Nogger's Blog

Biofuels And All That

11/08/12 -- I read with interest yesterday a report saying that Commodities house Czarnikow now speculate that following the expiry of the US ethanol blenders' credit at the end of 2011, the adjustment to Europe’s E90 loophole, and the sharp spike in world corn prices we could even see Ensus come back online (albeit at an unspecified date).

My initial reaction was one of my usual scepticism, yeah right, sure, why not close down when wheat is GBP200/tonne, wait for it to fall to GBP140/tonne and do nothing, then wait for it to go all the way back up to GBP200/tonne and re-open again. Hmmmm....

It is with increased interest then this morning then that I read that the Argentine government yesterday decided to hike it's tax on biodiesel exports from 20% to 32%, starting today, in order (it says) to to make domestic fuel prices more affordable.

Now we all know that you can't believe anything a politician says, ditto you know when a woman is lying as her lips move, so we can probably immediately disregard anything that Argy femme fatale and all round babe that President Cristina Fernandez utters as being total codswallop the nanosecond that it leaves her highly glossed pouting lips.

Being around her must be like being in a living, breathing, real life episode of Dallas every day. A dead, much older ex-husband, the make-up, high heels, tight short skirts, exotic lingerie (I assume - if she wears any at all that is), expensive fast cars, diamonds, and massive position of power and money. In fact, I wouldn't be at all surprised to see ex-husband Néstor, who died appropriately enough under mysterious circumstances after reportedly suffering a massive heart attack (what was he up to at the time, we can only wonder) come back to life being played by Antonio Banderas in time for the next series, only for us to be told that everything that has happened between 2010 (when poor old Néstor became an underground turnip inspector) and 2012 has all been a dream.

I appear to have drifted off on a bit of a tangent here, hang on....

Right, so the Argies have upped the tax on biodiesel exports, we know that they aren't arsed about helping the people, getting more tax revenue in is what they are bothered about. Now it is an interesting fact is it not that, according to Oil World, Argentina exported 900,000 MT of biodiesel in the first half of 2012, up from 726,000 MT in FH 2011. Of that 900,000 MT a whopping 93% (840,000 MT) came here to the EU.

You may recall that Spain banned imports of biodiesel from outside the EU back in April in a spat with the Argies following the latter's decision to seize control of energy company YPF from Spain's Repsol. The Spanish are still taking previously contracted Argy biodiesel, and in fact accounted for more than half the 840,000 MT that was imported from Argentina in FH 2012, but that is expected to quickly dry up in the second half of the year.

So, we now have a situation where Argentina's biggest single customer has shut the door and they've now upped the export tax 60%. Meanwhile across the pond we've got ethanol plants closing due to a combination of high corn prices and reduced availability, reduced demand from Europe now that the "splash & dash" loophole has been closed, whilst US demand for gasoline is down resulting in surplus ethanol stocks.

Throw in increased public awareness that the US ethanol mandate is pushing up domestic food prices over there, and a growing lobby to at least partially waive the  Renewable Fuels Standard and things are starting to look interesting for European biofuel supply & demand.

President Obama apparently goes on a three-day bus tour of Iowa, America's largest corn producing state, starting Monday to see for himself how bad things are this year. Friday's tinkerings from the USDA incidentally still leave 42% of the US corn crop going into ethanol production.

Maybe there is a case for Ensus re-opening after all? Of course all this is dependant on the EU persisting with it's own misguided Renewable Energy Directive. That, it would seem is what this market has come to,  political decisions which we have no way of predicting will happen or not, decide price direction from here.

Soybeans Up, Corn And Wheat Down After USDA Report

10/08/12 -- Soycomplex: Aug 12 Soybeans closed at USD17.09 1/2, up 15 cents; Nov 12 Soybeans closed at USD16.43 3/4, up 12 1/2 cents; Aug 12 Soybean Meal closed at USD544.50, up USD5.80; Aug 12 Soybean Oil closed at 53.60, up 121 points. For the week that puts Aug 12 beans up 53 1/4 cents and Nov 12 beans 15 cents higher. Aug 12 meal rose USD12.90 and Aug 12 oil 156 points. Nov 12 beans finished 29 cents off the early session highs on spillover weakness from corn and wheat. Funds were said to have been net buyers of 6,000 soybean contracts on the day. The USDA cut US soybean yields and production by more than expected. US soybean output this year was pegged at 2.692 billion bushels, down 12% on last month. Yields were cut from 40.4 bpa to 36.1 bpa, 1.1 bpa lower than the average trade estimate. They USDA countered the lower supply by also slashing demand by 363 million bushels, that pegged new crop ending stocks at 115 million bushels, exactly what the trade was expecting. Separately, underlying strong global demand for US soybeans, we had the USDA announcing fresh export sales of 290,000 MT of soybeans to China for 2012/13 shipment, taking their total confirmed purchases for the week to 715,000 MT. China's soybean imports in July were 5.87 MMT, up 4.4% from June, up 10% on July 2011 and the highest monthly total in 25 months. Argentina raised their export tariff on biodiesel to 32% from 20%.

