Nogger's Blog

Chicago Closing Comments - Friday

13/07/12 -- Soybeans: Jul 12 Soybeans closed at USD16.42, up 16 1/4 cents; Nov 12 Soybeans closed at USD15.52 1/2, up 23 1/2 cents; Jul 12 Soybean Meal closed at USD488.90, up USD10.10; Jul 12 Soybean Oil closed at 53.57, up 42 points. For the week Jul 12 beans gained 22 1/4 cents, Nov 12 beans 46 3/4 cents, Jul 12 meal added USD17.30 and Jul 12 oil advanced 30 points. Funds were said to have been net buyers of around 4,000 soybean contracts on the day. Hot and dry remains the outlook. "Corn and soybean farms have built up a 3-5 inch moisture deficit in the recent 30 days. The 5-day forecast calls for only light to moderate showers, while temperatures trend higher into the 90s F. Midwest rainfall next week is projected to be normal while heat continues," say Martell Crop Projections.

Corn: Jul 12 Corn closed at USD7.55 3/4, down 15 1/2 cents; Dec 12 Corn closed at USD7.40 1/4, up 8 cents. For the week Jul 12 corn was 12 1/2 cents higher, with Dec 12 gaining 47 1/4 cents. Jul 12 went off the board today, with September now the new front month. Funds were said to have been net buyers of around 12,000 corn contracts on the day. "Extreme heat and drought has contributed to a severe and irreversible damage in corn. Though temperatures have backed off from the 100 F heat wave early in July, very low humidity and persistent drought kept stress on developing crops. Corn ratings July 8 were the worst since 1988, a historic drought year when production fell by 39%," say Martell Crop Projections.

Wheat: Jul 12 CBOT Wheat closed at USD8.42, up 9 1/4 cents; Jul 12 KCBT Wheat closed at USD8.41, up 4 cents; Jul 12 MGEX Wheat closed at USD9.35 1/4, up 2 1/2 cents. For the week Chicago wheat was 50 3/4 cents higher, with Kansas gaining 51 1/2 cents and Minneapolis adding 21 1/2 cents. As the US winter wheat harvest winds down attention switches to South America. "A winter drought has worsened in Argentina’s leading wheat province Buenos Aires, where practically no rain has occurred for over a month. Also very dry are Cordoba and Santa Fe, the other wheat provinces. Hard freezes have been common in recent days in Buenos Aires temperatures falling as low as 25 F. Cold and dry weather is not conducive to winter wheat seeding and development," say Martell Crop Projections.

EU Wheat Ends Week Posting Impressive Gains

13/07/12 -- EU grains finished higher with Nov 12 London wheat up GBP2.25/tonne to GBP188.00/tonne and Nov 12 Paris wheat EUR4.50/tonne firmer at EUR258.75/tonne.

For the week wheat both sides of the Channel, and the Atlkantic, posted impressive gains with Nov 12 London wheat GBP7.50/tonne higher and Nov 12 Paris wheat rising EUR16.75/tonne as continued wet weather boosts milling wheat premiums.

Paris wheat also gained as the euro sank to a 3 1/2 year low against the pound as Moody's cut Italy's credit rating two notches and warned that further cuts were possible.

The HGCA said that UK farmers planted just over 2 million hectares of wheat for the 2012 harvest, if it ever comes, an increase of 2% and the highest area since 2008. Over half the wheat planted is group 4 varieties. That news, coupled with the weather, is likely to keep milling wheat commanding big premiums over feed this season.

The total barley area is up 5% to just under 1 million hectares, whilst the oilseed rape area is a record 712,000 ha. The area planted to all three is seen lower than last year in Scotland due to adverse weather conditions at planting time in the autumn.

All we need now is some demand. Export markets are sluggish, and the pound firming against the euro doesn't help.

ABF issued an interim management statement this week that said "Production at Vivergo’s bioethanol plant in Hull, an installation of some complexity, which has required an extended commissioning programme, has been delayed until the end of the calendar year."

Meanwhile, despite reports that they were gearing up for a re-open, Ensus remains firmly shut for the time being.

