Chicago Closing Comments - Friday

17/08/12 -- Soycomplex: Sep 12 Soybeans closed at USD16.71, up 14 3/4 cents; Nov 12 Soybeans closed at USD16.45 3/4, up 20 1/2 cents; Sep 12 Soybean Meal closed at USD522.70, up USD6.20; Sep 12 Soybean Oil closed at 53.11, up 7 points. Nov 12 beans were 2 cents higher on the week. Funds were said to have been net buyers of around 5,000 soybean contracts on the day. There continues to be much debate over potential US soybean yields, and how much benefit may be derived from recent rains. The widely followed Pro Farmer Crop Tour begins on Monday, with final yield estimates out on Friday. The GFS model turned drier for the week ahead in its midday forecast. The weekly US crop progress report comes out on Monday, with the trade expecting US soybean good to excellent ratings to be steady to three points higher than the 30% of a week ago.

Corn: Sep 12 Corn closed at USD7.98 1/2, up 3/4 cent; Dec 12 Corn closed at USD8.07 1/4, down 1/4 cent. For the week Sep 12 corn was 1 1/2 cents lower and Dec 12 corn 2 cents easier. As with soybeans, there's plenty of discussion around about US yields, with some disasters and a few pleasant surprises being reported amongst early harvested corn. It seems likely that most of the corn with better yield potential is still in the field. The Pro Farmer Crop Tour may give us a better handle on yield potential next week when it travels from Ohio through to Minnesota. An Ohio state tour this week found an average corn yield there of 139 bpa. There's some evidence of demand destruction kicking in for US corn. Yesterday's weekly export sales total was a disappointment at a combined 253,400 MT versus the 350-550 TMT expected. Southeast Asia bought 80 TMT of Pakistani corn this week. Funds were said to have been around even on the day in the corn pit. The weekly commitment of traders report showed large funds adding around 17,000 corn contracts to their long position on the week through to Tuesday.

Wheat: Sep 12 CBOT Wheat closed at USD8.74 1/2, up 12 3/4 cents; Sep 12 KCBT Wheat closed at USD8.85 1/2, up 13 cents; Sep 12 MGEX Wheat closed at USD9.27 1/2, up 6 cents. For the week Chicago wheat was 10 3/4 cents lower, with Kansas wheat falling 7 1/2 cents and Minneapolis down 8 cents. Funds were said to been net buyers of around 3,000 Chicago contracts on the day. South Korea bought 49 TMT of US wheat for Nov/Dec shipment, although it is given credit for having bought much more than that from other origins, most likely India, this week. Thailand bought 40 TMT Indian wheat for Sept/Oct shipment this week, it's first such purchase in 8 years. Rabobank say China may import 4.0 MMT of wheat in 2012/13, mostly from Australia. Argentina's Ag Ministry estimate the 2012/13 wheat area at 3.7 million hectares versus 4.63 million in 2011/12. Planting is said to be 95% complete and recent soaking rains have got the crop off to a good start with 85% of the crop rated as being in good to very good condition. Ongoing concerns about Russian supplies and export potential look set to support prices in the long run.

London Wheat Continues To Punch Above It's Weight

17/08/12 -- EU grains ended mixed, although wheat was higher with Nov 12 London wheat up GBP1.50/tonne to close at GBP200.25/tonne and with Nov 12 Paris wheat EUR3.00/tonne firmer at EUR262.75/tonne.

For the week Nov 12 London wheat added GBP4.25/tonne, whilst its Paris counterpart shed EUR1.25/tonne. London wheat continues to punch well above it's weight, aided this week the the announcement of the imminent re-opening of Ensus and an uncertain outlook for UK yields this year. May 13 London wheat closed at GBP202.75/tonne, the equivalent of roughly EUR257.50/tonne. May 13 Paris milling wheat closed just EUR1.50/tonne higher than that.

Nov 12 London wheat set a lifetime contract high of GBP201.00/tonne today, and also closed above GBP200.00/tonne for the first time for a front month in almost 15 months. And all this in the middle of harvest!

Talking of which, that has stalled this week following a period of widespread and heavy rain but should pick up again this weekend, particularly in the south east. If the forecast holds true then we could be in for the warmest weekend of the year, particularly in the south east.

Maybe we will have a better handle of UK wheat yields next week, but for now hopes aren't high. Quality wheat looks like it will be hard to find, with full spec milling premiums, only a fiver a few old crop months ago, now in the mid-30's over feed for new crop.

The trade is almost universally bullish. Russian traders are exporting grain like there's no tomorrow, and for them there possibly isn't. At least there may be no export trade tomorrow with a second export embargo in three season's surely looming.

They're expected to export 2.5-3.0 MMT of grains this month, to add to the 2.1 MMT shipped out in July. Rusagrotrans have cut their 2012/13 full season grain export estimate to 12 MMT. With a further 3.0-3.5 MMT of grain predicted to be exported in September, that would bring Russia's 2012/13 Q1 exports alone to around 7.6-8.6 MMT.

