corn 16 3/4 cents higher, with new crop Dec 12 up 53 1/2 cents - an increase of more than 10%. Old crop beans are up 58 cents and new crop Nov 12 has added 68 1/2 cents. Jul 12 Chicago wheat is 65 3/4 cents firmer and Dec 12 up 60 1/4 cents.

There's some pretty meaty gains there, it will be interesting to see if the can hang onto them this afternoon. It is Friday after all.

The market seems to be developing "that look" again. Riding for a fall my Mum used to call it. The bulls have an air on invincibility about them once more. "This crop is toast and the only way is up big buddy. The world's gotta eat. If every man, woman and child in China ate just one more chicken nugget each then we'd run out of corn by next Tuesday, etc, etc.." That sort of thing.

Cue the USDA and their June Acreage report a week from today. The stage seems set perfectly for them, and we do know how they like the limelight.

Russia's Deputy Minister of Agriculture says that a revised grain production forecast is in the wings, and it's likely to be "considerably lower" than the 94 MMT estimate that they've been standing by for some time now. I bet it won't be as low as SovEcon's 85 MMT that is already in the market though.

They've exported 26.7 MMT of grain so far in 2011/12, and are likely to finish the season at around 27 MMT, he adds.

In yet more farting about, the CME Group now say that the open outcry pit session will trade until 2pm local time starting on Monday. That means that it and the electronic session will now both finish at the same time, which is 8pm in English money.

How many changes to trading times is that? I've lost count. What an embarrassing shower of money grabbing ne'er do wells they really are. We're only doing what the people want, they say. But then again that's what Pol Pot and Hitler used to say.

Don't get too comfy that you've finally got your head round these new trading times though, because it's all change again on Friday. With the USDA due out with their acreage and quarterly stocks report at 7.30 am local time, or 3.30pm in the good old U of K, the daytime session will kick off ten minutes earlier than normal - not that we really know what "normal" is any more.

Confused? You should be.

Nogger's Daily Sheet

22/06/12 -- The longest day is behind us, and what a long, boring and wet one it was. From here on in it's all downhill to winter, if you pass GO do not collect GBP200.

There's the small matter of a harvest to get over at some point in between now and Christmas - if it stops raining before then that is. What wouldn't our Septic mates across the pond give for a thorough soaking like this, eh?

Well, they can't have it, this is British rain, for British people.

Old crop Jul 12 London wheat is up GBP2.25/tonne this morning I see, it's highest levels in more than a year. I can only assume that that is weather related, as it's starting to look like whatever old crop is still around is going to have to last a bit longer than was thought.

Nov 12 is down GBP0.75/tonne, widening the gap between old and new crop to a cavernous GBP23.00/tonne, up from GBP16.00/tonne four weeks ago.

What's happening elsewhere? Rabobank have said that Australia will harvest 24.5 MMT of wheat in 2012/13 after recent rains proved "very helpful" - that's 0.4 MMT higher than ABARES recent estimate, although still well down on 2011/12's record bin-busting 29.5 MMT.

The Philippines says that it will buy more feed wheat and less corn in 2012/13 due to price considerations.

In a similar vein, Reuters report that in Japan corn inclusion rates in livestock feed have fallen to a two decade low, whilst wheat's percentage of the ration has increased to at least a twenty year high.

Crude oil prices have rebounded a little this morning after taking a right old pasting throughout the week. Indeed it's been a bad couple of months for oil, with WTI crude down 25% in the past eight weeks.

That doesn't do much for ethanol margins in the States. With high corn prices, slack demand for ethanol, crude prices tumbling, US oil stocks at record levels (see this interesting chart) and the tax blenders credit having disappeared the odds are stacked against the ethanol industry.

Well they've been saying for long enough that they should be able to stand on their own two feet and not rely on government subsidies for ever, so let's see how they get on.

Pacific Ethanol Inc apparently lost USD7.5 million in the first quarter of 2012 compared to making a USD2.6 million profit in Q1 of 2011.

Whilst we are throwing interesting charts about, this one may also interest you. London wheat versus WTI crude oil.

Note how the two are fairly closely matched for the first half of the chart, but that any correlation has gone totally out of the window latterly.

Throwing up multi-million pound bioethanol refineries in such volatile times is not for the faint-hearted.