Chicago Market Back On The Up

12/07/12 -- Soycomplex: Jul 12 Soybeans closed at USD16.25 3/4, up 2 3/4 cents; Nov 12 Soybeans closed at USD15.29, up 6 1/2 cents; Jul 12 Soybean Meal closed at USD478.80, up USD0.80; Jul 12 Soybean Oil closed at 53.15, down 47 points. Despite prices being close to their highest in history demand for soybeans remains strong with Brazilian crushers reported to be buying from Argentina to keep themselves going, and planting of the 2012/13 crop doesn't begin for more than two months yet! Weekly US export sales were above expectations once again at 332,100 MT for 2011/12 and 427,100 MT for 2012/13. Funds were said to have been net buyers of around 4,000 soybean contracts on the day. New crop sales are running at a record pace, with most of it destined for China or "unknown" - usually the same thing. This week's USDA figures place China accounting for 64% of all world soybean exports in 2012/13. Over a quarter of the entire 2011/12 world production will be imported by China this year.

Corn: Jul 12 Corn closed at USD7.71 1/4, up 20 1/2 cents; Dec 12 Corn closed at USD7.32 1/4, up 28 1/4 cents. Funds were said to have been net buyers of around 20,000 corn contracts on the day. Weekly export sales were better than last week at 172,700 MT for 2011/12 and 492,100 MT for 2012/13. Suggestions that, faced with this year's huge decline in anticipated US corn yields, the US would consider reducing the ethanol mandate were quashed by the US Ag Secretary. The USDA only cut demand from the ethanol sector marginally from 5 billion bushels to 4.9 billion on Wednesday. "The strong cooling that was forecast for the Midwest has not materialised this week. Instead, above normal warmth has prevailed, though not as extreme as the heat wave previously. Very dry soils are heating up faster in the morning, due to less evaporative cooling from the surface. There has been no morning dew, because of parched fields and dry atmospheric conditions," report Martell Crop Projections.

Wheat: Jul 12 CBOT Wheat closed at USD8.32 3/4, up 25 cents; Jul 12 KCBT Wheat closed at USD8.37, up 16 cents; Jul 12 MGEX Wheat closed at USD9.32 3/4, up 18 3/4 cents. Funds were said to have been net buyers of around 4,000 Chicago wheat contracts on the day. Weekly export sales of of 311,800 MT were fairly modest. Reports out of Canada suggest that the winter wheat harvest there will be 2-3 weeks ahead of normal. There is increased talk of an El Nino weather event unfolding in the next few months. Unfortunately that will come too late to assist US crops, but just in time to potentially hinder Australian winter wheat development. Meanwhile a sharp drop in wheat production in the Black Sea region this year will see their export ambitions take a severe dent in 2012/13. On Wednesday the USDA pegged wheat production from Russia, Ukraine and Kazakhstan 26 MMT down on output in 2011.

EU Wheat Rises On US Weather

12/07/12 -- EU grains closed higher with Nov 12 London wheat up GBP3.35/tonne to GBP185.75/tonne and Nov 12 Paris wheat EUR7.50/tonne firmer at EUR254.25/tonne.

The market is back on the up after yesterday's brief correction.

US weather and declining crop prospects out of the Black Sea continue to be the main drivers. Prospects for both look pretty bleak.

The Ukraine Ministry downgraded their 2012/13 grain export forecast to 20 MMT from 22-23 MMT previously. Earlier this week the Kazakh Ministry said that their grain harvest would halve this year, meanwhile early yields out of Russia are running 30-40% down on last year.

Closer to home, wet weather continues to hamper harvesting hopes in Europe, with milling wheat premiums rising on a daily basis.

Export interest at these levels though is hard to come by, with the world's top wheat importer Egypt saying it is likely to stay out of the market until August.

Brussels issued only 98,000 MT of soft wheat export licences for the first week of the 2012/13 marketing year, 11% less than in the same week a year ago, and hardly an inspiring total to set the ball rolling for the new campaign.

The spectre of a euro collapse has been pushed into the background, such is the uproar over the US drought, with every taxi driver and part time model now climbing onto the bandwagon - never a good sign.

Ratings agency Moody's cut Italy's credit rating two notches, adding that the risk of a Greek exit from the euro has risen.