Meanwhile the European debt crisis has been pushed to the back of traders' minds following the Draghi "whatever it takes" comments. German Chancellor Merkel said yesterday “Germany is committed to do everything we can in order to maintain the common currency.”

Brussels issued 290 TMT of soft wheat export licences this week, bringing the cumulative 2012/13 marketing year total so far to 1.3 MMT.

Is El Nino Coming? And If It Is What Does It Mean?

17/08/12 -- The US drought-bringing plague that is La Nina finally seems to be giving way to her illustrious little brother El Nino. But what is El Nino, and what are some of the weather effects it often brings? Here's a few pointers from my US weather friend Gail Martell of Martell Crop Projections:

Changes in the tropical Pacific Ocean winds, air pressure the sea temperatures indicate an emerging El Nino. Presently an "El Nino watch" in place. Sea surface temperatures across the eastern equatorial Pacific Ocean are currently 0.8 C above normal, and slightly above the 0.5 C threshold for El Nino. The Climate Prediction Centre anticipates the development of El Nino as the large-scale winds and air pressure patterns in the Pacific Basin are taking on El Nino characteristics.

The probability of El Nino forming is 70%, based on a consensus of scientists polled by the Climatic Prediction Centre. Virtually all the dynamical models predict a developing El Nino in August-September prevailing through the Northern Hemisphere winter.

What sort of weather does El Nino produce?

The ENSO signal is a see-saw pattern causing exceptional wetness at the eastern end of the Pacific Basin, but drought at the western end in the Indonesian Basin.

Argentina is one of the world’s most sensitive regions to the ENSO signal. With El Nino, conditions are wet and favourable for crops. Twice-normal rains have developed this month in Buenos Aires, southern Santa Fe and La Pampa. The forecast continues wet with predictions for another .75 to 3 inches in the next 5 days.

Australia is strongly impacted by El Nino, but in a negative way, experiencing drought in New South Wales, Victoria and South Australia. Conditions this month have been cold and dry. Field moisture has deteriorated sharply with below-average rains the past 3-4 weeks.

In the American Midwest, El Nino causes a wet signal. August rainfall has increased in the corn- and soybean belt, though not all farms have received generous showers. The average rainfall this month is 1.3 inches against 1.63 normally, and 80% of average. A fresh round of showers has developed overnight in Iowa and Wisconsin.

The El Nino signal is also very cool in the Midwest. The new forecast calls for the coolest weather of the season and 5-10 degrees F below normal in the heartland.

Insight on US crops

Field conditions were so dry to begin with that increased August rainfall has largely soaked into parched fields, not improving crop potential much. Soybeans have benefited somewhat. Had the rainy weather pattern started a month earlier, corn and soy potential would have significantly improved.

Chicago Closing Comments - Thursday

16/08/12 -- Soycomplex: Sep 12 Soybeans closed at USD16.56 1/4, down 3 1/2 cents; Nov 12 Soybeans closed at USD16.25 1/4, down 9 1/4 cents; Sep 12 Soybean Meal closed at USD516.50, down USD3.50; Sep 12 Soybean Oil closed at 53.04, down 3 points. The electronic market was higher for much of the day, but heading into the open of the daytime session a report from the Farm Services Agency, surveying US spring planted acres, came out which appeared to imply a 1.2 million acre larger soybean area than the estimate that the USDA is currently using. Weekly soybean export sales came in at just over 1 MMT, a bit better than the 750-950 TMT that the trade was expecting. New crop commitments for the 2012/13 marketing year are already past halfway towards the USDA's full season target of 1.11 billion bushels. No sign of much rationing yet then, even at these levels. China sold the full 400TMT of state-owned soybeans on offer at today's government auction. CNGOIC estimated China’s 2012/13 soybean imports at 59.0 MMT vs. a previous estimate of 60.0 MMT. Funds were said to have been net sellers of 4,000 soybean contracts on the day.

Corn: Sep 12 Corn closed at USD7.97 3/4, up 3 3/4 cents; Dec 12 Corn closed at USD8.07 1/4, up 3 1/2 cents. The same FSA survey that implied a larger soybean planted area than the numbers that the USDA are using also suggested an extra 500,000 acres of corn got planted in the US this spring. Talk is that this will enable the USDA to hold their current forecast on harvested area, that was regarded as too high last week at 87.36 million acres, whilst increasing abandonment rates to close to 10% this year. Even so many consider that the true abandonment rate will be a couple of percentage points higher than that. There are signs of demand rationing at these levels though, corn weekly export sales were a combined 253,400 MT versus the 350-550 TMT expected. The former Chinese State Admin for Grain said that China is more likely to import what corn it needs in 2012/13 from South America due to high US prices. Strategie Grains cut their EU-27 corn production estimate by 7.1 MMT from their previous estimate to 58.1 MMT, although they added that "an improvement in the weather would provide better conditions for filling the grains than (currently) exist." Funds were said to have been net buyers of around 6,000 contracts on the day.