Corn: Sep 12 Corn closed at USD8.00, down 18 1/4 cents; Dec 12 Corn closed at USD8.09 1/4, down 14 1/2 cents. For the week Sep 12 corn was 10 cents lower and Dec 12 corn 1 3/4 cents higher. It was a very choppy session with the highs set in early trade before a "buy the rumour, sell the fact" mentality kicked in. Dec 12 corn closed almost 40 cents off the early highs. Funds were said to have eventually wound up as net sellers of 16,000 corn contracts on the day. US 2012 corn production was cut more than anticipated to 10.779 billion bushels, down 2.2 billion on last month. Yields were pegged at 123.4 bpa versus the expected 126.2 bpa and 146.0 bpa in July, the lowest yield since 1995/96. Demand from the US ethanol sector however was cut 8% from 4.9 billion bushels to 4.5 billion. US exports were also slashed 16% to 33.5 MMT in the face of stiffer competition from Argentina and Brazil, whilst imports were raised 150% from last month and almost 200% from 2011/12. Brazil's corn crop for 2012/13 was raised 3 MMT to a record 70 MMT and Argentina's up by a similar amount to an also record 28 MMT. That helped place world 2012/13 corn ending stocks a little higher than expected at 123.3 MMT, a 14% stocks to use ratio.

Wheat: Sep 12 CBOT Wheat closed at USD8.85 1/4, down 27 3/4 cents; Sep 12 KCBT Wheat closed at USD8.93, down 22 cents; Sep 12 MGEX Wheat closed at USD9.35 1/2, down 23 1/2 cents. For the week Chicago wheat was 6 cents lower, with Kansas wheat unchanged and Minneapolis 11 1/2 cents easier. Funds were estimated as net sellers of 6,000 Chicago wheat contracts on the day. US 2012 wheat production was raised from 2.224 billion bushels to 2.268 billion, contrary to expectations for a small reduction to 2.220 billion. Better than expected early US spring wheat yields were reflected in a spring wheat production well above the trade’s estimate of 484 million bushels at 500 million. Global wheat supplies for 2012/13 were projected 2.1 MMT lower. Russian output was cut by more than expected to 43 MMT from 49 MMT last month. Kazakhstan was seen down 2 MMT to 11.0 MMT whilst Ukraine was raised 2 MMT to 15.0 MMT. Global wheat consumption for 2012/13 was raised 3.2 MMT on the anticipated switch from corn to wheat usage. That sees world 2012/13 ending stocks reduced from 182.4 MMT to 177.2 MMT, around 1.75 MMT lower than anticipated, although still a comfortable stocks to use ratio of 26 percent. After the close Egypt tendered for an unspecified volume of wheat for mid-September shipment, it's first tender since April.

EU Wheat Lower On The Day, Higher On The Week

10/08/12 -- EU grains closed mixed, although wheat was mostly lower, with Nov 12 London wheat falling GBP0.75/tonne to GBP196.00/tonne and Nov 12 Paris wheat down EUR1.50/tonne to EUR264.00/tonne. Aug 12 Paris wheat went off the board today, down EUR1.50/tonne at EUR263.50/tonne.

For the week Nov 12 London wheat still gained GBP4.00/tonne and Nov 12 Paris wheat added EUR3.00/tonne. For Nov 12 London wheat this was the highest close in the contract's history on the weekly chart.

Wheat traded either side in early trade on the day but edged down in the afternoon following the release of the USDA's eagerly awaited August supply & demand report after which Chicago wheat moved lower.

Not that the report was particularly bearish, it seemed to be more a case of buy the rumour and sell the fact. US corn and soybean yields & production were both cut more than anticipated. US wheat production was raised 1.2 MMT to 61.73 MMT however, an increase of 13.5% on last year.

World wheat production though was trimmed 2.5 MMT, with Russia taking the largest (but not unexpected) hit, down 6 MMT to 43 MMT - towards the lower end of trade estimates. Output from Russia, Ukraine and Kazakhstan is now seen at 69 MMT versus 101 MMT last year.

Russia's wheat exports in 2012/13 are forecast to shrink 63% to just 8 MMT, with Kazakhstan's down by a third to 7 MMT, although Ukraine's are seen increasing 13% to 6 MMT thanks to better production than feared and healthy carry-in stocks.

World wheat ending stocks were forecast 5.3 MMT lower to just over 177 MMT, the lowest since 2008/09, although that still represents a comfortable stock to use ratio of 26 percent.

In amongst all the data was a small downwards revision for European wheat production to 132.9 MMT, a 3% reduction on last year. The French crop is seen up 8% to 39 MMT, with Germany's broadly unchanged at 22.5 MMT and the UK's up a tad on last year at 15.5 MMT (although that's 100,000 MT down on last month).

Trade gossip suggests that the UK number may be optimistic. Very early wheat harvest results are disappointing so far with yields of 7.4 MT/ha being reported compared to the five year average of 7.8 MT/ha. With a planted area of 2 million hectares that would suggest a crop of 14.8 MMT, although other trade estimates are lower than that.