Chicago Ends Turbulent Session Lower

11/07/12 -- Soycomplex: Jul 12 Soybeans closed at USD16.23, down 25 3/4 cents; Nov 12 Soybeans closed at USD15.22 1/2, down 16 cents; Jul 12 Soybean Meal closed at USD478.00, down USD4.20; Jul 12 Soybean Oil closed at 53.62, down 59 points. Despite a bullish USDA report in which they pegged US soybean yields this year at just 40.5 bpa, a 3.4bpa, or 7.7% drop from last month, the market turned lower at the end of a very turbulent session. Old crop ending stocks were lowered to 170 million bushels, in line with expectations, whilst new crop carryout was pegged at a very tight 130 million, down 16 million from last month and below trade forecasts. Funds took profits on an estimated 9,000 soybean contracts on the day as weather quickly usurped the USDA data and midday models turned wetter. In the end beans finished well off the highs and lows of the day, with the Nov 12 contract posting a 70 cents trading range, hitting 33 cents lower at one stage.

Corn: Jul 12 Corn closed at USD7.50 3/4, down 10 1/4 cents; Dec 12 Corn closed at USD7.04, down 13 1/2 cents. The USDA knocked a stunning 20bpa off their June yield estimate to surprise the trade. Even so the official 146bpa figure suggested merely falls into line with other private estimates kicking around, indeed some are significantly lower. The USDA however are normally much more conservative in their approach, and the trade was expecting them to line up around the 154bpa mark, so this was quite a shock. Cynics would wonder if they were being deliberately aggressive to create a "state of emergency" mentality in order to "force" a reduction in the ethanol mandate. Only time will tell. As with soybeans weather forecasts quickly took over an the market moved lower, but again finished well off both the highs and lows of the day. Funds were said to have sold around 20,000 contracts on the day. Weekly US ethanol production was reportedly at a two year low last week.

Wheat: Jul 12 CBOT Wheat closed at USD8.07 3/4, up 3 cents; Jul 12 KCBT Wheat closed at USD8.21, up 9 cents; Jul 12 MGEX Wheat closed at USD9.14, unchanged. Wheat too had a volatile session, ending in the middle of a wide daily trading range, with funds net sellers of a more modest 2,000 Chicago contracts on the day. US 2012/13 all wheat production was pegged at 2.224 million bushels, slightly below expectations, with 2012/13 ending stocks at 664 million, some 61 million below the average trade guess. Despite the sharp drop in anticipated US corn production this year the USDA cut 2012/13 wheat usage in domestic feeding by 20 million bushels. World wheat ending stocks were reduced 3 MMT to 182 MMT, the lowest since 2008/09, although at 27% stocks to usage, still a very comfortable amount. Production in Russia and Kazakhstan was reduced, with Ukraine's left on hold. The combined production of the three is now seen at 75 MMT, nearly 26% down on last year's 101 MMT.

EU Wheat Declines, Buy The Rumour, Sell The Fact

11/07/12 -- EU grains closed mostly lower despite a bullishly construed USDA report with Nov 12 London wheat down GBP0.60/tonne to GBP182.40/tonne and Nov 12 Paris wheat EUR1.75/tonne weaker at EUR246.75/tonne.

It was a strange old day, with the long awaited USDA report confirming trade fears of a very sharp reduction in US corn and soybean yields. Corn yields were slashed 20 bushels/acre from last month to 146bpa, with soybeans yields also cut heavily to 40.5bpa. Both estimates were below the lowest trade estimates of what the market thought that the USDA would say, although not necessarily the lowest numbers privately.

Predictably the market was sharply higher as soon as the news was announced, with corn racing to post gains of 25-30 cents and beans up 30-35 cents, before a buy the rumour sell the fact mentality kicked in.

That sent US grains lower, dragging European futures down with them. After a rally of the sort of magnitude that we have witnessed recently the market is always going to be vulnerable to a swift correction, even if it's for little apparent reason.

As far as wheat is concerned the USDA pegged world production 7 MMT lower than last month, with usage trimmed only 2 MMT, 2012/13 ending stocks were cut 3 MMT. Although at 182 MMT that still places them at a very comfortable stocks to use ratio of 27%.

The main changes in production saw Russia's output cut 4 MMT, China & Kazakhstan's by 2 MMT apiece and Canada's by 0.4 MMT. The EU-27 crop was raised 2 MMT from last month to 133.14 MMT, although that's still a 3% drop on last year.

The main beneficiaries in Europe were France whose crop was increased 1 MMT to 38.0 MMT, 5.5% up on last year, and Germany where production was raised 0.7 MMT to 22.5 MMT, a 1% fall on 2011. The UK crop was left unchanged at 15.6 MMT. Poland's crop took a 0.4 MMT hit to 7.7 MMT.