Wheat: Sep 12 CBOT Wheat closed at USD8.61 3/4, up 15 cents; Sep 12 KCBT Wheat closed at USD8.72 1/2, up 14 1/2 cents; Sep 12 MGEX Wheat closed at USD9.21 1/2, up 8 cents. Russia's on farm Aug 1st wheat stocks of 10.61 MMT are a nine year low, according to SovEcon. Total grain stocks of 15.73 MMT are at their lowest levels since 2006, they add. Meanwhile the Russian Ministry say that they have harvested 27.9 MMT of wheat to date off just over half the planted area. Yields are averaging 2.18 MT/ha versus 3.15 MT/ha in 2011, a fall of more than 30 percent. The Kazakh Ministry of Agriculture cut their grain harvest forecast from 14 MMT to 13 MMT, less than half last year's bumper output. Weekly export sales were 396,700 MT versus the expected 450-550 TMT. Cumulative sales are now 30.6% of the current USDA export target of 1.2 billion bushels, well behind the average 5-year pace of 37.7%. It is expected though that this could improve significantly in the second half of the season as Black Sea exports grind to a halt. Strategie Grains estimated the EU-27 wheat crop at 133.1 MMT, an increase of almost 2 MMT on last month, led by an extra 1.7 MMT from France. There were also increases for Germany and Poland. Funds were said to have bought around 3,000 Chicago wheat contracts on the day.

London Wheat Hits New Highs

16/08/12 -- EU grains finished higher with Nov 12 London wheat up GBP3.50/tonne to GBP198.75/tonne and Nov 12 Paris wheat EUR3.50/tonne firmer to EUR259.75/tonne.

Nov 12 London wheat set a new life of contract high of GBP199.50/tonne, enthused by the news of the re-opening of Ensus coinciding with continued feeling that UK yields, which have got off to a poor start, will decline further as the harvest progresses.

"Harvest of winter wheat started last week with farmers in the South East, South West and Eastern regions making good progress with early maturing varieties such as Cordiale, Diego, Grafton and Soissons," said the HGCA.

"Early yields are highly variable (5-10.8 MT/ha) and come from a small number of crops, predominantly early maturing varieties. Overall the early yields, based on a small number of early harvested varieties, are lower than the 5 year average, but Cordiale and Soissons in particular are not high yielding varieties in the HGCA recommended lists," they noted.

The winter barley harvest is around 85% complete, with yields around the 5-year average of 6.3 MT/ha, they added. Spring barley harvesting is only just underway. The winter oilseed rape crop is some 80% harvested with yields in line with the 5-year average at 3.4-3.6 MT/ha, although well below last season's record 3.9 MT/ha, they concluded.

Strategie Grains raised their forecast for the EU-27 all wheat crop to 133.3 MMT from 131.4 MMT previously and some 0.4 MMT above the USDA's latest estimate. The increase mainly comes from better than expected output from France, Germany and Poland.

The EU-27 barley crop was raised 0.6 MMT to 53.1 MMT which is 0.8 MMT higher than the USDA said last week due to improved production from German, Polish and Danish harvests.

In contrast EU-27 corn production was lowered by a hefty 7.1 MMT to 58.1 MMT, some 3.4 MMT less than the USDA's estimate. "Maize development has been severely impacted by the hot, dry weather in central and southern Europe," they said.

Elsewhere SovEcon said that Russia's Aug 1st grain stocks are at their lowest levels since 2006, with on-farm Aug 1st wheat stocks of 10.61 MMT the lowest since 2003.

Russia formally joins the WTO on Aug 22nd. There aren't many that would currently bet against a grain export embargo following within a month or two at the most.

Lunchtime News

16/08/12 -- The overnight electronic market sees wheat around 17-18 cents firmer, corn 4-5 cents higher and soybeans up 6-11 cents.

Wheat leads the way for a change on reports from SovEcon that Russian wheat stocks held by farmers are at their lowest in nine years, down 30% on last year to 10.61 MMT. That news, combined with the rapid early pace of Russian shipments, surely means that an export ban is more or less a formality before long.

The weekly export sales report from the USDA gave us below expectations for corn, at the low end for wheat, and at the top end for soybeans.

Corn sales were a combined 253,400 (versus 350-550 TMT expected), wheat sales were 396,700 MT (vs. 450-550 TMT) and soybean sales 1 MMT (750-950 TMT).

There was no particularly stunning Chinese activity. They took one cargo of old crop corn switched from "unknown" delivery.

Existing new-crop soybean sales are now already running at 54% of the USDA's target for the whole of 2012/13.

Russia say that they have harvested 27.9 MMT of wheat to date, off just over half the planted area. Yields are averaging 2.18 MT/ha versus 3.15 MT/ha in 2011. The barley harvest currently stands at 9.7 MMT off 57% of the planted area with yields at 1.92 MT/ha versus 2.42 MT/ha last year.

The Kazakh Ministry of Agriculture have cut their grain harvest forecast from 14 MMT to 13 MMT.

Japan has bought 70,865 MT of US wheat in its usual weekly Thursday tender. Other Asian buyers are shopping around, with Thailand buying 100,000 MT of Indian wheat - its first such purchase in at least 8 years.