The USDA also cut the world corn crop to 849 MMT, 6% down on last month, thanks largely to US output being slashed 17% to 273.8 MMT - a six year low. Europe's corn crop was also cut 4 MMT to 61.5 MMT, whilst Ukraine's was trimmed 3 MMT to 21 MMT.

The USDA raised European rapeseed production by half a million tonnes to 18.5 MMT, with France producing 5.36 MMT (unchanged on last year), Germany 4.9 MMT (up 27%) and the UK 2.64 MMT (down 4%).

The USDA are estimating the average UK wheat yield at 7.7 MT/ha (which may prove to be too high this year), with barley yields coming in at 5.6 MT/ha (maybe too low) and rapeseed yields averaging 3.6 MT/ha (the HGCA say 3.4-3.6 MT/ha).

USDA Report Nitty Gritty

10/08/12 -- Here's a few of the salient points from this afternoon's USDA report:

Wheat:

US 2012 wheat production raised from 2.224 billion bushels to 2.268 billion, contrary to expectations for a small reduction to 2.220 billion. Global wheat supplies for 2012/13 projected 2.1 MMT lower. Russian output cut by more than expected to 43 MMT from 49 MMT last month. Kazakhstan down 2 MMT to 11.0 MMT and Ukraine raised 2 MMT to 15.0 MMT. Indian production increased 2.9 MMT. Global wheat consumption for 2012/13 raised 3.2 MMT on switch from corn to wheat. That sees world 2012/13 ending stocks reduced from 182.4 MMT to 177.2 MMT, around 1.75 MMT lower than anticipated. Europe's wheat crop trimmed slightly to 132.9 MMT, Canada's increased from 26.6 MMT to 27.0 MMT, Australia's unchanged at 26.0 MMT.

Corn:

US 2012 corn production cut more than anticipated to 10.779 billion bushels, down 2.2 billion on last month. Yields pegged at 123.4 bpa versus the expected 126.2 bpa and 146.0 bpa in July, the lowest since 1995/96. Demand from the US ethanol sector cut from 4.9 billion bushels to 4.5 billion. US Imports for 2012/13 raised by 45 million bushels to 75 million: "reflecting strong domestic corn prices and competitively priced foreign supplies." US 2011/12 old crop ending stocks raised more than expected to 1.021 billion bushels, that helps 2012/13 carryout come in in line with expectations at 650 million bushels, although that's still 533 million down on last month. World 2012/13 ending stocks 123.3 MMT, slightly higher than expected thanks to Brazil's corn crop for next season being raised 3 MMT to a record 70 MMT and Argentina's up by a similar amount to 28 MMT. China's corn crop this year raised from 195 MMT to a record 200 MMT. Ukraine's crop cut 3 MMT to 21 MMT and Europe's down 4 MMT to 61.5 MMT.

Soybeans:

US 2012 soybean production estimated lower than expected at 2.692 billion bushels, down 12% on last month. Yields cut from 40.4 bpa to 36.1 bpa, 1.1 bpa lower than the average trade estimate. US 2011/12 old crop ending stocks cut by more than expected to 145 million bushels. New crop US ending stocks cut in line with trade estimates to a very tight 115 million bushels. World 2012/13 ending stocks a bit lower than forecast at 53.4 MMT. Brazil's 2012/13 crop potential raised 3 MMT from last month to a record 81 MMT. Argentina's next crop left unchanged at 55 MMT. These represent production increases of 24% and 34% respectively but are a long way off being written in tablets of stone and will need some pretty ideal growing conditions to come to fruition.

The USDA Numbers

10/08/12 -- The USDA's August WASDE numbers are out, here's some of them:

USDA 2012 US Yield Estimates (bushels/acre):

USDA 2012 US Production Estimates (billion bushels):


USDA 2011/12 US Ending Stocks Estimates (billion bushels):


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


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


South American 2012/13 Crop Production (MMT):

Ukraine Latest

10/08/12 -- According to the Ukrainian Ministry of Agriculture harvesting of grains and rapeseed there is just about complete, producing 15.64 MMT of winter wheat with an average yield of 2.9 MT/ha., and 647,000 MT of spring wheat (off 96% of the planted area) with an average yield of 2.91 MT/ha. Interesting to note spring wheat yields marginally higher than those of winter wheat.

In addition, 5.73 MMT of barley has been harvested with an average yield of 2.22 MT/ha along with 1.18 MMT of rapeseed off 97% of the planted area with an average yield of to 2.23 MT/ha.

These will be bunker weight totals I would suggest, giving a probable total wheat harvest of around 15.0-15.5 MMT in clean weight, 6.5-7.0 MMT down on last season, although 2-2.5 MMT higher than a recent Reuters survey suggested.

Russia Latest

10/08/12 -- The Russian Ministry of Agriculture report grain harvesting at 38.1% complete, producing a crop of 37.1 MMT so far.

The average yield was to date is said to be 2.17 MT/ha compared to 3.00 MT/ha last year, a reduction of 28%.

Of that total 25 MMT of wheat has been harvested so far with an average yield of 2.32 MT/ha versus 3.28 MT/ha last year at this time, which is 29% down on a year ago.

Russia planted about 2 million hectares (4.9 million acres) less wheat this year than in 2010, when yields averaged 1.91 MT/ha, according to SovEcon.

