Chicago Grains Stage Mini Recovery

21/12/12 -- Soycomplex: Jan 13 Soybeans closed at USD14.30 3/4, up 22 cents; Mar 13 Soybeans closed at USD14.29 1/4, up 24 1/2 cents; Jan 13 Soybean Meal closed at USD433.80, up USD6.10; Jan 13 Soybean Oil closed at 48.71, up 80 points. Despite today's rally Jan 13 beans were still down 65 1/4 cents on the week. Bargain hunting was the theme after a three day decline that tried, but failed, to break through support at USD14/bushel. Fresh news was lacking, and trade was thin in pre-holiday mode. The USDA said that a sale of 110 TMT of US soybeans to "unknown" announced earlier in the week was in fact not for export, but a domestic sale. That news, and this week's Chinese cancellations will doubtless cut next week's export sales report to much lower levels than we have witnessed in recent weeks. With net commitments already running at 83% of the USDA's target for 2012/13 a week or two of depressed holiday sales isn't going to make a great deal of difference. Chinese customs data puts Jan/Nov soybean imports at 52.5 MMT, up 11.37% from a year ago. The Argentine Ag Ministry said that soybean planting there is 73% complete versus 77% a year ago and 80% of the crop is rated good/very good.

Corn: Mar 13 Corn closed at USD7.02, up 5 1/2 cents; May 13 Corn closed at USD7.04 3/4, up 5 cents. Corn managed to claw its way back up above the USD7/bu mark in subdued low volume trade, even so Mar 13 finished the week with losses of 28 3/4 cents. Chinese customs data puts Nov corn imports at 384,213 MT, up 56.98% from a year ago. That takes their calendar year to date imports to just under 5 MMT, up sharply versus 2011. The Argentine Ministry sees the corn crop there at 67% planted versus 75% a year ago, with 91% of the crop rated good/very good. On the Argentine weather front "while some drier weather is expected today and tomorrow, rains will return to the region on Sunday, with heavy rains expected on Monday and Tuesday, which will lead to more significant planting delays and widespread wetness," say MDA CropCast. South Korea's NOFI bought 193 TMT of optional origin corn for May/Jun shipment, US corn was allowed (they'd earlier excluded it from the tender) although South American corn is the most likely origin. The commitment of traders report shows funds dumping more than 50,000 corn futures and options in the week through to Tuesday, and they've probably sold a further 20-25,000 since then.

Wheat: Mar 13 CBOT Wheat closed at USD7.92, up 1 1/2 cents; Mar 13 KCBT Wheat closed at USD8.42, down 1 3/4 cents; Mar 13 MGEX Wheat closed at USD8.81 1/2, down 2 1/4 cents. For the week as a whole Mar 13 Chicago wheat fell 22 cents. The commitment of traders report shows "managed money" selling around 17,500 Chicago wheat contracts on the week through to Tuesday night, along with more than 10,000 Kansas wheat lots. As with corn they are said to have been further net sellers since. They are now net short on Chicago wheat. Taiwan has bought 75,600 MT of US wheat overnight for Feb/Mar shipment. South Korea's NOFI bought 60 TMT of feed wheat for March shipment, possibly of Indian origin. There's widespread talk of Brazil switching their attention to US wheat as reports come in of sharply lower Argentine production combined with serious quality issues. The Argentina Ag Ministry say that the wheat harvest there is 58% complete versus 69% a year ago. Reports that they were to restrict Jan/Feb wheat exports to 2 MMT have now been superseded* by suggestions that they are to halt all wheat exports until the harvest is completed at the end of January. Chinese customs data shows them importing 117,900 MT of wheat in November, taking their Jan/Nov imports to 3.68 MMT, up sharply on a year ago.

* Looks wrong to me but it isn't. In fact this is supposed to be the English word most commonly spelt incorrectly in published documents and on the internet. So stick that where the sun doesn't shine, which is most of the UK today as it happens.

EU Grains Recover Some Lost Ground To End Week

21/12/12 -- EU grains regained some of the week's losses on bargain-hunting with Jan 13 London wheat up GBP3.50/tonne to GBP210.50/tonne, May 13 GBP4.00/tonne higher to GBP215.00/tonne and new crop Nov 13 gaining GBP4.30/tonne to GBP189.30/tonne. Jan 13 Paris milling wheat rose EUR5.50/tonne to close at EUR254.50/tonne.