Agriculture and Agri-Food Canada peg wheat production there up 400 TMT from last month to 26.7 MMT, a 5.7% increase on last year.

Heavy soaking rainfall of up to 2" has doused Argentina’s grain belt, the sudden change & the wet forecast may be linked to emerging El Nino conditions, say Martell Crop Projections.

EU Rapemeal Prices

16/08/12 -- Rapemeal prices on the continent show little change for a second day running, despite sharp gains in Chicago soymeal last night. That sounds like a buying opportunity to me!

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


Nogger On Tour 2012

16/08/12 -- Tour season is almost upon us, with my next guest appearance set to be at a meeting organised by the very pro-active Bristol Corn & Feed Trade Association on the 18th September at Bristol Golf Club.

Here Nogger will apparently dazzle the assembled throng with "a potted history of how he started in the industry, how & why he started blogging, his thoughts on where the market is now and prediction as to where it may be going!" No pressure there then.

Also I will attempt to give you the first three in the 2013 Grand National in the correct order, with the aid of my spirit guide Septic Peg, who will also let you fondle her runes for a fiver.

There are also two proper speakers: Pierre Begoc of Agritel and Matthew Tickle. Both of who should be highly entertaining and informative. I met Pierre in Kiev last year as it happens, and he will no doubt be providing an "inside" account of unfolding harvest events in Ukraine, Russia and Kazakhstan.

Matthew will be disucssing the uses of proteins and potential alternatives to Soya, very appropriate given that domestic prices are now well above GBP400/tonne.

Clearly you'd have to be criminally insane not to want to attend such a prestigious event. Contact the BCFTA on to reserve a place or find out more.

Chicago Closing Comments - Wednesday

15/08/12 -- Soycomplex: Sep 12 Soybeans closed at USD16.59 3/4, up 36 1/4 cents; Nov 12 Soybeans closed at USD16.34 1/2, up 36 1/2 cents; Sep 12 Soybean Meal closed at USD520.00, up USD13.40; Sep 12 Soybean Oil closed at 53.07, up 28 points. Funds were thought to have been net buyers of around 9,000 soybean contracts on the day. Continued strong demand from China may have seen them back in the market this week to buy on this latest dip that saw Nov 12 CBOT levels fall below USD16/bu, according to trade gossip. China's CNGOIC estimated their 2012 soybean crop at 13.0 MMT, down more than 10% from a year ago, as farmers switched to corn plantings. The USDA currently sees China importing almost 60 MMT of soybeans in 2012/13, almost two thirds of all the world soybean trade. That's a 57% increase in the last five years and three and a half times the volume that they were importing less than ten years ago. Trade estimates for tomorrow's weekly export sales report are 750-950 TMT.

Corn: Sep 12 Corn closed at USD7.94, up 14 1/4 cents; Dec 12 Corn closed at USD8.04, up 15 cents. Funds were said to have been net buyers of around 12,000 corn contracts on the day. US weather is turning cooler, but not necessarily wetter. "A very strong weather disturbance is coming to the Midwest from Canada, expected to deliver the coolest air of the season to the US heartland. Strong cooling does not guarantee heavy rainfall. The plunging cool front would set off only light showers in the western two-thirds of the Corn Belt, the area most in need of heavy rainfall," say Martell Crop Projections. There are reports of a pest infestation called army worm in China's corn crop, which some analysts estimate could cut up to 4 MMT off production this year. China’s Ag Ministry said as of yesterday that 3.3 million hectares of farmland has been affected. The usual weekly report from the US energy dept showed a slight increase in ethanol production for the third week in a row. Tomorrow's weekly export sales report will be interesting to see if there are any signs of demand rationing. Trade estimates are for sales of 350-550 TMT.

Wheat: Sep 12 CBOT Wheat closed at USD8.46 3/4, up 7 cents; Sep 12 KCBT Wheat closed at USD8.58, up 6 cents; Sep 12 MGEX Wheat closed at USD9.13 1/2, up 10 3/4 cents. Funds were given credit for buying some 3,000 Chicago wheat contracts on the day following what was said to be the biggest three day decline in more than a year. Tomorrow's weekly export sales will also be of interest, with wheat sales expected at 450-550 TMT, as there has been some evidence of US wheat missing out on export business this week. Egypt bought three cargoes of Russian wheat and one of Ukraine origin this week. Algeria has bought 500TMT of durum wheat this month, thought to be mostly from Canada. More than one report in circulation suggests that Russia may impose an export tax on wheat/grain as early as next month, and/or come up with some plan to limit exports by November. It's certainly plausible as they could easily have shipped 10-12 MMT of grains by the latter date - the volume currently being touted as their entire 2012/13 exportable surplus.

EU Wheat Steady Despite Chicago Declines

15/08/12 -- EU grains closed with Nov 12 London wheat up GBP0.25/tonne to GBP195.25/tonne and Nov 12 Paris wheat up EUR1.25/tonne to EUR256.25/tonne.

Considering that the harvest is underway, European wheat remains fully steady. Especially if you consider that Chicago wheat has just posted its worst three day loss in more than a year between Friday and Tuesday.