If we were to use a harvested area of 2 million hectares less than in 2010, and a final yield figure of 2.32 MT/ha, then we'd end up with a total wheat harvest of 45.8 MMT. However, it's the normally more productive south of the country where the harvest is well advanced, yields normally drop significantly as harvesting progresses into the Urals and Siberia.

Either way, Russian wheat output this year looks set to end up well below the USDA's 49 MMT July estimate.

Scary footnote: final wheat yields in 2011 came in at 2.26 MT/ha - which is over a tonne/ha, or 31%, lower than the 3.28 MT/ha average yield seen at the end of the first week of August.

Chicago Sharply Higher Heading Into USDA Report

09/08/12 -- Soycomplex: Aug 12 Soybeans closed at USD16.94 1/2, up 64 1/2 cents; Nov 12 Soybeans closed at USD16.31 1/4, up 50 cents; Aug 12 Soybean Meal closed at USD538.70, up USD16.80; Aug 12 Soybean Oil closed at USD52.39, up 81 points. If there was to be any pre-USDA report book-squaring there was absolutely no sign of it, with fund buying an estimated 12,000 soybean contracts on the day. The trade is clearly expecting a bullish report for beans, with US production seen falling from 3.05 billion bushels last month to less than 2.8 billion this time round. The USDA's renowned skill for creative accounting will be tested to the full when it comes to projected ending stocks for 2012/13 as there is little scope for reducing soybean demand giving China's continued appetite for US beans. Right on cue they were back again today to book 165,000 MT of new crop. Rumours circulate that they may have bought up to 1 MMT of US beans in the past week as prices fell to around USD16/bu from over USD17.50/bu less than three weeks ago. Goldman Sachs apparently said in a note that they expect CBOT soybeans to hit USD20/bu in the next three months. Trade estimates for tomorrow's 2012/13 US ending stocks range from 95-140million bushels, averaging out at 115 million versus 130 million last month. MOFCOM estimated China’s July bean imports at 5.29 MMT, but said that imports in August will fall to 4.37 MMT. Weekly export sales of a combined 300,400 MT were in line with trade expectations.

Corn: Sep 12 Corn closed at USD8.18 1/4, up 7 1/2 cents; Dec 12 Corn closed at USD8.23 3/4, up 7 1/4 cents. Funds were said to have been net buyers of around 10,000 corn contracts on the day. A Dow Jones survey sees the USDA placing US corn production at 10.97 billion bushels in tomorrow's report, fully 2 billion, or 15%, down on last month. Some pundits are forecasting production below 10 billion. Weekly export sales were at the low end of trade estimates at a combined 1.103 MMT, considering that the trade already knew about a substantial sale to Mexico for 2012/13. The USDA appear to have a bit more leeway when it comes to not letting 2012/13 corn ending stocks fall too low in that they could lower exports, domestic feed demand and usage from the ethanol sector. They may well also increase 2011/12 ending stocks, thereby increasing the amount of carryin into 2012/13. Conab estimated Brazil’s 2011/12 corn crop at a record 72.78 MMT versus a previous estimate of 69.48 MMT and up 26.8% from 2010/11. The East Kansas Agri Energy ethanol plant said that it will halt production on Oct 1st. The firm cited the prolonged US drought conditions as having a negative impact on availability of corn along with rising feedstock prices, they also said that the demand for gasoline is down resulting in surplus ethanol stocks.

Wheat: Sep 12 CBOT Wheat closed at USD9.13, up 13 3/4 cents; Sep 12 KCBT Wheat closed at USD9.15, up 11 1/4 cents; Sep 12 MGEX Wheat closed at USD9.59, up 13 3/4 cents. Funds were said to have been net buyers of around 5,000 Chicago wheat contracts heading into tomorrow's USDA report. That is only expected to show a very minor adjustment to US wheat production, with all wheat output seen down fractionally from 2.224 billion bushels last month to 2.220 billion this time round. It's the world production numbers that will be of more interest, with Russian output pegged at 49 MMT last month and trade estimates now centred around 45.5 MMT. Ukraine and Kazakhstan could also see cuts to their production in line with other trade estimates. For 2012/13 world wheat ending stocks the average trade estimate is 178.949 MMT from within a range of estimates of 172.5-184.0 MMT. The July USDA estimate was 182.44 MMT. Japan bought 106,530 MT of mostly US wheat for Sept/Nov shipment in its usual weekly tender. Weekly export sales of 665,300 MT were at the top end of trade estimates of 400-675 TMT. Ukraine exported 840 TMT of grain in July versus 1.47 MMT of grain in June, according to ProAgro. Shipments in the first week of August have slowed further to 110 TMT, they add.

EU Grains Press Higher On Black Sea Downgrades

09/08/12 -- EU grains ended sharply higher with Nov 12 London wheat up GBP4.00/tonne to close at GBP196.75/tonne - a life of contract closing high - and with Nov 12 Paris wheat EUR5.75/tonne firmer to EUR265.50/tonne.

Further Black Sea crop downgrades look likely to to quickly rule out Russia, Ukraine and Kazakhstan as forces to be reckoned with on the international wheat export stage this season.

