Chicago Rises Buoyed By Strongest US Wheat Export Sales In Almost 2-Years
28/12/12 -- Soycomplex: Jan 13 Soybeans closed at USD14.24, up 5 1/4 cents; Mar 13 Soybeans closed at USD14.18, up 4 cents; Jan 13 Soybean Meal closed at USD427.70, down USD2.10; Jan 13 Soybean Oil closed at 48.94, up 65 points. For the week that puts front month beans 6 3/4 cents lower, with meal down USD6.10 and oil up 23 points. Funds were estimated to have been net buyers of around 2,000 soybean contracts on the day. Weekly export sales were below expectations at only a net 87,000 MT, by virtue of cancellations of 272,300 MT to China and 111,000 MT to unknown destinations. Even so sales are massively ahead of the level required to meet USDA targets. Weekly shipments were strong again at 1,153,800 MT - a record thirteenth week in a row that they've topped the 1 MMT mark. In addition, the USDA announced 165 TMT of US beans sold to China for 2012/13 delivery under the daily reporting system. They also announced 30 TMT of US soybean oil sold to unknown for 2012/13 delivery, extending a run of very strong oil sales lately. South Korea also bought 25 TMT of US beans for May shipment. The Buenos Aires Cereals Exchange placed the 2012/13 Argentine soybean area at 19.7 million hectares, unchanged from their previous estimate. They said that 80.1% of the crop has been planted versus 73.6% a week ago and 80.6% a year ago. The Argentina Ag Ministry estimated the bean area a tad lower at 19.355 million hectares. They said 84% of the Argentine bean crop has been planted versus 77% a week ago and 87% a year ago. Both area estimates are below the USDA's 19.8 million hectare forecast.
Corn: Mar 13 Corn closed at USD6.94, up 2 1/2 cents; May 13 Corn closed at USD6.96 3/4, up 2 1/4 cents. For the week Mar 13 corn was 8 cents lower. Weekly export sales were disappointing yet again at only 104,300 MT, less even than last week's paltry 114,400 MT. Total export commitments now stand at 44 percent of the USDA target compared to the 5-year average of 57 percent. Weekly shipments were so so at best coming in at 286,600 MT. The Buenos Aires Cereals Exchange estimated the 2012/13 Argentine corn area at 3.4 million hectares, unchanged from their previous estimate and down 12% from a year ago. They say that 74.7% of the crop has been planted versus 67.0% a week ago and 79.7% a year ago. The Argentine Ag Ministry estimate the 2012/13 Argentine corn area much higher at 4.575 million hectares. They say that 81% of the crop has been planted versus 74% a week ago and 85% a year ago. The Ministry are thought to be deliberately over-estimating the crop in a transparent attempt to keep a lid on inflation. The USDA estimate the Argentine planted area at 3.7 million hectares. The Argentine Corn Association, Maizar, estimate Argentina’s 2012/13 corn crop at 26–27 MMT, although that is down 1-2 MMT from their previous estimate it would still beat the previous record of 25.2 MMT set two years ago. The weekly US ethanol grind of 834,000 barrels per day beat the level required to hit USDA targets by around 11,000 bpd.
Wheat: Mar 13 CBOT Wheat closed at USD7.78 3/4, up 6 1/2 cents; Mar 13 KCBT Wheat closed at USD8.26, up 2 3/4 cents; Mar 13 MGEX Wheat closed at USD8.67 3/4, up 3 cents. For the week that puts front month Chicago wheat down 13 3/4 cents, with Kansas down 16 cents and Minneapolis falling 13 3/4 cents. Weekly export sales topped 1 MMT and were the highest genuine weekly total in almost 2 years (ignoring carryover volume when switching between crop years). This was the second week in a row that wheat export sales have beaten those for soybeans and corn. Even so, the total percent of wheat sold or shipped is still running well behind the 5 year average pace, but there do finally appear to be signs that things will catch up with USDA targets now we are into the second half of the season. SRW sales were well above the average needed to hit the USDA export target – with 80% of that already sold. HRW sales have picked up with this week’s sales also exceeding the average needed to hit the USDA target. The Buenos Aires Cereals Exchange estimated the 2012/13 wheat crop there at 9.8 MMT, unchanged from their previous estimate, but well down on last year. They say that 67.4% of the crop has been harvested versus 78.5% a year ago. The weekly commitment of traders' report shows that large spec positions (futures and options combined) now hold a net wheat short of 66,517 contracts, which may limit the downside.