CBOT wheat fell 8% during those three sessions, whereas Paris wheat was less than 3% lower and London wheat less than 1% easier during this time.

The UK supply and demand equation has been altered by the surprise announcement of the imminent re-opening of the Ensus bioethanol refinery on Wilton, with it's annual requirement for more than 1 MMT of wheat.

Meanwhile heavy rain across most of the country yesterday will have stalled the early wheat harvest, although things should soon dry out if the forecast 90F weekend temperatures arrive (at least for the south and south east).

Many pundits are now forecasting a UK wheat crop around 1 MMT below last year's 15.3 MMT total, further tightening the UK balance sheet.

Elsewhere, Russia remain aggressive marketeers, winning 75% of this week's Egyptian business despite widespread reports that this season's crop has been more adversely affected by drought than was realised just a month or two ago.

SovEcon say that Russia’s exportable surplus of 10-11 MMT may run out by November if Russia’s grain exports remain strong. They estimate August grain exports at 2.5-3.0 MMT versus 2.13 MMT in July, and forecast September grain exports also around the 2.5–3.0 MMT mark.

They now see Russia's 2012/13 grain crop at 70-74 MMT compared to their previous estimate of 72-75 MMT and 94 MMT in 2011/12.

Russia’s Ag Ministry say that as of 14th Aug 27 MMT of Russia’s wheat crop has been harvested. Average wheat yields are said to be 2.21 MT/ha versus 3.18 MT/ha at this time a year ago, a reduction of more than 30 percent.

EU Rapemeal Prices

15/08/12 -- Rapemeal prices on the continent little changed today despite some decent gains last night and again this morning in soymeal values in Chicago.

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


Chicago Closing Comments - Tuesday

14/08/12 -- Soycomplex: Sep 12 Soybeans closed at USD16.23 1/2, up 1 1/4 cents; Nov 12 Soybeans closed at USD15.98, down 2 3/4 cents; Sep 12 Soybean Meal closed at USD506.60, up USD1.80; Sep 12 Soybean Oil closed at 52.79, down 31 points. Funds were said to have been modest sellers of around 1,000 soybean contracts on the day. Strong demand for US soybeans is evident not only in robust exports, but also by the July NOPA crush which came in well above expectations of 131 million bushels at 137.4 million, and up almost 12% on July 2011's 123 million. Meal exports at 653,260T were well above June exports of 585,504T and July 2011 exports of 386,812T. With domestic demand for beans at this level it seems clear that the USDA's existing 1.69 billion bushel estimate for the entire 2011/12 crush is too low and will need to be revised higher in future S&D reports. That will cut carry in for 2012/13, further tightening ending stocks for the season ahead.

Corn: Sep 12 Corn closed at USD7.79 3/4, down 3 cents; Dec 12 Corn closed at USD7.89, down 3 1/4 cents. Funds were also modest sellers of around 1,000 corn contracts on the day. Corn seems to be struggling to hold above the USD8/bushel mark. US weather has turned cooler, with Monday's daytime high of 69 F at O'Hare International Airport in Chicago the lowest August high in three years. Rains however are largely confined to the east of the corn belt. Demand for US corn is switching to Brazilian origin material or feed wheat from Australia, India or the Black Sea. Agritel peg the Ukraine corn crop at 19.5 MMT versus 22.0 MMT last year and the USDA's current estimate of 21.0 MMT. Continued talk that this season's historic US drought will enough to persuade the EPA to reduce or waive completely the ethanol mandate seems to be enough to keep the bulls at bay for the time being.

Wheat: Sep 12 CBOT Wheat closed at USD8.39 3/4, down 17 cents; Sep 12 KCBT Wheat closed at USD8.52, down 16 cents; Sep 12 MGEX Wheat closed at USD9.02 3/4, down 8 1/2 cents. Wheat looks the weakest leg of the three, with funds selling an estimated 4,000 Chicago contracts on the day. There was disappointment that Egypt bought Black Sea wheat again for the second time in a week, this time booking one cargo each of Russian and Ukraine wheat in their second tender of 2012/13. US wheat was too expensive to feature once again. Agritel estimated the 2012 Russian wheat crop at 41.5 MMT, down 10% from their previous estimate with wheat exports seen at 8.0 MMT versus a previous estimate of 11.0 MMT. ProAgro estimate 2012/13 Ukraine grain exports at 19.8 MMT versus 23.4 MMT last season. The Ukraine Ministry say that farmers there will plant 8.2 million hectares of winter grains, including 6.6 million ha of wheat, for the 2013 harvest which is down 2.6% on last year.

EU Wheat Closing Comments - Tuesday

14/08/12 -- EU grains ended mixed with Nov 12 London wheat up GBP0.60/tonne to close at GBP195.00/tonne and with Nov 12 Paris wheat EUR2.25/tonne easier at EUR255.00/tonne.

London wheat continues to punch above it's weight, with Nov 12 closing within GBP1.00/tonne, or 0.5%, of the lifetime closing contract high. By contrast Nov 12 Paris wheat finished the day EUR14.75/tonne, or 5.5%, below its lifetime closing high.