Chicago Closing Comments - Thursday

21/06/12 -- Soybeans: Jul 12 Soybeans closed at USD14.38 1/2, down 8 cents; Nov 12 Soybeans closed at USD13.71 1/4, down 24 1/4 cents; Jul 12 Soybean Meal closed at USD429.00, up USD1.60; Jul 12 Soybean Oil closed at 49.81, down 100 points. Funds sold an estimated 7,000 soybean contracts on the day in a return to "risk off" trade firmer the dollar and saw WTI crude close below USD80/barrel for the first time since early October 2011. Weekly export sales for soybeans were less than expected at 608 TMT vs the 700-950 TMT anticipated. Cropcast became the latest analyst to lower its US yield estimates, cutting soybeans' potential from 44.1bpa to 42.4bpa, which is 1.5bpa lower than the current USDA forecast. Another analysis group, ProExporter, forecast 43.3bpa. The Argentine government estimate their soybean crop at 40.3 MMT versus a previous estimate of 41.5 MMT.

Corn: Jul 12 Corn closed at USD5.86 1/2, down 25 1/4 cents; Dec 12 Corn closed at USD5.50, down 16 1/2 cents. Fickle funds were said to have dumped 17,000 contracts on the day, having been heavy buyers at the beginning of the week. That would still place them up around 25,000 on the week as a whole though. Corn weekly export sales of 382 TMT were below the 450-650 TMT anticipated. The firming dollar and tumbling crude were both bearish influences, as too was poor Chinese economic data. Cropcast cut its US corn yield estimate to 158.6bpa, from 163.7bpa previously and the USDA's 166bpa. ProExporter estimate 157.2bpa. Midday weather forecasts added a bit of rain for the Midwest next week, with temperatures seen moderating. "Maximum temperatures in the 90s F previously this week are being replaced by low 80s F. Night temperatures would chill down into the upper 50s – low 60s F compared to 70s F previously," said Martell Crop Projections.

Wheat: Jul 12 CBOT Wheat closed at USD6.61 3/4, down 2 1/4 cents; Jul 12 KCBT Wheat closed at USD6.83, down 3 1/2 cents; Jul 12 MGEX Wheat closed at 8.43 3/4, down 1/2 cent. Funds were said to have sold around 2,000 Chicago wheat contracts on the day. The USDA's weekly export sales report for wheat of a combined 842 TMT were well ahead of the 300-500 TMT expected - the only one of the big three to beat trade forecasts. The Argentine government estimate the 2012/13 wheat area to 3.8 million hectares versus a previous estimate of 4 million (which is also that of the USDA). Farmers there are seen planting less wheat in protest to government intervention in the grain markets. Libya and Iraq are tendering for 50,000 MT each of wheat on the international stage. Algeria is said to have bought 600,000 MT of probably French wheat and Japan bought 108,500 MT of US wheat in it's regular Thursday tender.

EU Grains Close

21/06/12 -- EU grains closed mostly higher with Jul 12 London wheat up GBP1.25/tonne to GBP179.75/tonne and Nov 12 also GBP1.25/tonne firmer at GBP159.75/tonne. Aug 12 Paris wheat closed EUR1.75/tonne firmer at EUR212.00/tonne, whilst Nov 12 was EUR1.75/tonne higher at EUR214.25/tonne.

This was the highest close for Jul 12 London wheat since early September 2011, and the best for a front month in a year. New crop Nov 12 London wheat posted its best closing level in exactly a month.

Pretty impressive, and ever so slightly bizarre, considering that outside markets offered little in the way of support. It was quite the opposite in fact, with Brent crude slumping to an 18-month low and US WTI crude down below USD80/barrel for the first time in more than 8 months.

Reports that Algeria bought 600,000 MT of optional origin wheat, thought likely to be French material, was supportive today. Apart from that though there was precious little fresh bullish news about.

The general consensus seems to be that EU wheat and barley production prospects are greatly improved following widespread and heavy rainfall throughout most of the region in the last 8-10 weeks.

Much more rain could however start to damage quality before long. Yields however will surely beat last year in many of the major producing countries.

RMI Analytics described the condition of French barley as "superb" - according to a report on Agrimony.com: "French crops looked fabulous...We were seeing levels of 1,000-1,200 ears per square metre – unbelievable."

