The Morning Vibe
10/04/13 -- The overnight grains are generally a tad easier in quiet trade this morning, any pre-report positioning should be done by now.
Everybody is waiting on the USDA report. What spanners will they throw at us this time? There has to be a possibility that they will raise Brazilian corn production significantly more than the 0.4 MMT that the trade is expecting. The average guess of 72.9 MMT is after all well below CONAB's 77.45 MMT released just yesterday.
What will they do with US corn and soybean ending stocks is also of interest. The trade is expecting the US corn carryout to rise from 632 million bushels to an average guess of 824 million as export commitments lag the required level to hit the USDA target of 22.5 MMT for the season. For soybeans meanwhile the average trade estimate is to see 2012/13 ending stocks up from 125 million last month to 137 million. The 125 million figure appears to have been the line drawn in the sand by the USDA which they will not cross no matter what.
Unlike corn though, US exports are well ahead of schedule. The USDA has an export target for 2012/13 of 36.6 MMT, and almost 33 MMT of that has already been shipped. Outstanding sales unshipped so far are over 3 MMT, so we have a situation where total commitments are already in excess of 98% of this 36.6 MMT goal. Whilst they are maybe unlikely to cut below the existing 125 million carryout, they may not increase it either.
Chinese soybean demand is showing signs of waning though, with Q1 imports down 13.5% at 11.48 MMT. The USDA's forecast for China to import 63 MMT of soybeans in 2012/13 is starting to look a little high. Maybe that means that there is scope to reduce Brazil's export potential?
We've still had no confirmation from the USDA yet of any wheat sales to China. If they have been buying heavily last week how much is just demand switching to the US from Canada (as has been rumoured due to gluten problems in some Canadian cargoes), and how much is fresh interest? There are widespread reports of quality issues with China's own wheat crop last year, not to mention question marks over the size of their harvest.
The European grains have all opened weaker, with London wheat down GBP0.70-0.80/tonne, Paris wheat down EUR1.25-1.50/tonne and Paris corn down EUR0.75/tonne. Where they end up is of more importance, although today's USDA report doesn't come out until the markets are closing at 17.00 BST.
The US Plains are heading for freezing temperatures again, which could damage winter wheat on the Plains. Further north heavy snow could further delay spring plantings. There's been talk this week that last week's freeze may have caused more damage to winter wheat in Oklahoma than was previously though. It has, according to one analyst from Oklahoma State University who says "In my experience, most freeze events are overhyped, however this one was the real deal" in this report (with pics) Freeze injury update – worse than we thought.
The USDA attaché in Morocco forecasts that grain production there will rebound sharply this year from last year's drought hit crop. Total grain production is seen up by more than half to 7.9 MMT, with the wheat crop coming in at 5.9 MMT. The attaché has cut his forecast for Moroccan wheat imports this year from 4 MMT to 3.3 MMT and says that the North African nation will only import 2.7 MMT of wheat in 2013/14.
Before the USDA comes out this afternoon we have the weekly ethanol production data from the US Energy Dept. Last week's daily ethanol output of 807,000 barrels/day fell short once more of the near 840,000 bpd required to hit the USDA target for corn demand of 4.5 billion bushels from the sector.