A Reuters survey pegs Russian, Ukraine and Kazakh wheat production at around 45.5 MMT, 13.0 MMT and 12.0 MMT respectively for a combined crop of 70.5 MMT. That's some 30% down on last year's output of around 101 MMT. The three Black Sea powerhouses would normally account for around a quarter of global wheat trade, but this is now expected to fall to more like 15% in 2012/13, according to Offre and Demande Agricole.

Russia's IKAR says that August grain exports will reach 3.5 MMT, adding to a total of 2.1 MMT shipped out in July. The Agriculture Ministry only estimate Russia’s entire 2012/13 exportable surplus at only 10-12 MMT, yet the government say that there is no immediate need to ban exports.  

Russia's grain harvest is currently said to be around 38% complete nationally, and 80% done in the South of  the country, the largest production area, where yields are 25-30% lower than last year.

At home, the UK winter barley harvest is around 60% complete with yields coming in around the five year average at 6.2-6.4 MT/ha, say ADAS. Specific weights are below normal, at 52-72 kg/hl, they add.   The oilseed rape harvest is said to be only 35% complete, with highly variable yields of between 2.5 MT/ha to 5.5 MT/ha, but averaging 3.4-3.6 MT/ha, down around 10% compared with last season's record 3.9 MT/ha. 

The main start of the winter wheat harvest is still a week or two away just yet, although a few fields have been cut so far. One report on Twitter today mentioned Cordiale being harvested in Cambridge with a disappointing yield of 7.4 MT/ha.

The trade is now braced for a big USDA report tomorrow, with US corn yields expected to take another sharp reduction to add to last month's 20 bushels/acre cut. No major changes are expected to US wheat output, with production seen only being trimmed fractionally. US 2012/13 ending stocks are forecast to rise from last month's estimated 664 million bushels to 681 million. World 2012/13 ending stocks are seen down from 182.4 MMT last month to 179 MMT this time round.

With prices at current levels wheat offers are popping up from some unusual sellers. Two Indian state run trading houses say that they have firm agreements to sell 190,000 MT of government wheat reserves for export. Bangladesh is said to be close to striking a deal to sell/barter 1 MMT of wheat to Iran.

The Lunchtime Ramble

09/08/12 -- Have you missed me? I've been in the Maldives for a bit of R&R, although I've kept my hand in with a couple of morning blogs every day as you may have noticed.

Yes, dedicated to the core, Nogger actually works a couple of hours a day even when on holiday in the Maldives.

So, I'm back, at least in a manner of speaking, although I'm not planning on hitting the ground running until Monday. So today/tomorrow I will be more like caressing the ground gently. Nibbling it's ear a bit and maybe giving it a bit of a tickle and a playful pat on the bottom.

I blame the jet lag. I was wide awake at 4.30am this morning and up by 5.30am so I'll probably be nodding off into my cocoa by half past seven tonight, which is about bedtime over there. I'd thoroughly recommend the place by the way. Imagine living in a nice sunny bar, manned by incredibly friendly staff, which has an enormous tropical fish tank in the middle of it into which you occasionally dip your head when you're hot, and you aren't far off.

It's a long way though, although the tedium was broken somewhat when a stewardess spilt a full tray of orange juice into the lap of a sleeping man about three rows in front of me on the way home yesterday. Rudely awoken by this impromptu and unique "golden shower" the guy was so startled that after she & he had dried himself off a bit he became so flustered that when she finally asked him if he'd actually like a glass of orange juice to drink, and he said yes, he then went and spilt that one all over himself too.

Although thinking about it, maybe that wasn't the mistake it seemed like at the time. Up a bit, down a bit, yes you've almost got it...

Emirates were very accomodating like that I have to say, with loads of entertainment on the screens in the headrest in front of you. Although beating the computer at chess with fools mate, which it kept falling for repeatedly despite being set on "level: hard", only has limited amusement value after the first sixteen goes.

They give you loads of free newspapers too. Talking of which, what on earth has happened to the Daily Mail crossword? It's never been overly testing I will grant you, but "17 down: one more than nineteen, six letters beginning with T" wasn't the kind of challenge I was looking for to help pass a long journey having spanked the computer at chess.

Anyway, the point is I am back, and for all of you who have emailed & sent me texts enquiring about mine, MrsN#3's & the dog's well-being, everybody is fine, you worry too much you do & I will be getting back to you individually next week.

Meanwhile the markets are fully steady I see, despite Russia having absolutely no intention whatsoever of introducing any export restrictions, honest.

I read one report this morning that said the Russian Institute for Agricultural Markets, IKAR, estimate Russia’s grain exports at 3.5 MMT in August versus a second highest on record for the month of July of 2.1 MMT last month. If this was the Daily Mirror crossword I'd now ask you "how much grain do IKAR reckon Russia will have exported by the end of August" and you'd go "erm, hang on where's that calculator, I think I put it over there next to my USB bunny rabbit thing that lights up and does a little dance every time I get an email, here it is, erm...I make that 5.6 MMT my little suntanned Nogger chum."