The USDA lowered world barley‬ production 3 MMT to 131.9 MMT, with Ukraine down 1.5 MMT to 6.0 MMT, Kazakhstan down 0.2 MMT to 1.8 MMT and Canada down 0.5 MMT to 8.5 MMT. Output here in the EU-27 was left unchanged from last month at 53.6 MMT, of which the UK is seen contributing 5.6 MMT, a small increase on 2011.

The USDA Numbers

11/07/12 -- The USDA's July WASDE numbers are out, here's some of them:

Another Interesting Snippet

11/07/12 -- The CME "move the goalposts at a minute's notice" Group yesterday raised the margin call requirements for soybean and soymeal by 20%. This comes as news broke that Iowa-based broker PFGBest "collapsed after regulators accused it of misappropriating customer funds for more than two years" according to Reuters.

You can read the Reuters story about PFGBest here

Talking of moving the goalposts, seeing as the USDA report is out at 13.30 BST the Chicago daytime session opens early at 13.20 BST today.

Milky, Milky, And A Bit Of Contention

11/07/12 -- We've heard all the excuses before: "It's not our fault that the arse has fallen out of the price of cheese. Nobody wants cream when it's raining. We can only sell milk at the price that the housewife is willing to pay. It's all very regrettable, but we'd like to assure our valued suppliers that we will hold the current low prices low for as long as we possibly can. We've got shareholders to keep happy you know. That's our #1 priority."

The UK's dairy industry* is rightly up in arms over falling milk prices as once again feed prices go into orbit. Asda's stand at the Great Yorkshire Slow (deliberate spelling mistake for those that live in the area) was picketed by angry farmers yesterday. (As an aside, I assume that they all turned up in their tractors as nobody else was able to get into or out of the car parks).

And today thousands of dairy farmers are expected to descend on London to meet Farming Minister Jim Paice plead their case. Mr Paice was in the news yesterday for admitting that he didn't know what the price of milk was, as his wife buys most of it. I'd be embarrassed to admit that too, an MP has far better things to do than to go shopping surely? There's the moat to clean out for a kick off.

As the use of the phrase "most of it" suggests that someone else is involved, who I wonder, buys the rest of it? Jim's kids are grown up, according to his website, so I'm assuming that they've left home and therefore he can't rely on them for his milky requirements when Mrs P is incapacitated.

I have visions now of a distraught Jim sat at the breakfast table, tummy rumbling, Mrs P ill upstairs in bed, staring longingly at a dry bowl of cornflakes and a black cup of tea. "Margaret, Margaret.." (I don't know if that's what she's called, it's a guess). There's a pause. "Yes? What is it Jim, I'm ill you know?"

"How much is a pint of milk, Margaret?"

"Is that all, I'm bloody dying up here, it's about 50p - now let me rest will you?"

The kitchen door slams. Ten minutes pass.

"Margaret, Margaret..."

"Yes, yes, what is it now?"

"What sort do we buy Margaret?"

"Semi-skimmed, now leave me be."

The kitchen door slams. Ten more minutes pass.

"Margaret, Margaret....is that the one with the green top or the blue top?"

"For Christs sake! It's green, Jim, green, now bloody well leave me alone."

The kitchen door slams. Another ten minutes pass.

"Margaret, Margaret. Where do we keep the spoons?"

A single gunshot can be heard from the upstairs bedroom.

*Well most of them are anyway. "What do you mean by that?" It's just something I've heard. "Like what?" That not ALL dairy farmers are quite as upset as you might think. "Of course they are, they must be, what the Wensleydale or you on about?" I can't tell you. "Oh come on, you can't leave it like that." OK then, I've had it put to me that some of the big producers secretly xxxxxxx xxxx xxxx, and that, xxx xxxxxx xxx little man xxxx's xxx xxx of the business, then xxx xxxxxx that they can xxxxx xx xxxx xxxx xxxx profits. "Can I quote you on that?" No.

Pick A Number

11/07/12 -- Yes folks, it's USDA report day! Someone asked me last month what I thought the report would hold, and I said I thought it would be bearish for corn but that the market would be back to trading the weather within 10 minutes.

I was nearly right, it was bearish for corn, but the market was back trading the weather within five minutes! Today I really don't have a strong feeling yet what they will say, but I do have a gut instinct that whatever it is the market will be back trading the weather within a couple of minutes.