Despite today's gains Jan 13 London wheat was still GBP7.00/tonne lower for the week, with May 13 down GBP4.50/tonne and new crop Nov 13 falling a more modest GBP1.20/tonne. Jan 13 Paris wheat finished the week with net losses of EUR5.75/tonne.

Fundamentally nothing much has changed in the grains markets, but heavy fund selling tied to year-end book-squaring and the failure to seal a deal to ensure that the US doesn't fall off it's self-imposed "fiscal cliff" has driven the market sharply lower.

When I say nothing much has changed, in some cases things have got worse not better. The Argentine Ag Ministry cut their forecast for wheat production there to 10.5 MMT, although many analysts think that this is optimistic. The Argentine government have a vested interest in over-estimating the crop in an attempt to keep inflation under control.

The Bahia Blanca Grain Exchange say that Argentina's wheat crop could be as low as 8 MMT this year. The Buenos Aires Grain Exchange cut their estimate to 9.38 MMT. The USDA say that last season's crop was 15.5 MMT, so these forecasts represent a production cut of 39-48% on output in 2011/12. Quality is also a serious issue this year.

A report on Bloomberg says that the Argentine government are to halt wheat exports until the end of January "to avoid a domestic shortage" whilst the size and quality of this year's crop is assessed. Harvesting is currently only around halfway complete.

The bulk of Argentina's wheat exports normally go to neighbouring Brazil, although they have reportedly switched their attention elsewhere recently, including supposedly buying German wheat.

Brazil imported 4.4 MMT of wheat from Argentina in 2011, or around 56% of their total wheat import needs. Trade talk today suggests that Brazil have bought US wheat for Jan shipment this week and are actively looking for more for Apr/May shipment.

Meanwhile Ukraine and Russia are effectively out of the wheat export market for the next six/seven months, and EU wheat shipments are running 28% ahead of last year's levels (and accelerating) despite a 4% decline in production in 2012.

The Morning Vibe

21/12/12 -- It's a sea of green, as Ringo would say from his yellow submarine vantage point, with the overnight grains higher on bargain-hunting with beans 15-20 cents firmer, corn 3-4 cents better and wheat 2-3 cents higher.

What were this week's Chinese cancellations all about then? If I were to hazard a guess they were nothing more than an attempt to get out of some higher priced contracts. Beans are trading higher this morning on the Chinese Dalian Exchange, not following last night's Chicago lower.

The US now has 83% of the USDA's 36.6 MMT export target already shipped or on the books. South American new crop can't come fast enough. By the time we start to get the inevitable logistical problems there availability in North America will be tighter than a sharks arse at fifty fathoms.

There are signs now that US wheat is now competitively priced and that sales will improve in the second half of the season. Argentina, the wheat Primark of the southern hemisphere, is only around halfway through harvesting a small and low quality wheat crop, which will minimise it's ability to drive world prices down.

Taiwan has bought 75,600 MT of US wheat from Columbia Grain/Toepfer overnight for Feb/Mar shipment.

US corn remains the "Billy no mates" of the grain world.

Tonight we will get the weekly commitment of traders report, which will put a bit of flesh on the bones of exactly how much length has been removed from the market of late (although this data will only be a snapshot of how things looked as of Tuesday night).

The big question now is will it be a case of new month, new year, new money come January or will fund money continue to exit? The answer to that probably depends on what happens with regards to the US fiscal cliff.

As far as trying to get your head around that conundrum is concerned, someone emailed me yesterday to very helpfully reduce it all down to terms that even a monkey could understand:

U.S. Tax revenue:         $ 2,170,000,000,000
Fed budget:                 $ 3,820,000,000,000
New debt:                    $ 1,650,000,000,000
National debt:            $ 14,271,000,000,000
Recent budget cuts:          $ 38,500,000,000

Let's now remove 8 zeros and pretend it's a household budget:

Annual family income:                  $ 21,700
Money the family spent:                $ 38,200
New debt on the credit card:          $ 16,500
O/s balance on the credit card:    $ 142,710
Total budget cuts so far:                 $ 38.50

It all looks a bit scary when you look at it like that doesn't it?

The other analogy he used was suppose that you come home from work one day and find that the sewerage system in your street has completely blocked up and there's raw sewage throughout the house all the way up to the ceiling. What do you do, raise the ceilings or remove the shit?

Over to you Mr President...