Right, so with the latest official word on grain exports now only 10-12 MMT, and half(ish) of that likely to be gone by the end of the month is anyone else getting the impression that maybe the Russian grain companies are currently exporting like stink, fully expecting that a ban is coming. A similar ban depressed domestic prices in 2010/11, despite buoyant global levels as you may recall. In fact Russian merchants were also pushing grain out of the country like Usain Bolt off a shovel in the summer of 2010 just before the export embargo was officially introduced.

So why deny that the inevitable is likely to happen now? The final clue to this not very complicated Daily Mail style puzzle is that Russia are to finally set to join the World Trade Organisation this month after 18 years of negotiations, high class naked dancing girls, lots of vodka and bribery.

Introducing an export ban now would make bad press. Once they are in however, they can halt shipments if there is "a threat to national food supplies" - a case that should be too difficult to prove. Indeed, exports of 3.5 MMT in August alone would add weight to their case for being forced into doing so.

Chicago Closing Comments - Wednesday

08/08/12 -- Soycomplex: Aug 12 Soybeans closed at USD16.30, up 24 3/4 cents; Nov 12 Soybeans closed at USD15.81 1/4, up 15 1/2 cents; Aug 12 Soybean Meal closed at USD521.90, up USD9.60; Aug 12 Soybean Oil closed at 51.58, up 29 points. Funds were said to have been net buyers of around 5,000 soybean contracts on the day as the market rallied late in the session as renewed weather models removed some of the rain that had been in the forecast for the US Midwest for later in the week. The USDA reported the sale of 140,000 MT of US soybeans to unknown for 2012/13 shipment, adding support. There's some trade talk that China may have used the recent price dip - soybeans had fallen a dollar and a half in the past two and a half weeks - to book up to 1 MMT of US beans. Domestic prices on the Dalian Exchange there are currently around USD20/bushel. Trade estimates for tomorrow's weekly export sales report are 250-450 TMT. Taiwan bought 12 TMT US beans for Aug/Sept shipment overnight.

Corn: Sep 12 Corn closed at USD8.10 3/4, up 14 3/4 cents; Dec 12 Corn closed at USD8.16 1/2, up 16 cents. Funds were said to have been net buyers of around 10,000 contracts on the day. A drier outlook to midday weather forecasts was supportive along with expectations for a strong weekly export sales number tomorrow following last week's announced big sale to Mexico. The trade is forecasting anywhere between 1-2 MMT. There's much uncertainty over exactly how low the USDA will go with it's yield estimate in Friday's WASDE report. A Dow Jones survey says 126.2 bu/acre, whist a Reuters one goes 127.3 bu/acre. The latter would be the lowest since 1997 and the former the worst since 1995. The NOAA officially declared that July was the hottest month ever in the US, with average temperature of 77.6 F, which is 0.2 degrees above the previous record set in 1936. Taiwan bought 23 TMT US corn for Aug/Sept shipment overnight.

Wheat: Sep 12 CBOT Wheat closed at USD8.99 1/4, up 10 1/4 cents; Sep 12 KCBT Wheat closed at USD9.03 3/4, up 7 3/4 cents; Sep 12 MGEX Wheat closed at USD9.45 1/4, up 9 cents. Wheat bounced back from a lower opening in early trade on spillover support from beans and corn despite Russia saying that it had no plans to restrict grain exports. Russia’s Ag Minister said that 38% of the 2012 grain crop has been harvested so far and that average yields are 2.17 MT/ha, down 27% from a year ago. Ukraine's Prime Minister said 2012 total grain supply is estimated at 58 MMT (including carryin stocks) with the 2012 grain crop forecast at 45 MMT. Their exportable surplus is said to be 21-23 MMT (including 5 MMT of wheat, 3 MMT of barley and 12.7 MMT of corn). Estimates for tomorrow's weekly export sales report are 400-675 TMT. The Buenos Aires Grain Exchange says that Argentine wheat plantings will be down 22% this year.

EU Grains Closing Comments

08/08/12 -- EU grains finished mixed with Nov 12 London wheat down GBP0.15/tonne to GBP192.75/tonne and Nov 12 Paris wheat up EUR1.00/tonne to EUR259.75/tonne.

The euro was weaker on news that industrial output in Germany fell more than expected in June and comments from the French central bank that their economy will fall back into recession this quarter.

Not that it was all plain sailing for sterling either - the Bank of England slashed its outlook for British economic growth to zero for this year.

BoE governor Mervyn King said there was no urgent need to print more money, and even less of a case to cut interest rates, but warned that the British economy would grow at sub-par speed for at least the next three years.

Russia's deputy PM, Arkady Dvorkovich, said that there was no need to take any immediate action to curb grain exports following a government meeting to discuss global grain markets and the country's strong start to the 2012/13 export campaign - despite what is shaping up to be a sharp reduction in output.

"Tariffs are always possible for any commodity," Mr Dvorkovich went on to be quoted as saying however, which seems to leave the backdoor open for some form of export restrictions later in the season if grain shipments continue at their current pace.