EU Wheat Higher On The Day, Lower On The Week
28/12/12 -- EU grains closed mostly higher with Jan 13 London wheat up GBP1.10/tonne to GBP206.75/tonne, May 13 also firming GBP1.10/tonne to GBP211.75/tonne and new crop Nov 13 GBP1.50/tonne higher at GBP186.75/tonne. Jan 13 Paris milling wheat rose EUR1.50/tonne to close at EUR251.25/tonne.
For the holiday-shortened week as a whole Jan 13 London wheat lost GBP3.75/tonne, May 13 fell GBP3.25/tonne and Nov 13 lost GBP2.55/tonne. Jan 13 Paris wheat declined EUR3.25/tonne.
Fresh news has been pretty thin on the ground this week, as you might expect. Ukraine said that they had exported 14 MMT of grains to date so far this marketing year, that includes 5.8 MMT of wheat, 6.2 MMT of corn and 1.8 MMT of barley. Some suggest that they may attempt to squeeze out another few cargoes of wheat before the export door is shut. Even so, they are more or less out of the market.
In South America the quality of this year's harvest is still being assessed, although the signs aren't promising. The Buenos Aires Cereals Exchange estimated this year's Argentine wheat crop at 9.8 MMT, unchanged from previous estimate, but more than a third down on a year ago. They said that 67.4% of the rain-battered wheat crop has been harvested versus 78.5% a year ago.
The are tentative signs that the much-anticipated switch in global wheat demand to the US has begun. The USDA today announced weekly wheat export sales in excess of 1 MMT - the best weekly total in almost two years. Egypt were a featured buyer, taking 405 TMT of the that.
London wheat is almost GBP20/tonne off the contract highs, and it's fortunes for 2013 seem mainly tied to external influences such as the last ditch attempt by President Obama to avert a US "fiscal cliff" disaster.
The other big external influence to look out for in the New Year is fund activity. Will they continue to maintain a "risk-off" mentality and exit the grains for safer, if less potentially lucrative, asset classes? Or will they return to the foray with renewed vigour in 2013? As ever that is a very difficult one to call.
From the fundamental viewpoint we have EU exports running well ahead of last year's pace and signs that demand is switching to the US. Russia/Ukraine are as good as sold out.
In the Southern Hemisphere, Argentina look like having a very small and low quality crop. Australia will keep chipping away, although their output is likely to be down at least 25% from last year.
Meanwhile, demand is expected to remain robust with China importing much more wheat than in previous years and Japan incorporating wheat at the highest levels in animal feed rations in at least 20 years.
Production prospects for 2013 will soon start to be in focus. The US winter crop headed into dormancy in the worst condition it had been in since the USDA started issuing crop condition reports in the 80's. Russia is a mixed bag, so too is Europe with generally good conditions in the east getting worse as you head west. In Ukraine things look very promising at the moment. India's crop is much closer to hand, and they are expecting another bumper harvest in Mar/Apr.
The Morning Vibe
28/12/12 -- Fund liquidation has been the name of the game for the past month as we approach year-end.
In fact exactly a month ago today front month CBOT corn was USD7.60 and wheat was USD8.76, meaning that corn has fallen 9% and wheat nearly 12% since Nov 28. Soybeans are down a more modest 2% during this time.
In the same period London wheat is down almost GBP20/tonne, or nearly 9%, whilst Paris wheat has declined by just over EUR26/tonne, or 9.4%.
The big question now is how will things shape up once we are past year-end? And will Obama pull another 11th hour rabbit out of the hat to avoid the US toppling over the edge of the fiscal cliff?
What we do know is that the Index Funds will be rebalancing their exposure to certain commodities in January. There's an interesting article on this here.
The upshot being that some funds are including soymeal and Kansas wheat for the first time. To "make room" for these commodities funds are expected to be net sellers of CBOT corn, soybeans and wheat, whilst buying CBOT soymeal and KCBT wheat.
Without a deal on the fiscal cliff AND fund selling in CBOT corn, soybeans and wheat prices could be under pressure early in January regardless of market fundamentals. Don't you just love the funds?
In other news today, MDA CropCast have left their Argentine wheat production forecast unchanged at 9.98 MMT, saying that "rains are now easing across the region,
and should remain quite limited through next week. This will allow wetness to ease a bit, and also allow wheat harvesting to finally improve a bit. The drier weather will be most beneficial in central and eastern areas."
China's Zhengzhou Commodity Exchange has started trading rapeseed and rapemeal futures today, and they've got off to a bit of a flyer with Sep 13 rapeseed closing 4.3% higher at 5,215 yuan (USD828/tonne) and May 13 rapemeal up 2.1% at 2,409 yuan (USD382/tonne).