Chicago Slumps Further On Chinese Cancellations

20/12/12 -- Soycomplex: Jan 13 Soybeans closed at USD14.08 3/4, down 28 1/4 cents; Mar 13 Soybeans closed at USD14.04 3/4, down 26 1/4 cents; Jan 13 Soybean Meal closed at USD427.70, down USD8.80; Jan 13 Soybean Oil closed at 47.91, down 50 points. The big news of the day for beans was Chinese cancellations of 540 TMT, meaning that they've cancelled around 1 MMT this week. That knocked the market for six even though the USDA reported actual shipments this week of 1.35 MMT, of which almost 1 MMT did go to China. That's the 12th week in a row that exports have topped 1 MMT, which in itself is a record. Weekly export sales were 619,400 MT (plus 20,500 MT for 2013/14), a little below trade expectations of 650-800 TMT. Nevertheless accumulated exports of 18.9 MMT, plus outstanding sales of 11.4 MMT, mean that the US already has 83% of the USDA's full season target on the books even with today's cancellations. Argentina is in for more rain, prompting MDA CropCast to cut their soybean production estimate there by 2 MMT from last week to 53.17 MMT. Ag Canada cut their forecast for Canadian 2012/13 canola ending stocks from 450 TMT to 350 TMT - less than half those of 2011/12.

Corn: Mar 13 Corn closed at USD6.96 1/2, down 6 1/2 cents; May 13 Corn closed at USD6.99 3/4, down 7 1/4 cents. Corn set new 5-month lows, aided by another disappointing set of weekly export sales. These came in at only 114,400 MT for 2012/13 (plus 5,800 MT for 2013/14) against trade expectations of 325-550 TMT, and only around a third of the pace needed to hit the USDA export sales target. South Korea’s Kocopia bought 55 TMT of what will probably be Brazilian corn, whilst South Korea’s largest animal feed miller, Nofi, is tendering for 210 TMT of corn specifically excluding US origin based on price. Japanese government data shows that corn utilisation in animal feed in October matched September's 20 year low of 42.5%. Japan imported 12.27 MMT of corn between January and October, 80% of which was came from the US versus 92.5% a year ago. The Argentine Ag Ministry cut their corn planting forecast from 5 million hectares to 4.6 million. They rate 90% of the crop as being good/very good.

Wheat: Mar 13 CBOT Wheat closed at USD7.90 1/2, down 15 1/4 cents; Mar 13 KCBT Wheat closed at USD8.43 3/4, down 14 1/4 cents; Mar 13 MGEX Wheat closed at USD8.83 3/4, down 11 3/4 cents. Like corn, wheat also stumbled to 5-month lows even though weekly export sales were higher than trade expectations, and of those for corn and soybeans. At 651 TMT (plus 20,000 MT for 2013/14) they were 46 percent above the prior 4-week average. Maybe we really finally are seeing a world demand switch? Whilst Japanese usage of corn in animal feed slumps to a 20-year low, for wheat it is running at a 20-year high, albeit only at an inclusion rate of 4.5% in October. Japan bought 121 TMT of mostly US wheat in their regular tender today. The Argentine Ag Ministry cut their wheat production forecast to 10.5 MMT, still a bit better than many other analysts who line up in the 9.5-10.0 MMT area. If the Ministry are correct then that would be a drop of more than 25% on last year. MDA CropCast left their estimate unchanged at 9.98 MMT. The Ministry said harvesting was 45% complete. A a new round of storms in the week ahead will do little to help.

EU Wheat Slump Continues

20/12/12 –- EU grains were down again, extending recent losses, with Jan 12 London wheat ending GBP5.00/tonne lower to GBP207.00/tonne, with benchmark May 13 falling GBP4.75/tonne to GBP211.00/tonne and new crop Nov 13 GBP3.00/tonne easier at GBP185.00/tonne. Jan 13 Paris wheat fell EUR5.75/tonne to EUR249.00/tonne.

A sharp year-end related sell-off in Chicago grains also has the European market backpedalling as we head towards the end of 2012. US corn and wheat futures both slumped to fresh 5-month lows today as fund money continues to exit the grains.

These recent developments appear to have little to do with market fundamentals however.

Brussels had another busy week, issuing 537 TMT of soft wheat export licences to bring the marketing year to date total to 9.12 MMT, a very impressive 28% up on year ago levels. At the start of November, when Russia and Ukraine were still active in the market, exports were only 6% up on last season, so the incredibly rapid rate of acceleration in shipments is there for all to see.