As I have mentioned here earlier in the week, I can't recall a previous report when corn yields were widely expected to drop my such a margin in just one month as today. Neither do I recall a report where the difference between what the trade expect the USDA to say, and what the trade think that yields really are are so far apart. That already seems to suggest that today's yield estimate will immediately be discounted as incorrect.

For the record the trade guess at what the USDA might say for corn today is around 154bpa, 7% down on last month.

The real fun for corn will come from how the USDA alter demand to attempt to stop projected 2012/13 ending stocks falling back to the very tight scenario that we have lived with for the last 12 months.

It has been widely rumoured this week that one leading US feed company may have bought up to a million tonnes of Brazilian corn for Oct/Dec shipment, due to price differentials.

There is also demand from the ethanol sector, with crude having fallen from around USD105/barrel to USD85/barrel since mid to late April whilst corn has risen from USD6/bu to approaching USD8/bu in the same time.

Both those factors could see them lower domestic demand.

It is also reported that Australian feed wheat is lining up around USD25/tonne cheaper into Asia than US corn at the moment, with optional origin wheat at around a USD35/tonne discount. That could impact on their projected US corn exports.

For soybeans, we maybe won't see potential yields drop by that much, with the USDA still hanging their hat on late life-saving rains still to come. The trade is forecasting a cut from 43.9bpa to 42.3bpa, a reduction of around half that compared to corn in percentage terms.

For soybeans though the USDA don't appear to have the same leeway for tinkering with the demand side of the coin to prevent projected ending stocks falling too low. Not with China banging the door down on an almost daily basis and South America already seemingly pretty much sold out.

Now at this point I would probably throw some of last month's USDA supply and demand numbers are you. However the USDA website is now not showing what last months numbers were, which I notice has been the case regularly of late 24 hours or so before the release of their report.

A team of people in Washington are obviously number crunching away in readiness for today's figures to be available online as soon as possible after 13.30 BST. Which makes you think, how many people already know what these numbers are? That's potentially a bit of pretty useful information isn't it, if you had access to it?

I noticed last month that, now that we have the electronic market trading right up to the release of these figures, there seemed to be a little clue as to whether the numbers were likely to be bullish or bearish based on a sudden change to a significant sea of red an hour or two before the scheduled release.

Coincidence? Maybe, but I will be watching today to see if something similar happens.

As ever I will endeavour to get the pertinent numbers up here within 10-15 minutes of their release. I'm just typing out what they are now...!!

Chicago Consolidates Ahead Of USDA Report

10/07/12 -- Soybeans: Jul 12 Soybeans closed at USD16.48 3/4, down 16 1/4 cents; Nov 12 Soybeans closed at USD15.38 1/2, down 9 1/4 cents; Jul 12 Soybean Meal closed at USD482.20, down USD3.30; Jul 12 Soybean Oil closed at 54.21, down 22 points. Funds were said to have been net sellers of 6,000 soybean contracts in profit-taking ahead of tomorrow's USDA report. Corn yields may be what most in the trade are looking for, but 2011/12 soybean ending stocks are already tight, Chinese imports aren't letting up, and reduced US output this year should see 2012/13 ending stocks even tighter than this season. The latest weather forecasts show main precipitation chances in the week ahead to be in the south east. Rain is certainly needed in these areas but these aren't as major producing states as those further north and west. Whatever tomorrow's USDA report says we will probably be back to trading the weather before the daytime session is over.

Corn: Jul 12 Corn closed at USD7.61, down 14 1/4 cents; Dec 12 Corn closed at USD7.17 1/2, down 12 1/2 cents. Funds trimmed some of their recently acquired corn longs as a little precaution ahead of tomorrow, being estimated net sellers of 11,000 corn contracts on the day. The average trade guess for USDA yields tomorrow is 154.1 bpa. That is what the trade expects them to say, not what the trade thinks that the real yield potential is. That number is more in the 140-145 bpa range. The Renewable Fuels Association say that there is "no justification for altering the overall RFS in any way, nor does it have the authority to impulsively reduce the program's targets." Sufficient corn stocks are available within the industry to "easily satisfy" this year's RFS ethanol target of 13.2 billion gallons, they say. Effectively, the ethanol mandate will not be lowered. They don't however say who is going to produce all this ethanol if margins are negative.