China's Ministry of Commerce estimate the country's Dec rapeseed imports at 418,500 MT versus their previous estimate of 121,100 MT.
Chicago Eases On More Fund Selling
27/12/12 -- Soycomplex: Jan 13 Soybeans closed at USD14.18 3/4, down 5 3/4 cents; Mar 13 Soybeans closed at USD14.14, down 4 1/2 cents; Jan 13 Soybean Meal closed at USD429.80, down USD1.50; Jan 13 Soybean Oil closed at 48.29, unchanged. Year end liquidation got the better of an attempt at consolidating Boxing Day losses, with funds net sellers of an estimated 2,000 soybean contracts on the day. Strong demand remains from China, despite last week's cancellations. The USDA reported fresh soybean sales of 115 TMT to China and 108 TMT to unknown destinations, both for 2012/13 shipment on Wednesday. The Ministry of Commerce estimate that they will now import 6.31 MMT of soybeans in December. Oil World pegged China's 2012/13 bean imports at 61.7 MMT versus 59.2 MMT in 2011/12. They also placed Chinese Oct12–Mar13 soybean imports from the US at 19.8 MMT versus 16.6 MMT in 2011/12. Imports from Brazil during the same period are seen falling to 2.2 MMT from 6.7 MMT in 2011/12. Similarly imports from Argentina are forecast to drop to 1.7 MMT from 4.3 MMT in 2011/12. Michael Cordonnier has cut his Argentine soybean crop estimate by 1 MMT to 54.0 MMT on continued wetness. He left his Brazilian soybean production forecast unchanged at 80 MMT. Estimates for tomorrow's weekly export sales report for beans are 400-600,000 MT.
Corn: Mar 13 Corn closed at USD6.91 1/2, down 1 3/4 cents; May 13 Corn closed at USD6.94 1/2, down 2 cents. As with beans an early attempt to rally failed as funds dumped a further 2,000 lots of their length onto the market. Michael Cordonnier forecast the Argentine corn crop at 22.5 MMT, unchanged from his previous estimate. MDA CropCast cut their projections by 2.1 MMT from last week to 23.1 MMT due to "acreage reductions and earlier significant wetness." Both estimates are well below the USDA's current forecast of 27.5 MMT. Cordonnier pegged Brazilian corn production unchanged from last time at 70.0 MMT, the same as the USDA, whilst MDA CropCast go for 70.8 MMT. Indonesia's Ag Ministry forecast corn production there in 2013 at 19.831 MMT versus 18.962 MMT this year. The weekly US ethanol grind numbers are out tomorrow, production last week was 822,000 barrels per day, around the volume required to hit USDA targets for the season. Estimates for tomorrow's weekly export sales report are just 100-300 TMT.
Wheat: Mar 13 CBOT Wheat closed at USD7.72 1/4, down 2 1/4 cents; Mar 13 KCBT Wheat closed at USD8.23 1/4, down 1 1/4 cents; Mar 13 MGEX Wheat closed at USD8.64 3/4, down 4 1/4 cents. Wheat futures also attempted and failed to maintain an early rally. India are said to be offering a further 150 TMT of their surplus wheat stocks for export. Bangladesh bought 50 TMT of optional origin wheat in a tender for Dec-Jan shipment. Trade estimates for tomorrow's weekly export sales report are 500-700 TMT. Last week's total was 671,100 MT, although seasonal factors could easily see this week's total fall on the low side of expectations. Nevertheless, the trade is expecting a better performance on the export front from US wheat once we get into the New Year. Reuters were reporting temperatures in northwest Kansas hard red winter wheat areas as low as single digits Fahrenheit (minus 12 to minus 17 Celsius) on Wednesday morning.
EU Wheat Declines, Following US Lead, As Year-End Approaches
For front month London wheat this was a 2-month closing low, whilst for Paris wheat it was the lowest on more than 5-months.
The markets were playing catch-up today with losses in Chicago from Boxing Day night generated by fund selling and year-end positioning. Paris wheat was under added pressure from the euro rising to it's best levels against the US dollar since April. Remember though that the markets are always pretty thin at this time of year, so price movements can be exaggerated.
Defra have confirmed the UK wheat crop in 2012 at 13.261 MMT, a 13% reduction on last year with yields down 14% to 6.7 MT/ha. The barley harvest was virtually unchanged from last year at 5.522 MMT, although yields were down 2.7% to 5.5 MT/ha. The OSR harvest was confirmed at 2.557 MMT, 7.3% down on last year with yields falling 13.6% to 3.4 MT/ha.