German customs data out today shows that they exported 899 TMT of wheat in October, a 55% increase on September's shipments and a massive 165% more than a year previously. Cumulative exports for the 2012/13 marketing year are now 2.2 MMT, up more than 26% on a year ago. Based on the information coming out of Brussels these percentage increases are probably even larger now.

Heavy rains across the UK and France are allowing wetness concerns to redevelop, say MDA CropCast. They forecast the EU-27 2013/14 wheat crop at 132 MMT, only a relatively modest 4% increase on this year's crop, and substantially less than Copa Cogenca's estimate of 138.3 MMT released earlier in the week.

The German Statistical Office say that winter wheat plantings there are 7% up on last year at 3.1 million hectares, with barley plantings up 11% and OSR sowings 10% higher. It is of course a very long time before these crops are in the barn however.

The Ukraine Ministry are said to have authorised the release of a further 300 TMT of wheat for export, which should take their net total to around 6 MMT this season with 5.7 MMT already shipped. There's a possibility that they may review the situation in the spring and allow a little bit more to be exported depending on how crops that are in the ground now survive the winter.

There are reports that bitterly cold temperatures in parts of Russia may be causing some winterkill on crops unprotected by a decent covering of snow.

Winter wheat's chances of some much-needed moisture on the parched US Plains seem to be improving. "A band of heavy snow developed from northeastern Colorado to southern Wisconsin overnight. Snowfall in northern Kansas and southern Nebraska converted to water would be 10-25 mm, the first important precipitation in more than 60 days," say Martell Crop Projections.

The Morning Vibe

20/12/12 -- It's a sea of red again this morning, with beans showing double digit losses down 12-14 cents, corn 6-8 cents lower and wheat down 10-12 cents.

Wheat has fallen below USD8/bushel and corn is now under USD7/bu on heavy fund liquidation.

It all looks like pre-Christmas, month-end, quarter-end, year-end, let's all jump off the fiscal cliff together like Thelma and Louise end of the world-end book-squaring.

In fact talking of the fiscal cliff the nice people at Saxobank have come up with a infographic to explain it all to you here.

This particular current demise has little to do with grain market fundamentals.

Syria has bought 100 TMT of wheat of unspecified origin. Morocco has bought 185 TMT of the same.

The Moroccan government have said that they are to extend the zero duty tariff on soft wheat imports until the end of April 2013. Their Jun/Nov imports are up 63% at 2.79 MMT.

Egypt meanwhile bought 290 TMT of US wheat yesterday.

This afternoon's USDA weekly export sales report will be of particular interest to see if soybean sales remain buoyant after the Chinese cancellations that were reported earlier in the week.

It will also be interesting to see how US wheat sales fare, is demand finally switching there? And is there any demand at all for US corn?

Chicago Nosedives Led By Corn

19/12/12 -- Soycomplex: Jan 13 Soybeans closed at USD14.37, down 29 cents; Mar 13 Soybeans closed at USD14.31, down 29 1/2 cents; Jan 13 Soybean Meal closed at USD436.50, down USD8.40; Jan 13 Soybean Oil closed at 48.41, down 76 points. Funds dumped another 8,000 lots of their soybean length in further year-end liquidation. Spillover weakness from corn also drove beans lower despite US analytical firm Informa Economics cutting their forecast for 2013 soybean plantings in t he US by more than a million acres to 78.9 million. Yesterday's Chinese cancellations still has the soybean market rattled. Tomorrow's weekly export sales report will therefore be of particular interest, with the trade expecting soybean sales of 650-800,000 MT.

Corn: Mar 13 Corn closed at USD7.03, down 17 cents; May 13 Corn closed at USD7.07, down 16 3/4 cents. Corn took a complete bath, with prices now threatening to fall below USD7.00/bushel for the first time for a front month since the first trading day of July. Informa increased their corn planting estimate for 2013 in the US to 99 million acres, 1.3 million more than their previous forecast. If true this represents an increase of 2.1 million acres on this year's planted area, and that was the largest acreage in 75 years. Unlike soybeans, US corn sales have consistently disappointed in recent weeks. Trade estimates for tomorrow's weekly export sales are 325-550,000 MT. Brazilian corn still undercuts US origin material into Asia, whilst Ukraine corn is also competitive.