As far as UK wheat supply and demand situation is concerned the big news of the day was the announcement that Ensus is to re-open after a 15-month shutdown.

Early UK wheat harvest results continue to be mixed, with Farmers' Weekly reporting that 75% of milling wheats coming into one Kent storage facility are failing to meet the required specification.

The Ukraine government estimate this season's grain crop at 45.0 MMT, down more than 20% on last year. Of that total wheat will account for 16.3 MMT versus 22.6 MMT in 2011, they add.

Private analysts are more pessimistic, estimating total grain production at 40.0-42.6 MMT, with wheat output around 13.6-14.0 MMT.

Looking ahead, the Ukraine Ministry estimate winter grain plantings at 8.2 million ha versus 8.4 million in 2011. Wheat sowings are seen down marginally to 6.6 million ha.

Recent heavy rains are seen as likely being beneficial to developing Ukraine corn and sunflower crops, plus early planted winter rapeseed.

Having been out of the market since April, Egypt was back with a second tender in a week, buying one cargo each of Russian and Ukraine wheat for September shipment. The Russian wheat was priced up around USD3.50/tonne cheaper than their weekend purchase.

The Lunchtime Byte

14/08/12 -- News that Ensus are to re-open their Wilton bioethanol plant after a 15-month shutdown is the big story of the day. It's on Reuters AND in the Middlesbrough Evening Gazette, so it must be true even though reported as recently as Friday that an Ensus spokesman had said that they "have not made a formal decision over when they can restart."

Does that mean then that the decision was made spontaneously over a few rounds of sandwiches in the last couple of days? That bastion of the British press that is the 'Boro Gazette says that Ensus will be "on line by the end of the month" and fully operational inside two.

North East wheat growers will be dancing a little jig of joy at the news that's for sure. Is there a Lamborghini dealership in Middlesbrough I wonder? If there isn't it could be a marketing opportunity of you're quick.

That could certainly make for an interesting market when Vivergo fires up too and with the Black Sea countries looking likely out of the export market in the new year.

Other news is pretty thin on the ground. Japan is tendering for 70,865 MT of US wheat and Algeria is in for 50,000 MT of optional origin wheat having bought 400,000 MT of US durum wheat yesterday.

Egypt are back tendering for wheat today having bought two cargoes of Russian wheat at just under USD316.50/tonne excluding freight over the weekend. Unconfirmed reports just breaking suggest that they may have bought one cargo each of Russian and Ukraine wheat at around USD313-314/tonne.

A Moroccan tender, its first of 2012/13, for 300,000 MT of US soft wheat attracted no bids. Grain production there is said to be down 39% this year.

India continues to let some of its surplus wheat stocks trickle out into the market at these levels.

Malaysian palm oil futures fell to a 10-month low yesterday.

The Ukraine Ministry say that farmers there will plant 8.2 million hectares of winter grains for the 2013 harvest, down 2.6% on last year. Recent heavy rains should be beneficial in aiding crops to get established, something that didn't happen last year.

The July NOPA US soybean crush came in at 137.38 million bushels, up 3.224 million on June and well above the 131 million expected.

EU Rapemeal Prices

14/08/12 -- Rapemeal prices on the continent are sharply lower today in line with steep losses in Chicago soymeal last night.

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


The Morning Wire

14/08/12 -- There's only a very modest sign of a Turnaround Tuesday type scenario so far this morning. Wheat was in positive territory but has now slipped into the red, with corn 2-3 cents higher and soybeans up 15 cents on about to expire August and generally 5-7 cents firmer on the rest.

Aug 12 soybeans, meal and oil all go off the board today.

Sep 12 CBOT wheat closed at it's lowest level in exactly a month last night, yet Nov 12 London wheat finished within GBP2.35/tonne of the life of contract closing high. Nov 12 Paris wheat incidentally ended last night EUR12.50/tonne off the life of contract closing high.

Versus the late-November lows Chicago Dec 12 wheat is up 33%, Nov 12 London wheat up 42% and Nov 12 Paris wheat up 50%.

Based on very early harvest results here in the UK it's looking like a wheat crop of 14.0-14.5 MMT is on the cards versus 15.3 MMT last year and the USDA's current 15.5 MMT prediction.

Also based on what's been cut so far the proportion of feed to milling wheat is likely to be much higher than it was last year. Indeed, I'd go as far as to say that even if total output is down around a million tonnes on last year, we'll have a larger feed wheat crop than we did in 2011.

Heavy rain has fallen in Ukraine across the last 24 hours, with Agritel reporting 48mm in the capital Kiev. Agritel are calling this rain event "the most important since the beginning of agricultural work in the spring," which should be good news for recently planted new crop rapeseed and the still developing corn and sunseed crops. According to the Ministry at least the 2012 wheat, barley and rapeseed harvest is just about finished.

After buying 120,000 MT of Russian wheat over the weekend, Egypt immediately issued a second tender for more wheat last night with the results expected later this afternoon.