EU Rapemeal Prices

21/06/12 -- Rapemeal prices on the continent are lower today as some of the protection that had been built into prices following recent steep gains in Chicago soymeal is taken away.

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

The Lunchtime News

21/06/12 -- The electronic grains are down, but off earlier lows in a modest correction from recent strong gains. The US weather doesn't seem much different to yesterday, although maybe a tad cooler. Some rain has fallen overnight and this morning centred around SE Nebraska, NE Kansas and SW Missouri.

Crude is lower following disappointment that the Fed didn't fire the printing presses up for a third time and on bad economic news out of China.

The USDA's weekly export sales report was a mixed bag. Wheat sales of a combined 842 TMT were well ahead of the 300-500 TMT expected. Corn sales of 382 TMT were below the 450-650 TMT anticipated as were soybean sales at 608 TMT (vs 700-950 TMT).

Libya and Iraq are tendering for 50,000 MT each of wheat on the international stage. Algeria is said to have bought 600,000 MT of probably French wheat and Japan has bought 108,500 MT of US wheat in it's regular Thursday tender.

Fresh news is hard to come by. Brent crude has hit an 18-month low and NYMEX crude is threatening to fall below USD80/barrel. Spain is paying 4.7% for loans maturing in two years - getting on for nine times as much as neighbours France who are paying just 0.54%. Manufacturing in the US is growing at its slowest pace in 11 months, according to Reuters.

The Morning Paper

21/06/12 -- Grains are doing a fairly good job of attempting to ignore bearish outside influences this morning. OK, they are in negative territory, but not by that much all things considered.

First off we have market disappointment that yesterday's Ben Bernanke speech didn't deliver more QE to stimulate growth, merely an extension of their so-called Operation Twist.

Then this morning we have news that China's factory sector has contracted for the eighth month in a row.

Neither of those pieces of news have done crude oil any good, with Brent falling to an 18-month low this morning and WTI crude dipping below USD80/barrel for the first time since September 2011.

Back to the fundamentals, we have the USDA out later today with the weekly export sales report, with corn sales expected to come in around 450,000-650,000MT, soybean sales at 700-950 TMT and wheat sales at 300,000-500,000MT.

You will recall that last week's corn sales were very poor at only 92,100 MT of old crop - a marketing-year low - and 77,700 MT of new crop.

Brazil is expecting a record corn crop of its own this season, and theirs is on the market now with local reports suggesting a really good second crop is on the cards, with yields approaching those of the first crop.

It is noteworthy that China this week announced that it is lowering photosanitary requirements for Brazilian and Argentine corn imports.

Brazil has however already sold a lot of soybeans for shipment across the summer that will keep ports very busy, potentially limiting logistics for exporting large volumes of corn. Reuters today report "more than 250" vessels waiting to load grains, fertiliser, sugar etc at the major ports of Santos and Paranagua.

Going forward Ukraine is already shaping up to be an aggressive seller of new crop corn and will likely drop it's price accordingly until it can find buyers willing to take a risk on its quality and the inevitable winter shipping disruptions.

The Ukraine Deputy Minister of Agrarian Policy says that the country will harvest 48-49 MMT of grains this year, which combined with carryover stocks of 12 MMT leaves them with plentiful supplies to accommodate their own needs and still export a hefty 27 MMT in 2012/13.

Widespread rain across the UK again today will be adding to quality concerns for wheat and worries for some of the taller rapeseed crops around.

China's Ministry of Commerce says that May soybean imports were up 16% on a year ago at 5.28 MMT. They also say that they are to drop an anti-dumping claim against the US concerning DDGS exports. That could pave the way for they buying more DDGS and being less corn reliant possibly?

Rosstat say that June 1st Russian grain stocks in the hands of agricultural, harvesting and processing organizations were 16.8 MMT, almost 12% lower than a year ago when their export ban was still in place. Wheat accounted for 7.8 MMT of the total, around 25% less than a year ago.