Wheat: Mar 13 CBOT Wheat closed at USD8.05 3/4, down 5 1/2 cents; Mar 13 KCBT Wheat closed at USD8.58, down 2 1/2 cents; Mar 13 MGEX Wheat closed at USD8.95 1/2, down 6 cents. Wheat got support from a clean sweep in the latest GASC tender, plus the announcement by the USDA of a further additional sale of 110 TMT to the private Egyptian buyers. Acute weakness in corn however proved too strong to resist. The trade is optimistic that US wheat sales will finally now start to pick up as Black Sea offers have dried up and European availability also starts to tighten. Trade estimates for tomorrow's weekly export sales are 400-600,000 MT. Informa lowered their US winter wheat plantings estimate to 42.2 million acres from 42.5 million, with the spring wheat area left unchanged.

EU Wheat Declines

19/12/12 -- EU grains closed mostly lower although Jan 13 London wheat was unchanged at GBP212.00/tonne. Benchmark May 13 fell GBP0.25/tonne to GBP215.75/tonne and new crop Nov 13 was GBP0.60/tonne easier at GBP188.00/tonne. Jan 13 Paris wheat ended EUR1.00/tonne lower at EUR254.75/tonne.

EU grains followed US markets lower.

The Russian Ministry estimated the winter grains crop to be harvested in 2013 at 36.8 MMT, a 26% increase on this year.

Customs data showed that the UK only exported 90,355 MT of wheat in October, a 67% decrease on October 2012, taking cumulative exports for the 2012/13 marketing year to date to 379,358 MT, 57% below last year's total at this time.

Domestic wheat imports in October were in fact far higher at 220,874 MT reflecting the poor quality, and quantity, of this year's crop. That puts 2012/13 imports so far at 811,136 MT.

That would suggest that the Defra estimate on full season imports of just over 2 MMT will be on the low side. Private trade estimates suggest that 2.5-3.0 MMT may be nearer the mark.

Egypt's GASC bought 180 TMT of US wheat in it's tender, taking advantage of the recent price dip that's driven Chicago wheat prices to their lowest levels since early July.

In addition to that business the USDA also reported the sale of 110 TMT of US hard red winter wheat to private Egyptian buyers.

Bangladesh announced that it plans to buy 500 TMT of wheat over the next 6 months, most likely that will come from India who say that they expect their 2013 harvest, which begins in March, to be their third bumper crop in a row.

Jordan bought 100 TMT of optional origin barley in a tender.

Argentina announced that it would limit Jan/Feb wheat exports to a total 2 MMT before reviewing the situation in March.

Chicago Soya Dives On Chinese Cancellations

18/12/12 -- Soycomplex: Jan 13 Soybeans closed at USD14.66, down 30 1/4 cents; Mar 13 Soybeans closed at USD14.60 1/2, down 27 3/4 cents; Jan 13 Soybean Meal closed at USD444.90, down USD10.50; Jan 13 Soybean Oil closed at 49.17, down 62 points. Beans capitulated sharply on profit-taking. For all the recent talk of China buying US soybeans under the counter, the USDA today announced Chinese soybean cancellations of 300 TMT along with "unknown" cancelling a further 120 TMT. Just to confuse the issue a bit more "unknown" also bought 110 TMT. All of this was for 2012/13 delivery. Funds dumped an estimated 8,000 soybean contracts on the day. Safras e Mercados said Brazilian soybean plantings are 98% complete versus 94% a week ago and 96% for the 5 year average. Celeres estimated the Brazilian soybean crop at 79.0 MMT, 2 MMT less than the USDA. AgRural yesterday said 82.2 MMT. Opinions on Argentina's production potential differ widely, with some estimates as low as 45-47 MMT and others as high as 55-57 MMT. Monsanto say that Paraguay could have a record 8.6 MMT soybean crop in 2012/13 if the weather remains co-operative. Informa Economics will release their US 2013 prospective planting estimates tomorrow.

Corn: Mar 13 Corn closed at USD7.20, down 4 cents; May 13 Corn closed at USD7.23 3/4, down 3 3/4 cents. Fund selling was estimated at 4,000 contracts on the day. Michael Cordonnier estimated the Brazilian corn crop at 70 MMT, unchanged from his previous estimate and the same as the USDA. He pegged the Argentine crop at only 22.5 MMT, which is 5 MMT less than the USDA. He said 63% of the Argentine corn crop has been planted versus 57% a week ago and 73% on average at this time. Argetina looks wet again in this week's weather forecast, prompting ideas that not all the intended corn will get planted. Informa are out tomorrow with their latest US 2013 planting forecasts. Last month they had corn acres at 97.7 million. Copa Cogenca estimated the 2013 EU-27 corn crop at 62.2 MMT, which they say is only 1.4% up on this year's 61.3 MMT, although most other analysts have the 2012 EU-27 corn crop at around 55 MMT.