More heavy rain and widespread flooding over the Christmas period has the UK winter wheat crop for the 2013 harvest already looking pretty shoddy. Trade estimates over how much of the intended acreage had been planted are quite varied. If we use a mean of around 77.5% and yields similar to this year's disappointing result then we'd end up with a UK winter wheat crop of only 10.4 MMT in 2013. A return to the 7.7 MT/ha average yield of 2011 would still only return a crop of 11.9 MMT next year.
There will undoubtedly be an increase in spring wheat sowing, but even so the area planted is still likely to be relatively insignificant.
Of course many would argue that less than 77.5% of the intended 2 million hectares has been planted, and in addition that we will be lucky to get to 6.7 MT/ha next year - even if that was the lowest yield since 1988 - given the current state of the crop in the field.
Who knows what 2013 will throw at us, but we do know that there is a very long way to go yet. Whilst this degree of uncertainty remains supportive, along with the threat of at least the smallest wheat crop since 2001's 11.58 MMT, that doesn't necessarily mean that for UK wheat the only way is up.
The cost of imports will decide what, if any, upside there is for UK wheat prices in 2013 and many pundits are forecasting significantly lower world wheat prices in the second half of the year.
Chicago wheat futures meanwhile slumped to new 6-month lows overnight on continued fund selling on a combination of year-end related activity and continued concerns on whether an 11th hour deal can be done to avert the US tumbling over the edge of the rapidly approaching "fiscal cliff".
Whether fund money continues to exit the grains sector, or returns with renewed vigour in the New Year, may hold the key to price direction in Q1 of 2013.
Market Update
CBOT Soybeans: Closed 9 cents higher Christmas Eve, but lost those gains and more to end Boxing Day 15 1/4 cents lower. Weekly export inspections of 44.486 million bushels released Boxing Day were pretty respectable and up 3.396 on the previous week. In addition the USDA reported fresh soybean sales of 115 TMT to China and 108 TMT to unknown destinations, both for 2012/13 shipment on Wednesday.
CBOT Corn: Finished Christmas Eve 2 1/2 cents higher, but fell sharply on Boxing Day closing 11 1/4 cents lower. Weekly export inspections for corn were modest once again at 13.475 million bushels. CBOT corn now at it's lowest levels in almost 6 months.
CBOT Wheat: Was 1 3/4 cents firmer on Christmas Eve, but shed 11 1/4 cents on Boxing Day. Export inspections were fairly modest at 15.128 million bushels. CBOT wheat now at it's lowest levels in almost 6 months.
CBOT Soymeal: Gained USD1.00 on Christmas Eve, lost USD3.50 on Boxing Day.
CBOT Soyoil: Added 23 points on Christmas Eve and fell 65 points on Boxing Day.
London Wheat: Unchanged Christmas Eve, market closed Boxing Day.
Paris Wheat: Unchanged on Christmas Eve and EUR1.00/tonne higher on Boxing Day.
Paris Corn: Unchanged on both Christmas Eve and Boxing Day
Paris Rapeseed: Down EUR0.25/tonne on Christmas Eve and unchanged on Boxing Day.
Further fund liquidation as we approach year-end remains the over-riding theme. China appear to be coming back to buy the beans they cancelled pre-Christmas at these lower levels, with further purchases this week. The Ministry of Commerce estimate that they will now import 6.31 MMT of soybeans in December versus previous estimate of 5.0 MMT - I can't find official clarification of this right now, but I think that this would be a record monthly volume.
Oil World estimate China's 2012/13 soybean imports at a record 61.7 MMT versus 59.2 MMT in 2011/12.
There's now talk of a strike by the longshoreman’s union at most of the US Pacific Northwest ports.
Michael Cordonnier has cut his Argentine soybean crop estimate by 1 MMT to 54.0 MMT on continued wetness. He also says however that the very first early-maturing soybeans have been harvested in Brazil's Mato Grosso state this week.
Safras e Mercado are said to have raised their Brazilian soybean production estimate to a record 84.3 MMT versus the USDA's 81.0 MMT and up almost 27% on the 66.5 MMT harvested in 2011/12.
Reuters are reporting temperatures in northwest Kansas hard red winter wheat areas as low as single digits Fahrenheit (minus 12 to minus 17 Celsius) on Wednesday morning. Let's hope that they have a protective snow covering in those areas.
India are offering a further 150 TMT of their surplus wheat stocks for export. Bangladesh have bought 50 TMT of optional origin wheat in a tender