Chicago Ends Mostly Higher On Weather Concerns

20/06/12 -- Soybeans: Jul 12 Soybeans closed at USD14.46 1/2, up 12 3/4 cents; Nov 12 Soybeans closed at USD13.95 1/2, up 11 cents; Jul 12 Soybean Meal closed at USD427.40, down USD0.50; Jul 12 Soybean Oil closed at 50.81, up 37 points. Funds were said to have been net buyers of around 6,000 soybean contracts on the day on a continued hot and dry outlook for the Midwest. There is still time for the weather to co-operate and turn in a very respectable yield if heavy rain coincides with the key pod filling period. "This influential stage occurs over 30-40 day period in August and early September. Even short standing soybeans, stunted by drought, may load up with pods and make a productive yield, when rains are abundant," say Martell Crop Projections. Estimates for tomorrow's weekly export sales report for soybeans are 700-950 TMT.

Corn: Jul 12 Corn closed at USD6.11 3/4, down 3/4 cent; Dec 12 Corn closed at USD5.66 1/2, up 3 cents. Funds were said to have been net buyers of around 3,000 corn contracts on the day. Hot and dry is the forecast for the Midwest and also across the Northern Chinese Plains the next 5-7 days. With each day that passes the USDA's prediction of a record 166bpa US corn yield this year looks increasingly unlikely. Next Friday they release their June planting estimates. It is entirely possible that they could find an extra million acres or so of corn to add to their current prediction of 95.9 million, which in itself is the highest since 1937. Informa recently raised their corn planting estimate for the 2012 US harvest to 96.8 million acres which is 900,000 more than the USDA said in March. That way they could cut projected yields back in July without harming production too much. Weekly export sales for tomorrow are expected to be 450,000-650,000MT.

Wheat: Jul 12 CBOT Wheat closed at USD6.64, up 14 1/2 cents; Jul 12 KCBT Wheat closed at USD6.86 1/2, up 16 1/2 cents; Jul 12 MGEX Wheat closed at USD8.44 1/4, up 45 3/4 cents. Funds were said to have bought around 4,000 Chicago wheat contracts on the day. The nearby Minneapolis contract spiked sharply higher on reports heavy rains (it obviously isn't bone dry everywhere!) causing flooding in Duluth, Minnesota, a spring wheat futures delivery terminal. That may have encouraged shorts who were intending on making delivery against their sales to rethink their strategy. Wheat production and export estimates for Russia keep falling. The combines are expected to be rolling there around 10 days from now. Private estimates peg Russian wheat exports falling to around 12-14 MMT in 2012/13, compared to 21 MMT this year. Trade estimates for tomorrow's weekly export sales report are 300,000-500,000MT.

EU Wheat Close

20/06/12 -- EU grains closed mixed with Jul 12 London wheat unchanged at GBP178.50/tonne and Nov 12 London wheat also flat at GBP158.50/tonne. Aug 12 Paris wheat rose EUR2.25/tonne to EUR210.25/tonne and Nov 12 was also up EUR2.25/tonne to EUR212.50/tonne.

We appear to be treading water waiting for new crop.

The UK exported almost 129 TMT of wheat in April, bringing the marketing year to date total to 2.24 MMT, slightly down on year ago levels. That fits in nicely with Defra's 2011/12 full campaign estimate of 2.45 MMT.

Barley exports in April were almost 45 TMT, bringing the cumulative YTD total to nearly 764 TMT which already beats Defra's 2011/12 target of 750 TMT.

The UK's rapeseed exports fell to 144 TMT in April, down by a third on March, however the very strong early season pace means that we've shipped 875 TMT of rapeseed abroad in 2011/12, nearly 123% more than in the same period in 2010/11. Germany is the clear top export home, accounting for more than half of all foreign sales.

There's now widespread talk that Russia's wheat crop may have suffered worse winterkill and more recent drought damage than was originally thought. Exports in 2012/13 could fall by at least a third as a consequence it is now estimated.

The minutes of the MPC meeting released today show that the vote not to increase QE this month was narrowly split five against and four in favour. That's a marked difference from the 8-1 against in May and appears to signal that a shift towards further stimulus may be on the cards soon. That may strengthen the pound going forwards.

EU Rapemeal Prices

20/06/12 -- Rapemeal prices on the continent are mostly higher after some steep rises in Chicago soymeal last night.