Wheat: Mar 13 CBOT Wheat closed at USD8.11 1/4, up 3 1/4 cents; Mar 13 KCBT Wheat closed at USD8.60 1/2, up 4 1/4 cents; Mar 13 MGEX Wheat closed at USD9.01 1/2, up 5 1/4 cents. Wheat was lower in early trade but recovered by the end of the session on news that Egypt's GASC was back in the market, tendering for wheat for Feb 10-20 delivery. The US won a majority share in their last tender you may recall. The results of this tender should be known tomorrow. There's talk of Brazil wanting US wheat due to lower output and quality issues with their usual supplier - Argentina. Copa Cogenca see the 2013 EU-27 soft wheat crop at 127.7 MMT on improved yields. Russia’s December 1st grain stocks were said to be 29.7 MMT, down 30% from a year ago. Informa will release their 2013 US wheat area estimates tomorrow, last month had all wheat at 57.1 million acres.

EU Grains Lower Once More

18/12/12 -- EU grains closed mostly lower once more with Jan 13 London wheat down GBP5005/tonne to GBP212.00/tonne, May 13 down GBP2.00/tonne to GBP216.00/tonne and new crop Nov 13 GBP1.40/tonne easier at GBP188.60/tonne. Jan 13 Paris milling wheat fell EUR2.00/tonne to close at EUR255.75/tonne.

The market is under pressure from year-end liquidation and fund money pulling out of the grains sector.

Copa Cogenca estimated the UK wheat crop at only 13.5 MMT in 2013, despite a return to "normal" 7.7 MT/ha yields, as plantings slump to just 1.756m ha.

They also placed the UK barley crop at 6.52 MMT in 2013, (+18% on 2012) as spring plantings jump 40% to 865K ha.

In addition they pegged the UK rapeseed crop unchanged at 2.56 MMT in 2013, with plantings down 3% and yields up to 3.5 MT/ha.

As far as the whole of Europe is concerned they go for a modest 2.2% increase in soft wheat output to 127.7 MMT, with barley production falling by 2.7% to 54.1 MMT and the OSR crop climbing 8.8% to 20.96 MMT by virtue of a 6.3% increase in area and a 3% rise in yields.

Elsewhere, the Ukraine Ministry say that 92% of winter grains in good/satisfactory condition vs 66% this time a year ago.

Russia sold 61 TMT of the intervention grain offered up at this week's government auction, bringing the total amount sold since sales began on Oct 23 to just over 1 MMT.

"Snow cover increased across south central North Caucasus and eastern Ukraine over the past week, which has increased winterkill protection there. However, snow remains very limited across northern portions of North Caucasus as well as southwestern Volga Valley," say MDA CropCast.

What's Going On?

18/12/12 -- There seems to be a bit of end of year panic setting in, in a most unfestive manner all of a sudden. On the overnight market beans are suddenly 15-20 cents lower, with wheat and corn both 5-6 cents easier.

The jitters have spread to this side of the pond with front month Jan 13 London wheat down GBP4.00/tonne, Paris wheat around EUR3.00/tonne weaker and Paris rapeseed tumbling EUR5.00/tonne or so.

The US dollar is under pressure on "fiscal cliff" fears, and it's suddenly all looking very year-endish.

End users will be saying "I told you so" and there may be an element of nervousness now creeping in from those still sitting on ex farm wheat at home with Jan 13 London wheat now GBP14/tonne off the highs and even new crop Nov 13 currently down GBP13/tonne off the contract high set on Nov 28th.

So is this a time for capitulation, or time to stand firm?

Copa Cogenca have released their first peep into 2013/14 production, forecasting only a fairly modest rebound in EU-27 wheat production - up 2.2% to 138.3 MMT. Barley output is seen 2.7% lower at 54.1 MMT and rapeseed output up 8.8% to 20.96 MMT.

So there's nothing to dramatic and life-changing there.