"Canadian wheat looks generally promising for a favourable harvest. The USDA August wheat estimate was bumped up to 27 MMT on Friday, the biggest harvest in 3 years, increasing export potential to 19.50 MMT (up 2 MMT from 2011/12)," say Martell Crop Projections.

Elsewhere: "China is expecting a record corn harvest this season. Growing conditions have been very favourable with abundant rainfall and non-threatening temperatures on the Manchurian Plain, the key growing area.

"The projected 200 MMT of corn production, the USDA's new estimate, would be the 9th consecutive record harvest and 4% higher than last season. The national corn yield would also set a record at 92.9 bushels per acre. China's corn yields have been climbing at a steady rate of 1 bushel per acre, per year with improving technology for 15 years.

"However, China corn productivity will still fall well short of the United States. US corn productivity this season, while severely depressed by drought, is still well above China's 93 bushels per acre pegged at 123.4 bushels per acre," they add.

Fresh from having sold 190,000 MT of wheat last week (and 240,000 MT in July), one of India's state-run grain houses is back in the market offering 125,000 MT for tender again this week. Asian buyers are probably the most likely takers for that.

Both  Australia's and Japan's weather bureaus say that a switch from the La Nina weather pattern into El Nino is underway. El Nino would typically bring drier than normal conditions to India, amongst others, where monsoon rains are currently 17 percent below normal so far this year.

Drier than normal conditions are also generally observed in Eastern Australia in an El Nino year, with rainfall typically increasing in South America - just in time for record soybean plantings in Brazil and Argentina. Indeed, one contact in Brazil emailed me yesterday to say "our weather down here seems to be finally turning.  After about 18 months of drought in the south, some rains are appearing which we hope will enable us to plant better later in the year."

Chicago Market Slumps On Fund Selling

13/08/12 -- Soycomplex: Aug 12 Soybeans closed at USD16.56 1/4, down 53 1/4 cents; Nov 12 Soybeans closed at USD16.00 3/4, down 43 cents; Aug 12 Soybean Meal closed at USD526.30, down USD18.20; Aug 12 Soybean Oil closed at 52.95, down 65 points. When prices get this high, daily movements that would previously have been considered extreme become the norm. Funds dumped an estimated 12,000 soybean contracts on the day after weekend rains and as US weather forecasts offered a cooler and wetter outlook. "Chances for heavy rainfall continue most promising in the Great Lakes-Eastern Midwest this week where 1-1.5 inch amounts are predicted. West of the Mississippi River light to moderate rains are predicted from .25 to .75 inch. Normal weekly rainfall is around .85 inch in mid August. Midwest temperatures would be very cool this week as the heat dome gets nudged westward toward the Pacific Coast," said Martell Crop Projections. After the close the USDA pegged soybean good/excellent crop condition one point higher than last week at 30%. Weekly export inspections of 15.7 million bushels were above the level required to meet the USDA's 2011/12 full marketing year target of 1.35 billion with only three weeks of the campaign left to go.

Corn: Sep 12 Corn closed at USD7.82 1/2, down 17 1/2 cents; Dec 12 Corn closed at USD7.92 1/2, down 16 3/4 cents. Funds were said to have been featured sellers of around 16,000 corn contracts on the day. Weekly export inspections of 22.276 million bushels were better than expected although much lower than a year ago at this time. US corn is said to be USD35/tonne more expensive than Brazilian origin material. Japan is said to be in the market for several of cargoes of Brazilian corn for Oct/Dec shipment. US poultry processors Pilgrim’s Pride and Smithfield Foods are said to be buying or negotiating to buy corn from Brazil. Malaysia and Indonesia are said to be buying corn from Pakistan. The USDA left good/excellent crop conditions unchanged at 23% with poor/very poor raised one point to 51%. Early harvesting results are coming in highly variable, but with plenty of 100 bu/acre or less reports, although in general the poorer crops will be harvested first. Silaging corn, rather than harvesting it for grain, is also common which suggests that the USDA still needs to do some adjustments to their acreage estimates.

Wheat: Sep 12 CBOT Wheat closed at USD8.56 3/4, down 28 1/2 cents; Sep 12 KCBT Wheat closed at USD8.64 3/4, down 28 1/4 cents; Sep 12 MGEX Wheat closed at USD9.12 1/4, down 23 1/4 cents. Funds were said to have been net sellers of around 7,000 Chicago contracts on the day. Egypt snubbed US and EU wheat to buy two cargoes for September shipment from Russia at substantially discounted levels over the weekend. The latter are clearly not out of the market yet. Egypt promptly issued another tender mid-afternoon US time, the results of which should be known tomorrow. The USDA put the US winter wheat harvest at 94% complete. Spring wheat harvesting is well ahead of normal at 65% done versus just 24% normally. Spring wheat crop conditions fell two points in the good/excellent category to 61%. Weekly export inspections of 22.205 million bushels were respectable. FranceAgriMer increased their French all wheat crop estimate to 38.8 MMT, broadly in line with the USDA's revised 39 MMT forecast released on Friday. A 7% increase in plantings and improved yields will see US wheat production 13% higher than last season’s drought depressed crop, the USDA said Friday.