Wheat: Jul 12 CBOT Wheat closed at USD8.04 3/4, down 6 cents; Jul 12 KCBT Wheat closed at USD8.12, down 5 1/2 cents; Jul 12 MGEX Wheat closed at USD9.14, unchanged. Funds were said to have sold around 3,000 Chicago wheat contracts on the day. Tomorrow's USDA report is thought likely to be less of a market mover for wheat than corn or beans. There will however undoubtedly be some adjustments in world production. With Russia's output almost certain to be reduced from last month's 53 MMT estimate. Kazakhstan could also be cut, although Europe could rise. US all wheat output is expected to rise slightly from 2.234 billion bushels last month to 2.247 billion this time round. Given the anticipation for a large cut in US corn production, and reduced wheat output from the Black Sea, we could see world wheat ending stocks which were cut to 185.76 MMT last month trimmed further.

EU Wheat Rally Pauses Ahead Of USDA Report

10/07/12 -- EU grains finished mostly lower Nov 12 London wheat down GBP2.00/tonne to GBP183.00/tonne and Nov 12 Paris wheat EUR0.25/tonne easier at EUR248.50/tonne.

After a prolonged rally that has seen Nov 12 London wheat rise 25% in less than two months, a bit of profit-taking ahead of tomorrow's USDA World Supply & Demand and stocks reports was perfectly understandable.

There's still plenty for the bulls to grab onto though. Ukraine analysts UkrAgroConsult pegged the grain harvest there at 43.4 MMT, more than 2 MMT down on their previous forecast, citing in particular a worsening outlook for this year's corn crop.

They now estimate that at 20 MMT, 5.6% down on their previous estimate and 12% below last season's record 22.8 MMT crop. This figure is also 4 MMT below the USDA's current prediction.

Ukraine's 2012 wheat crop estimate was left unchanged from last month at 14.2 MMT, although this is 36% down on last year it is actually 1.1 MMT more than the USDA forecast in June.

Kazakhstan's Ministry of Agriculture said that they have not escaped the drought that has cut Russian and Ukraine cereal production this year, estimating their grain crop to halve from last year's record to around 14 MMT.

That is going to leave what are traditionally the three cheapest sellers in the marketplace with a lot less grain to export at giveaway prices in 2012/13.

Heavy rain across the UK and France continues to delay the harvest and raise quality concerns. Milling wheat premiums have sky-rocketed in the past couple of weeks. If the French and German crops fail to cut the mustard then there could be a lot of feed wheat around in Europe looking for a home.

Tomorrow's USDA report is expected to be of more significance for corn and soybeans than for wheat. US winter wheat production is seen rising by almost 20 million bushels with 2012/13 ending stocks increasing by nearly 30 million bushels, although usage could be increased by virtue of extra demand from the feed sector due to a sharp reduction in anticipated corn output.

It's Not Quite 1988 Just Yet

10/07/12 -- Upon reading dozens of stories likening this year's demise of the US corn and soybean crops to 1988, I've spent most of the day trying to find copies of the weekly USDA crop condition data for 1988.

After a fair bit of rummaging about about in the delicate soft underbelly of the internet I've managed to pull it off (oh, er missus) and produce this chart (click to enlarge).

This plots good/excellent ratings for this year, last year, the five year average and 1988. At 40% good/excellent last night things aren't as severe as the just 14% in the top two categories that we were looking at 24 years ago. As it happens, this week in 1988 was the worst that things got, although there probably aren't many out there that would bet on that also being the case this time round.

The Morning Muse

10/07/12 -- The electronic market and European grains have opened on the defensive this morning, with soybeans and corn currently 10-12 cents easier, and wheat 11-15 cents weaker in Turnaround Tuesday style.

I guess that we are talking profit-taking after recent steep gains, and a bit of caution creeping in ahead of tomorrow's USDA reports.

Nov 12 London wheat is currently GBP2.00/tonne lower and its Parisian chum EUR2.75/tonne weaker.

Where is it all going to end? As someone just said to me, at the moment grains are like this year's "must have" Christmas present. The Chinese certainly seem to want soybeans. Customs data out this morning shows them importing 5.62 MMT in June, a 31% increase on a year ago, taking FH 2012 shipments to over 29 MMT, 22.5% up on the same period in 2011.

China's Stats Bureau say that this year's summer grain production will be a record 130 MMT, but then again would you expect them to say anything different? Winter wheat output will be 114.3 MMT, up 3% on last year they add.