There are a few signs that the US Plains may be in for some wetter weather ahead. It sure needs it. Warmer than normal conditions may mean that whatever rainfall they get may do more good than you might expect at this time of year for wheat that hasn't gone into dormancy yet. Even so the last USDA crop ratings of the year were the worst on record by fully ten percentage points, so it's difficult to imagine that being turned around overnight by a few light showers.

Argentina's wheat crop is getting worse not better. They clearly aren't going to be exporting the 7.5 MMT that the USDA optimistically suggested last week, especially not with the mooted government imposed 4.5 MMT limit. The 3 MMT that was over-estimated has a fair chance of coming from the US.

We still have EU wheat exports running at a rapid pace, and availability from here set to tighten by the spring, so there could be a sting in wheat's tail yet.

South American soybean production meanwhile does appear to be in with a decent chance of record, or near record, crops all round in 2013. Although that will come hand-in-hand with record shipping delays too no doubt. Nothing fresh that we don't already know there then either.

I'd still maintain that the fund's appetite for grains holds the key to price direction in 2013, with a break to new highs in Q1 still a quite likely scenario if we see fresh money come back in once we enter the New Year.

The further forward we go in 2013, the greater the downside risk in my humble opinion. The cash market may not follow the futures prices quite so closely in the first half of the New Year however. Technical shortages of physically available wheat and soybeans are not difficult to imagine for those needing supplies at short notice.

Quiet Day, Quiet Week, So Far

18/12/12 -- The overnight grains are mostly a little lower, with beans down 6-8 cents, wheat mostly 1-2 cents weaker and corn 2 cents lower to 1 cent firmer.

The pound is up to it's best levels against a weak dollar since late September, and not far off breaking through the 1.63 mark - we haven't spent any length of time up there for 16 months.

Fresh news is pretty thin on the ground, with the trade already looking decidedly "holiday-ish".

The Australian wheat harvest is said to be about halfway done, and ABARES 22.3 MMT and the USDA's 22 MMT estimates are thought to be optimistic.

Japan is shopping for 121 TMT of mostly US wheat in a routine tender to be concluded Thursday.

The US Southern Plains got some light/moderate rain over the weekend. "Winter wheat in western Kansas and west Texas received .25 - .50 inch of precipitation Friday with a storm that moved northeast....Stormy conditions are expected to continue this week with .50 to .75 inch of additional precipitation. Rain and snow showers would target the central Great Plains and Midwest in a wide swath from Kansas and southern Nebraska eastward into Illinois and Indiana," say Martell Crop Projections.

Monsanto say that Paraguay could have a record 8.6 MMT soybean crop in 2012/13 if the weather remains co-operative. The USDA currently estimate 7.75 MMT. Blimey, the USDA on the low side, that's a first.

Militant French farmers apparently dumped 20 tonnes of shit outside government offices in Rouen yesterday in protest against what they an unfair Nitrates Directive. They then planted a Christmas tree on top of the shit heap before handing the rest of it out in plastic bags to unsuspecting passers-by to take home an put on their gardens. Class.

Chicago Soybeans Fail To Hold Early Gains

17/12/12 -- Soycomplex: Jan 13 Soybeans closed at USD14.96 1/4, up 1/4 cent; Mar 13 Soybeans closed at USD14.88 1/4, down 3 1/4 cents; Jan 13 Soybean Meal closed at USD455.40, down USD2.30; Jan 13 Soybean Oil closed at 49.79, down 20 points. Beans broke through the USD15/bu mark, but failed to hold at that level, which will be a set-back for the bulls. The very strong pace of early season US exports was underlined once more when the USDA announced the sale of 151,000 MT of soybeans to unknown destinations. Of that total, 91,100 MT is for delivery in 2012/13 and 60,000 MT for 2013/14 delivery. Much of Argentina got heavy rains over the weekend that will have disrupted corn and bean plantings once more. Even so the Argentine Ag Ministry now say that soybean planting is 73 percent complete vs 77 percent last year. On Friday the Rosario Grain Exchange estimated the Argentine soybean crop at 53 MMT versus the USDA's 55 MMT. In Brazil, Ag Rural upped their soybean production estimate by 0.3 MMT to a new record 82.2 MMT and versus the USDA's 81 MMT. Ag Rural said Brazil’s bean planting is 98% complete.