Guide prices, basis FOB Lower Rhine in euros/metric tonne, with change from previous session:

The Lunchtime News

20/06/12 -- The electronic market is a tad easier on wheat and corn in what seems to be a little bit of consolidation after the latter has just posted its biggest two-day gain in 20 months, according to Bloomberg.

Nothing much has changed though. US crop prospects don't look any different today than they did yesterday.

It is still only mid-June, and there is still time for things to take a turn for the better yet. However it should be noted that at 63% good/excellent, US corn is seven percentage points worse off than it was at this time a year ago. The USDA's current record yield estimate of 166bpa therefore looks way too ambitious at this juncture.

Ditto soybeans, where the crop is even worse when compared to 12 months ago, at 56% good/excellent versus 70% at this time in 2011. A second highest in history yield of 43.9 bpa therefore also looks questionable.

It is worth noting at this point that last season's final yields came in at just 147 bpa for corn and 41.5 bpa for soybeans. So despite crop conditions being worse than a year ago (and in the case of soybeans considerably worse), according to the USDA things will turn out alright in the end and we will have substantially better yields than in 2011.

Hurry up El Nino, that's all I can say.

Elsewhere, now that they are out of the Euro's, Ukraine's farmers have got around to finishing planting a record 4.6 million hectares of corn. That's an increase of 30% on last year and should stand them in good stead to come in with a second record corn harvest in succession.

The USDA currently predict a crop of 24 MMT for Ukraine this year, based on an average yield of 5.33 MT/ha. A repeat of last season's bumper 6.44 MT/ha yields would give them a crop of 29.6 MMT. No wonder then that new crop Black Sea corn offers are already undercutting wheat into Europe.

Bangladesh has bought 50,000 MT of wheat from awash with the stuff neighbour India. Reports that Indian traders can't make up their minds whether to ship the consignment or let it walk there of it's own accord have been hotly denied!

Walkies with the dog this morning took me past some very impressive looking wheat and barley crops, with yield potential looking very significantly better than this time last year. The USDA currently have the UK down to have a wheat crop of 15.6 MMT this year. I think that 16.2 MMT might be nearer the mark.

The Bank of England voted only 5-4 not to increase QE this month, the minutes of the MPC meeting released to day shows. That's a marked difference from a 8-1 split last month, and adds some credence that a further increase may be on the cards before too long.

The pound is nudging its best levels in almost a month against the dollar on the back of the usual "live for today because tomorrow we die" mentality.

Talking of which, Greece says that it is close to forming a three-party coalition government, which will not include the runners-up in Sunday's election, the anti-bailout radical left Syriza party.

Chicago Jumps On Weather Concerns

19/06/12 -- Soybeans: Jul 12 Soybeans closed at USD14.33 1/2, up 49 1/2 cents; Nov 12 Soybeans closed at 13.86, up 46 3/4 cents; Jul 12 Soybean Meal closed at USD427.90, up USD15.00; Jul 12 Soybean Oil closed at 50.44, up 168 points. Funds bought an estimated 12,000 soybean contracts on the day in an extension of yesterday's "risk-on" mode. Hot and dry US weather and declining crop conditions encouraged establishment on fresh long positions. Strong demand and tight old crop stocks were underlined by the USDA announcing the sale of 140,000 MT of beans to unknown for 2011/12 delivery. Citi Group estimated US 2012 soybean yields at 43.3 bu/acre versus their previous estimate of 43.7 bu/acre and the USDA's figure of 43.9 bu/acre. Another respected analyst Dr Michael Cordonnier came out with an even lower forecast of 42.5 bu/acre.

Corn: Jul 12 Corn closed at USD6.12 1/2, up 13 cents; Dec 12 Corn closed at USD5.63 1/2, up 29 1/2 cents. Funds were said to have bought 20,000 corn contracts on the day, doubling up on yesterday's purchase of a similar volume. The same weather concerns exist for corn. The USDA cut the percentage of the crop rated good/excellent by three points to 63% yesterday, versus 66% a week ago and 70% a year ago. There are dryness concerns in Northern China too, with their Ag Ministry saying this may hurt the corn crop there. Citi Group estimated the US 2012 corn yield at 161.0 bu/acre, down 1.2 bu/acre from their previous estimate of 162.2 bu/acre and fully 5 bu/acre below the USDA's estimate of 166.0 bu/acre. Dr. Cordonnier lowered his forecast to 159.0 bu/acre. Old crop corn stocks are also extremely tight, there's some talk of ethanol plants slowing down or even closing and selling their corn purchases back onto the market.