Last night's USDA crop progress report showed soybean good/excellent conditions declining 5% and corn falling 8% for the second week in a row in the top two categories.

These are the lowest ratings at this time of year since 1988.

UkrAgroConsult peg the Ukraine grain crop at 43.4 MMT, down 1.1 MMT on their previous estimate and almost 20% lower than last year. They see corn output at 20.0 MMT, wheat at 14.2 MMT and barley at 6.5. MMT.

A bit of a warning shot....remember how the news of  the demise of MF Global unsettled the market back in October/November? Reuters are reporting today that more than half of clients deposits at Iowa brokerage form PFGBest are "missing" and that the owner of the company has apparently attempted to commit suicide. Clients are only able to trade in order to liquidate accounts, they say.

Chicago Market Sharply Higher As Crop Ratings Decline

09/07/12 -- Soybeans: Jul 12 Soybeans closed at USD16.65 1/4, up 45 1/4 cents; Nov 12 Soybeans closed at USD15.47 3/4, up 42 cents; Jul 12 Soybean Meal finished at USD485.50, up USD13.90; Jul 12 Soybean Oil closed at 54.43, up 116 points. Even though the market closed significantly higher it was actually also well off session highs. A dry weekend and the promise of more of the same for the week ahead set the tone, and had Jul 12 beans trading at a record high for a front month with funds rushing in to extend their long by an estimated 13,000 contracts. The USDA pegged good/excellent crop conditions at 40%, five percentage points down on last week, but bang in line with expectations. The second top producing soybean state of Illinois has 42% of its crop rated poor/very poor, down eleven points in a week. More than half the crop in Indiana is now rated poor/very poor. Lanworth Inc, who use satellite imagery to forecast crop production, estimate the US soybean planted area at half a million acres lower than the USDA's number.

Corn: Jul 12 Corn closed at USD7.75 1/4, up 32 cents; Dec 12 Corn closed at USD7.30, up 37 cents. Funds were aggressive buyers to start the week once again, coming in for an estimated 25,000 contracts. A few months touched up the daily 40 cent limit, but as with soybeans were unable to hold those intra-day highs. Nevertheless there are few who would call this anything other than a pause en route to higher ground. The USDA cut good/excellent crop ratings by eight percentage points for the second time in a row to 40%. The crop in Illinois, also the second largest corn producing state, is now rated 48% poor/very poor, with a whopping 61% of the crop in Indiana now in the bottom two categories. In addition Lanworth say that US corn plantings this year are in fact a million acres lower than the USDA currently predict. The USDA are expected to cut projected 2012 US corn yields from 166bpa last month to 154bpa on Wednesday. Even so, further cuts are anticipated down the line, with some private estimates now below 140bpa at the end of the day.

Wheat: Jul 12 CBOT Wheat closed at USD8.10 3/4, up 19 1/2 cents; Jul 12 KCBT Wheat closed at USD8.17 1/2, up 28 cents; Jul 12 MGEX Wheat closed at USD9.14, up 1/4 cent. Funds were said to have been net buyers of around 4,000 Chicago wheat contracts on the day, following corn higher. Breaking news over the weekend of Russian flooding was supportive as we await clarification of any potential damage to standing crops, stored grain and also the road and rail infrastructure in the region. The USDA cut spring wheat good/excellent conditions by five percentage points to 66%, which is now a little lower than a year ago, although still a decent performance and far better than corn or soybeans. Winter wheat harvesting is now three quarters done versus 56% on average. A private forecast from Martell Crop Projections suggests that the crop in the top US state of Kansas will only come in at 350 million bushels versus the 387 million bushels currently estimated from USDA.

EU Wheat Higher Again As Russia Weather Woes Add To Those Of The US

09/07/12 -- EU grains closed sharply higher with Nov 12 London wheat up GBP4.50/tonne to GBP185.00/tonne and Nov 12 Paris wheat EUR6.75/tonne firmer at EUR248.75/tonne. Needless to say, both set fresh contract highs once again today.

US grains were sharply higher, with corn climbing the daily 40 cent limit, in afternoon trade following another dry weekend. Temperatures are seen moderating quite significantly over the next few days, but with precious little rainfall relief this side of next weekend.

To add to the weather woes parts of southern Russia got up to two thirds of their annual rainfall expectations in just a few hours at the weekend, with reports of more than 170 dead as flash flooding hit the region, including the major Black Sea port of Novorossiysk.