Now that this meeting is out of the way the market will start to focus on Friday's upcoming USDA supply and demand numbers. US corn and soybean yields will undoubtedly be cut, but by how much? The USDA lopped 20 bushels/acre off projected US corn yields last month, and there are some that think a similar cut could be on the cards this month too.

There are signs that maybe US weather is finally turning, although probably too late to do a great deal of good for corn in particular.

"The new Midwest forecast is wetter and cooler than indicated yesterday.   The jet stream is expected to carve out a deep trough causing generous rainfall and sharply cooler temperatures in the grain belt.   Midwest corn and soybean farms are now expected to receive at least 0.75 inch of rain, but 1.25 - 1.50 inches locally," say Martell Crop Projections.

Chicago Grains Tuesday Morning

07/08/12 -- The overnight market sees wheat 4-6 cents firmer, with corn up 3-5 cents and soybeans mostly 10-14 cents higher - with the exception of front month August which hovers around unchanged.

Wheat gains from ideas of reduced Black Sea production, and thus increased US export hopes, particularly in the final three quarters of the 2012/13 season after the initial rush of Q1 sales has passed from the likes of Russia and Ukraine.

Late last week we had a US corn production estimate of just 9.57 billion bushels from Farm Futures magazine, which would be the lowest output since 2002 despite the largest planted area in 75 years. Their anticipated yield figure of 114 bpa would be the lowest since 1995.

At this point it is worth considering that less than two months ago we were potentially looking at what was set to be easily a record US corn crop. Using the USDA's June acreage report's 96.4 million acres, assuming an average 8% abandonment rate and the then expected 166 bpa yield we'd have been talking a crop in excess of 14.7 billion bushels this year, more than 5 billion more than now looks to be on the cards. Which is coincidentally enough to keep the US ethanol juggernaut on the road for another 12 months.

If Farm Futures are correct, then the US will now use more than half of this year's corn crop to make ethanol, based on the USDA's July S&D estimate of 4.95 billion bushels of corn demand coming from that particular sector in 2012/13.

No wonder then that there are growing calls for the ethanol mandate to be partially or even fully waivered in 2013. How much difference that would make to the two-headed monster that is the US ethanol industry is open to debate. It would certainly make for an interesting experiment, if maybe a potentially unlikely one in an election year.

Soybeans meanwhile have paused for breath, having rallied by almost two thirds since mid-December, with the faint glimmer of hope that decent August rains could still finally help the crop make some kind of decent yield.

If those rains fail to materialise and we are left with something closer to Farm Futures Magazine's estimated 2.696 billion bushel crop then who knows where prices might go yet? It's been abundantly clear for some time that the US is just about the only seller of soybeans in the world who's shop is still open.

Brazil exported 22.92 MMT of soybeans between Jan/Jun this year - some 87% of the expected total soybean exports for the entire year. Argentina too are widely considered to be out of the market. Meanwhile China keep coming back for more (they bought 106 TMT of US soybeans just yesterday) and are expected to import around 58-60 MMT of soybeans in 2012. Incidentally, some estimates for their 2013 requirements are in excess of 70 MMT.

Planting of Brazil's 2013 soybean crop won't begin for more than a month yet, with harvesting of the earliest beans still five months away, and all sorts of hurdles to get over before those particular combines start rolling.

EU GrainsTuesday Morning

07/08/12 -- EU grains are modestly higher mid-morning Tuesday with Nov 12 London wheat up GBP1.00/tonne to GBP192.50/tonne and Nov 12 Paris wheat EUR1.00/tonne firmer to EUR259.50/tonne.

A firmer overnight tone to US grain markets adds support, with US corn crop conditions declining to the extent that half the crop there is now rated as being in poor or very poor condition.

Further supporting European grains are further reductions in anticipated Black Sea output. Yesterday we have SovEcon cutting their outlook on Russian wheat production to 40.3-43.0 MMT from 46.5 MMT previously and 56.2 MMT last year.

Today we have news that Ukraine is experiencing record temperatures,which are expected to continue for the rest of the week with up to 40°C expected in some places. "These are the highest recorded temperatures for the last 112 years and this will probably affect the production of corn and soybeans," say Agritel.

What will tomorrow bring? The Russian government are due to meet to discuss the grain markets and their dwindling production prospects, with wheat output now seen in the region of the 2010 crop of 41.5 MMT that prompted the last export ban.

Despite having publicly said that an embargo is not on the cards this year surely some sort of action will be required with a near record 2 MMT of grains already having been exported in July, and 2.5 MMT forecast to be shipped out in August.

Chicago Closing Comments - Monday

06/08/12 -- Soycomplex: Aug 12 Soybeans closed at USD16.07 1/2, down 48 3/4 cents; Nov 12 Soybeans closed at USD15.84 1/4, down 44 1/2 cents; Aug 12 Soybean Meal closed at USD518.20, down USD13.30; Aug 12 Soybean Oil closed at 51.48, down 56 points. Better than expected weekend rains and calls for a cooler and wetter outlook for the next couple of weeks got beans on the defensive, fostering ideas that maybe the US crop could see something of an eleventh hour rescue. The USDA reported the sale of 106 TMT of new crop soybeans to China. Safras e Mercado's weekly report says that Brazilian farmers have sold 95% of their 2011/12 soybean crop versus 73% a year ago and 79% on average at this time. They've already reportedly sold 39% of their 2012/13 soybean crop, planting of which is still more than a month away, versus 14% a year ago and 11% on average. Celeres estimate Brazil's 2012/13 soybean crop at a record 78.1 MMT, up 17.8% from 2011/12, with plantings seen at a record 27 million hectares, up 8.1% from a year ago. The USDA reported good/excellent soybeans at 29%, unchanged from last week, although poor/very poor increased two points to 39%. They said that 71% of the crop is setting pods versus the 5 year average of 53%.