Corn: Mar 13 Corn closed at USD7.24, down 6 3/4 cents; May 13 Corn closed at USD7.27 1/2, down 6 1/4 cents. Weekly export inspections of 15 million bushels were at least an advance on last week's appalling 8 million, but still well short of the level required to come close to hitting the USDA target for 2012/13. The Rosario Grain Exchange estimate Argentine corn production at 24 MMT, well below the USDA's 27.5 MMT, although not the lowest number in the arena. Sinograin said that China's corn crop is closer to 198 MMT than the 208 MMT that the USDA now predict. Ukraine said that it has exported 5.46 MMT of corn to date in this marketing year. CFTC data from Friday shows spec money cutting their corn length by more than 50,000 contracts in the week through to last Tuesday night. They are estimated to have shed a further 4,000 lots today.

Wheat: Mar 13 CBOT Wheat closed at USD8.08, down 6 cents; Mar 13 KCBT Wheat closed at USD8.56 1/4, down 8 cents; Mar 13 MGEX Wheat closed at USD8.96 1/4, down 6 3/4 cents. Weekly export inspections of 16.355 million bushels were no better that average even if they did beat last week's total of 13.938 million. Ukraine said it had exported 13 MMT of grains so far this marketing year, an increase of 71% on year ago levels. Of that total 5.65 MMT is wheat with a further 190 TMT of wheat said to be at the ports waiting to load. The government are said to have agreed an "informal" limit of 5.8 MMT with exporters there. Ukraine’s December 1st wheat stocks are said to be 6.5 MMT compared to 8.2 MMT a month ago. The Rosario Grains Exchange cut their Argentine wheat production estimate to 9.5 MMT, which is 0.3 MMT lower than the Buenos Aires Grain Exchange's Thursday forecast and 2 MMT beneath that of the USDA. The latter's Argentine wheat export forecast of 7.5 MMT in 2012/13 looks increasingly unlikely.

EU Wheat Ends Lower Again

17/12/12 –- EU grains closed lower, with Jan 12 London wheat down GBP0.50/tonne to GBP217.00/tonne, with benchmark May 13 falling GBP1.50/tonne to GBP217.50/tonne and new crop Nov 13 GBP0.50/tonne lower at GBP190.00/tonne. Jan 13 Paris wheat fell EUR2.50/tonne to EUR257.75/tonne.

For Jan 13 Paris wheat this was the fifth lower move in six sessions, and for Jan 13 London wheat it was the sixth in seven.

The trade is still trying to figure out what is the right price for wheat following last week's bearish USDA data.

Last week was in fact the first upwards revision for world wheat production for some time - the USDA had pegged global output lower for six months in a row prior to last Tuesday.

This time round they found 3.7 MMT more wheat world-wide than in November, the main upwards revisions coming from China (+2.6 MMT), Australia (+1 MMT) and Canada (+0.5 MMT). That helped to raise world 2012/13 wheat ending stocks by 2.2 MMT to 177 MMT.

Of those stocks 44% are held by India and China, in addition the latter country alone in fact also holds more than half of global corn inventories.

China's production and stocks of anything are always shrouded in mystery, that they do have 55.5 MMT of wheat in hand looks questionable given the recent pick up in imports that we have seen from them. Meanwhile Rabobank estimate the Australian wheat crop at 20.2 MMT, which is 1.8 MMT lower than the USDA's revised forecast.

Tuesday's numbers also includes an unchanged review of wheat production in Argentina this year at 11.5 MMT. The Buenos Aires Grain Exchange forecast that at 9.8 MMT on Thursday and the neighbouring Rosario Grain Exchange pegged output even lower at 9.5 MMT late on Friday.

Whilst we are casting a critical eye over last week's USDA numbers it is also worth noting their surprise upwards revision for corn production in China - up 8 MMT to 208 MMT. That outshines even the normally equally optimistic China Grain Reserves Corp (Sinograin) who say that output is likely to be closer to 198 MMT.

Meanwhile the entire state of Kansas, the top wheat producing state in the US, is in at least "severe" drought and 78% of it is in the grip of "extreme" drought, according to the latest data from the National Weather Service.

The recent demise in Chicago wheat probably has more to do with fund liquidation (estimated at more than 22,000 contracts in the week through to last Tuesday) than a wholesale change in the fundamentals. Year-end repositioning and US "fiscal cliff" fears, and what damage a resolution might have on the US economy, appear to be encouraging a risk-off move.

Just a week ago, prior to the release of the USDA report, the differential between front month CBOT wheat and corn was 106 cents. Today that has narrowed to around 85 cents, a more than 10% switch.