Wheat: Jul 12 CBOT Wheat closed at USD6.49 1/2, up 19 1/4 cents; Jul 12 KCBT Wheat closed at USD6.70, up 19 1/2 cents; Jul 12 MGEX Wheat closed at USD7.98 1/2, down 4 cents. Funds were said to have been net buyers of around 4,000 Chicago wheat contracts on the day. SovEcon cut their forecast for Russian grain production this year to 85 MMT versus their previous estimate of 89 MMT and compared with 94 MMT in 2011 due to dry weather and winterkill. The wheat crop was cut 3 MMT to 50 MMT, down more than 10% on last year's 56 MMT. They went on to say that their existing Russian wheat export forecast of 14 MMT for 2012/13 is also likely to be cut further. Exports in the current season drawing to a close are seen at 21 MMT, so foreign sales in 2012/13 are likely to fall by more than a third. The Australian Bureau of Statistics said that Australia's May 31 wheat stocks were 15.9 MMT, 4% higher than in May 2011. The largest quantity was stored in Western Australia with 6.6 MMT, or 41% of the national total.

EU Grains Close

19/06/12 -- EU grains finished higher with Jul 12 London wheat ending up GBP2.25/tonne to GBP178.50/tonne, and new crop Nov 12 ending GBP2.65/tonne higher to close at GBP158.50/tonne. Aug 12 Paris wheat was EUR1.25/tonne higher at EUR208.00/tonne, whilst Nov 12 was EUR2.75/tonne firmer at EUR210.25/tonne.

Deteriorating crop conditions in the US and Russia were behind today's move higher.

Last night the USDA cut their US corn crop ratings by 3 percentage points in the good/excellent category to 63% versus 70% a year ago. That makes the current USDA yield estimate of a record 166 bushels/acre look particularly unlikely.

SovEcon cut their estimate on grain production in Russia this year to 85 MMT from 88.5 MMT previously and around 9 MMT below last season's total.

Wheat production will fall to 50 MMT, they said (versus 56 MMT on 2011). That's 3 MMT down on their previous forecast and also that from the USDA last month.

Wheat production in the southern Krasnodar district may fall by 40% this year to just 4 MMT, according to the regional governor.

Rabobank were less bearish on Russia's crop prospects, forecasting a wheat crop of 52 MMT.

In addition they also pegged the EU-27 wheat crop at 132.5 MMT, which is 1.5 MMT more than the USDA said last month.

Chicago Close - Monday

18/06/12 -- Soybeans: Jul 12 Soybeans closed at USD13.84 1/4, up 8 1/4 cents; Nov 12 Soybeans closed at USD13.38 1/4, up 25 1/4 cents; Jul 12 Soybean Meal closed at USD412.90, up USD2.80; Jul 12 Soybean Oil closed at 48.76, up 32 points. Weekend rains that delivered less than they promised and relief at the Greek election results were responsible for a bit of "risk on" activity, with funds buying an estimated 6,000 soybean contracts on the day. US weather forecasts going forward are far from ideal, generally offering only scattered shower opportunities and warm temperatures. The Rosario Grains Exchange estimated Argentina’s soybean crop at 40.5 MMT vs. their May estimate of 40.9 MMT and the USDA's 41.5 MMT. The USDA cut their US soybean crop ratings from 60% to 56% good/excellent.

Corn: Jul 12 Corn closed at USD5.99 1/2, up 20 cents; Dec 12 Corn closed at USD5.34, up 28 cents. Funds were said to have stepped in to buy an estimated 20,000 corn contracts on the day, sending prices sharply higher. The early planting scenario means early maturity and with it we have an early weather market scenario as corn enters the key pollination period under varying degrees of stress in many states. The Rosario Grains Exchange estimated Argentina’s corn crop at 19.0 MMT unchanged from its May estimate, but 2 MMT lower than the current USDA prediction. After the close the USDA cut US good/excellent crop ratings by 3 percentage points to 63% versus 70% a year ago.