Corn: Sep 12 Corn closed at USD8.03, down 7 cents; Dec 12 Corn closed at USD8.05, down 2 1/2 cents. Weekend rains, and a wetter outlook, is less likely to be of benefit to corn than soybeans at this stage. Funds were estimated to have been net sellers of around 4,000 corn contracts on the day, enough for a modestly lower close. Safras e Mercado estimated Brazil’s 2011/12 corn crop at 72.4 MMT versus the USDA's 70.0 MMT. They also placed Brazil’s 2011/12 corn exports at 15.5 MMT, well above the USDA's forecast 11.0 MMT. The USDA crop condition report cut good/excellent ratings by one point to 23%, with very poor raised two points to 25%. That now leaves exactly half of the crop rated as poor/very poor. High temperatures and early planting have the crop very forward, at 26% dented already compared to the 5 year average of only 7%. Doane estimated the 2012 US corn crop at 10.792 billion bushels and pegged yields at 123.1 bpa. The USDA will released their own updated estimates on Friday. Ethanol plants continue to voluntarily slow or cease production as their profit margins narrow or disappear altogether.

Wheat: Sep 12 CBOT Wheat closed at USD8.93 1/4, up 2 cents; Sep 12 KCBT Wheat closed at USD8.95, down 1 cent; Sep 12 MGEX Wheat closed at USD9.44 1/2, unchanged. SovEcon estimated Russia’s 2012 grain crop at 72.0-75.0 MMT versus their previous estimate of 78.5-81.5 MMT and 94.0 MMT last year. Of that they say that Russia’s 2012 wheat crop will be 40.5-43.0 MMT versus their previous estimate of 46.5 MMT and 56.2 MMT last year. The USDA's current estimate is 49.0 MMT. If those figures are correct than some form of export curb looks a real possibility once again. Russia’s Ag Ministry say that the grain crop this year will total 75-80 MMT, with the wheat crop at 45.0 MMT. Saudi Arabia bought 290 TMT of hard wheat from the US, EU, Australia, and South America for Oct/Nov shipment over the weekend. There are some reports that Texas feed lots are looking at buying wheat from Canada. The USDA reported the winter wheat harvest at 88% complete, only one point ahead of normal. By complete contrast spring wheat harvesting has raced ahead to 47% done versus just 12% normally at this juncture. Good/excellent spring wheat conditions were unchanged at 63%.

EU Wheat Lower On US Rains

06/08/12 -- EU grains closed mostly lower with Nov12 London wheat down GBP0.50/tonne to GBP191.50/tonne and Nov12 Paris wheat EUR2.50/tonne easier at EUR258.50/tonne.

Better and more widespread weekend rains in  the Midwest weighed on the grains sector, although further concerns over Russian grain production underpinned losses.

"Waves of strong thunderstorms on the weekend produced more than one inch of rainfall on 65% of corn and soybean farms. It was the best weekly rainfall since late May in the grain belt. The GFS model forecast on Friday under-estimated the rainfall both in quantity and coverage," said Martell Crop Projections.

"August rainfall would be more beneficial for soybeans than corn. The soy crop is in the midst of setting pods. The bean filling stage follows pod setting period and takes 30-35 days to complete. Plants are stunted from severe drought, certain to make a low yield, but with generous rainfall for bean-filling conditions would improve somewhat. Midwest corn is mostly beyond repair though rains may boost late grain filling," they added.

One contact in the US emailed me to say: "Corn harvest started last week at Arthur, Illinois, a month and a half earlier than normal. The yields were said to be 100 bu per acre at 24% moisture, which is half of the yield those guys in the good black dirt area of Illinois expect to get, but still much better than most thought possible."

Elsewhere, SovEcon cut their forecast for Russian grain production this year to 72-75 MMT, some 20-23% down on last year, and well below their previous estimate of 78.5-81.5 MMT. Wheat production this year is now only forecast at 40.3-43.0 MMT, down from a previous estimate of 46.5 MMT and around the same level that prompted the Russian export ban in 2010 (41.5 MMT).

The Russian government meet on Wednesday to discuss the situation, although they have recently stated that they will not be introducing an export ban again this year.

Closer to home, FranceAgriMer report that 80% of France's spring barley crop is in good or excellent condition compared to only 25% this time last year. Higher levels of damage to winter wheat and barley than normal see French spring barley plantings at a more than 20 year high.

The combination of this significant increase in acreage, and excellent crop conditions, mean that "the country could have more than twice as much malting barley for export as normal, boding ill for prices," report Agrimoney.com.