EU Wheat Declines In Consolidation Mode

13/08/12 -- EU grains finished lower with Nov 12 London wheat down GBP1.60/tonne to GBP194.40/tonne and Nov 12 Paris wheat EUR6.75/tonne lower to EUR257.25/tonne.

The trade appeared to be in consolidation mode, disappointed that following Friday's bullish USDA data Chicago wheat and corn closed lower in a market saturated with speculative length.

Egypt bought 120,000 MT of Russian wheat for September shipment over the weekend at levels substantially cheaper than French or US offers. They clearly haven't pulled away from selling just yet.

FranceAgriMer pegged the 2012 French soft wheat crop at 36.5 MMT versus their previous estimate of 35.9 MMT and a 2011 wheat crop of 34.0 MMT, a 7.4% increase. As of Aug 9th the average yield was 7.5 MT/ha compared to the 5 year average of 7.1 MT/ha. Protein levels are said to be averaging 11.0-11.5 percent.

The durum wheat crop was estimated at 2.3 MMT versus 2.0 MMT in 2011 with an average yield of 5.3 MT/ha. Barley production is forecast at 11.5 MMT, up 31% on last year's 8.78 MMT.

Rapeseed output was seen at 5.3 MMT, unchanged from 2011 with an average yield of 3.4 Mt/ha.

Friday's USDA report was least bullish for wheat, with 2012 US yields forecast increased to 46.5 bushels an acre from 45.6 bushels an acre.

There were rains in parts of the Midwest over the weekend with further rains and cooler temperatures in the forecast for later this week.

The US states of Maryland and Delaware have asked the Obama administration to waive the existing requirement to include ethanol in gasoline sold at the pumps. Other US legislators are asking for a relaxation of the ethanol mandate due to low corn supplies and high prices.

One private estimate out today pegs the combined wheat production of Russia, Ukraine and Kazakhstan at 66.3 MMT this year, a 34% reduction on last year and 2.5 MMT below the USDA's Friday estimate.

Wheat exports from the trio are seen at 18 MMT, down 51% on 2011/12 and 3 MMT less than the USDA said last week. Corn exports are less likely to be impacted by the drought, down 16% to 12.8 MMT versus the USDA's predicted 14.0 MMT suggestion.

News Snippets

13/08/12 -- At 2pm London time the electronic market trades with wheat down 19-20 cents, corn 14-15 cents lower and soybeans 25-30 cents easier to start the week on profit-taking and chart weakness.

US crude is up the best part of a dollar, and close to it's best levels since May on reports that Israel is considering a strike against Iran over its nuclear program.

Egypt bought two cargoes of Russian wheat in a weekend tender - it's first since April - at considerably cheaper levels than US or French wheat was offered at, drought or no drought.

Asian buyers are looking at cheaper alternatives to US corn such as feed wheat from Australia and India, or Brazilian corn at around a USD35/tonne discount to US origin material.

Trade talk suggests that Friday's revised USDA corn abandonment rate of 9.3% is too low for a drought year as severe as this, and that final harvested acreage will come in significantly lower than the 87.4 million acres that the USDA now predict.

Rusagrotragrotrans say that Russia will export around 3.0 MMT of grains in August, 3.2-3.5 MMT in September and a further 3.7 MMT in October. Add in 2.1 MMT already exported in July and there's this year's projected 12 MMT of shipments gone already.

Public awareness of the magnitude of the US drought is growing. So too are calls for an at least temporary removal of the ethanol mandate. Expert opinion is divided over exactly how much impact that would have on US corn demand, with some arguing not very much at all. It is perhaps more important as far as the market is concerned to consider what the funds' perception of the impact would be. A stampede for the exit door might be the most likely scenario. They aren't of course buying corn because they need it or have an end use for it. Being involved in a game where the rules change halfway through isn't their idea of fun.

The Morning Rant

13/08/12 -- The overnight grains are lower, possibly on overnight rains in Illinois pushing east into Indiana this morning.

Maybe there is also a bit of unease concerning the hitherto "written in tablets of stone" ethanol mandate. The director-general of the UN's Food and Agriculture Organisation wrote to the FT last week calling for an "immediate, temporary suspension" of the RFS.

This morning I read that the G20 are to arrange an "emergency forum" to discuss rising food prices and what they can do about them. Here's bright idea, how about removing all subsidies, incentives and mandates that require us to turn food into fuel regardless of whether the economics of the equation stack up or not?

Not really rocket science is it? Simpler than the Daily Mail crossword in fact. Don't give me the jobs argument. "Look at the number of people that the industry employs" rubbish.

More people lost their jobs when Clinton Cards closed down than are employed by the UK biofuel industry FFS.

If an industry isn't economically viable without subsidies and/or a legal requirement that we must buy it's product no matter what, whilst that same legislation simultaneously pushes up the price of food then make it stand on it's own two feet I say. If it can't, then let it go the same way as other unsound business models and shut up shop.