Wheat: Jul 12 CBOT Wheat closed at USD6.30 1/4, up 20 3/4 cents; Jul 12 KCBT Wheat closed at USD6.50 1/2, up 20 1/2 cents; Jul 12 MGEX Wheat closed at USD8.02 1/2, up 15 cents. Funds were said to have been net buyers of around 4,000 Chicago contracts on the day. Rabobank estimated the EU–27 wheat crop at 132.5 MMT, which is 1.5 MMT more than the USDA said last month. The USDA said that the US winter wheat harvest is now almost at the hallway point - 48% done versus just 16% normally. Spring wheat is well advanced in terms of maturity at 33% headed compared to only 7% normally. Good to excellent crop conditions rose one percentage point for both spring wheat (to 76%) and winter wheat (54%).

EU Wheat Close

18/06/12 -- EU grains closed mostly higher with Jul 12 London wheat up GBP1.25/tonne to GBP176.25/tonne and Nov 12 GBP1.85/tonne firmer at GBP155.85/tonne. Even inactive Aug 12 Paris wheat managed to close EUR3.75/tonne firmer at EUR206.75/tonne, whilst Nov 12 was also EUR3.75/tonne higher at EUR207.50/tonne.

News that the pro-austerity New Democracy party came out top in the Greek elections on Sunday - albeit by a narrow margin - provided a short-lived boost to equities. That was quickly erased though as Spanish 10-year borrowing costs pushed above the widely regarded as unsustainable 7% level for a fresh eurozone era high.

Widely touted heavy weekend rains in the US largely disappointed, which saw the electronic Globex market trade higher throughout the day, with those gains increasing once Chicago began trading in the afternoon. That strength spilled over into European trade.

"Instead of very heavy rainfall, showers were light and scattered from a stronger-than-expected ridge of high pressure that stabilized the atmosphere and diminished rainfall," said Martell Crop Projections.

"Corn moisture needs are rising at the very same time that ground moisture is declining. Most corn is already in the rapid growth phase, due to early seeding dates. This is placing a tremendous demand on the soil for water," they added.

Meanwhile drought that originally began in Ukraine and southern Russia has now shifted eastward into the Volga Valley, Urals and Siberia, they say.

"This opened the door for increased rainfall in eastern Ukraine and southern Russia, and staving the tide of deterioration. At the same time, intensifying heat stress and drought is damaging prospects in Russia's vast spring grain belt. Wheat production may finish worse that the 53 MMT projected by USDA in June, already cut 3 MMT from the May estimate," they conclude.

The Morning Paper

18/06/12 -- So, the pro-bailout New Democracy party won the Greek election by a narrow margin pipping the anti-austerity Syriza party into second place. The former will now be looking to form a coalition government, of which the latter has already said they want no part.

The markets have reacted with muted enthusiasm, although the New Democracy leader Antonis Samaras has already said that he will push for more lenient bailout terms from Europe than those that had previously been agreed.

It seems that maybe the lessons of last Monday may have been learned, when stocks shot up in the morning following the announcement of a EUR100 billion bailout for Spanish banks. Soon however, the realisation that "in reality we are EUR100 billion more in hock than we were last week" set in and everything eased back again.

What we now have is Greece probably wanting to restructure the debt that it already has, that it can't repay, into a more favourable debt over a longer period of time at lower rates, that it still won't repay.

Spanish 10-year bonds are above 7% this morning, as the market seemingly switches it's attention towards the ailing bigger fish in the European pond. They admitted on Friday that they were likely to miss their budget targets for this year.

Back to the fundamentals...

The US corn belt mostly got scattered showers and thundershowers over the weekend with rainfall amounts 0.20-1.25 inches), locally heavier in places, which is not the widespread soaking hoped for. Southern and eastern areas remain dry with little rain and above normal temperatures in the forecast for the week ahead.

The USDA will report on the latest crop condition ratings this evening. Last week we had 60% of the soybean crop and 66% of the corn crop rated good/excellent. I'd expect that we will see a 2-3 percentage point cut in each tonight.

Informa released some big planting estimates on Friday night, pegging the US corn area at 96.8 million acres, almost a million more than the USDA said last month. Soybean and spring wheat plantings were also placed well above the USDA's numbers.

Iraq has bought 100 TMT of Russian, 100 TMT of Australian and 50 TMT of Canadian wheat over the weekend.