It is too early to know what damage may have been done to the local infrastructure, as well as to grain stored at the port and also relatively antiquated inland storage facilities. Authorities say the current disaster is "unprecedented" and that the damage caused is still being evaluated, although Novorossiysk port is said to have re-opened for business.

In other news the Russian Ministry said that 8.3 MMT of grain has been harvested so far, with yields averaging 2.6 MT/ha so far, around 38% down on the same time last year. The majority of the harvest so far has been wheat at 7.4 MMT, they add.

Elsewhere on the Black Sea, UkrAgroConsult say that Ukraine will harvest it's smallest barley crop since it became independent in 1991 at 6.5 MMT, 20% down on last year and 1 MMT lower than the USDA currently predict.

In Europe, the debt crisis has almost been forgotten about even though Spain and Italy's borrowing costs continue to rise, with yields on Spanish 10-year bonds breaking through the generally considered unsustainable 7% mark today. Yields on similar Italian bonds rose to 6.1%.

Tonight the USDA is expected to reduce the percentage of the US corn crop rated good/excellent from 48% last week to around 42% as of Sunday night. Soybeans in the top two categories are expected to fall from 45% to 40%.

US satellite imagery firm Lanworth say that the US corn planted area is in fact around a million acres less than the USDA currently predict, and that the soybean area is some half a million lower.

The USDA issue perhaps one of the most eagerly-awaited WASDE reports in years on Wednesday. How are they going to attempt to balance the books this time? Can they without losing face? Will they even bother? I can't personally recall heading into such a report when the trade's forecast on corn yields has been so far removed the USDA's previous estimate.

The Morning Vibe

09/07/12 -- The electronic grains have started the week strongly, completely reversing Friday night's end of week losses in corn and soybeans, and partially so in the case of wheat.

It would seem then that there wasn't a lot of rainfall relief for the Midwest over the weekend.

A new breaking development is heavy flooding in the Krasnodar district of Russia, the death toll for which has risen to 150, with 12 killed in the Black Sea port of Novorossiysk.

I don't have any information yet on damage potential to standing crops in the region and/or damage/loss to grains in storage, but there will surely be some.

Corn is around 20-25 cents higher this morning, with beans adding a further 30-40 cents. Front month Jul 12 beans are currently 33 3/4 cents higher at USD16.53 1/2, within sight of the record all-time closing high of USD16.58 set in 2008.

Jul 12 corn currently stands 18 3/4 cents higher at USD7.62, Thursday night's close of USD7.68 was the highest levels for corn in more than a year. A more or less vertical ascent considering that corn was at its lowest levels in 17 months as recently as Jun 1st.

There's talk of the US ethanol mandate being reduced (ie lowering the mandatory amount of ethanol inclusion levels in gasoline sold at the pumps in the US), with crude oil levels hovering around USD85/barrel and corn closing in on USD8/bushel. That would be a real game-changer were it to happen, with 40% of the US crop destined for the ethanol sector.

In an election year I guess anything could happen, although it sounds more like a vote loser than a vote winner at the moment to me. That could change though. If it did the market would probably fall out of bed overnight in one fell swoop of a pen in Washington.

Urea Prices Turning?

08/07/12 -- As grain prices have been going through the roof, I've been keeping an eye on urea levels going in the opposite direction. Now I freely admit to knowing four fifths of bugger all about the fertiliser market, but as I post weekly updates of fertiliser prices onto Dalmark's excellent GrainPortal.com then I do keep an eye on what prices are doing.

It's been highly noticeable that coming down is what they have been doing. In fact urea FOB Yuzhnyy on the Black Sea has slumped by around a third from USD540/tonne to USD365/tonne between the beginning of May and the end of June.

That's considerably more than the price of crude has declined (20%) during the same period, and takes it to levels not seen in more than a year. It will not have escaped your notice that whilst this 32% demise in the price of urea has been going on Nov 12 London wheat is up by around 20%.

Inputs down 32% and outputs up 20% sounds like an opportunity to me.

My fertiliser price source incidentally is the highly regarded Profercy.com, who tell me that following the announcement of a big Indian urea tender, urea prices are expected to gain sharply next week.

There are a few charts comparing Urea price movements with London wheat and crude oil on the Market Info page which you may find interesting. For some reason these charts load much faster in Chrome and Firefox than they seem to do in IE, so if you are using the latter have a modicum of patience whilst they load.