Nogger's Blog

24/07/13 -- Soycomplex: Extreme volatility continues with both front month beans and meal closing down the daily limit. Meal, which was limit up on Monday and traded between USD18 higher and USD18 lower yesterday, now closes limit down! Meanwhile the Aug 13/Nov 13 soybean spread, which was as wide as USD2.31 3/4 on Monday night has narrowed by almost a dollar in just two days to end at USD1.35 3/4 this evening. There are clearly too many front end spec longs that don't want to get caught having to take delivery with first notice day just a week away. With such a wide disparity between old and new crop months something had to give I suppose, but don't rule out further volatility and more erratic behaviour in the run up to the expiry of the Aug 13 contracts three weeks from now. There were over 58,000 contracts offered over at limit down in the August meal contract, with synthetic trade around USD25-30/tonne below the limit down close of USD467.80, so we can expect sharply lower trade again in the morning when the Globex market opens. Rumour continues that the Chinese government may release 3.0 MMT of beans from reserves. The USDA estimate for Chinese soybean imports of a record 69 MMT in 2013/14 looks too ambitious at the moment. Trade estimates for tomorrow's weekly export sales report for beans are 300-650 TMT. Aug 13 Soybeans closed at USD13.92 1/2, down 70 cents; Nov 13 Soybeans closed at USD12.56 3/4, down 3 1/2 cents; Aug 13 Soybean Meal closed at USD467.80, down USD20.00; Aug 13 Soybean Oil closed at 44.26, down 52 points - another fresh lifetime contract low and the worst close for a front month since October 2010.

Corn: As with soybeans the largest losses came in the front month, narrowing the old crop/new crop spread. The Sep 13/Dec 13 differential, which was 42 3/4 cents on Monday night, is now down to 28 cents tonight. The US weather remains non threatening with the corn crop in the middle of the key pollination phase. The trade is now starting to think that just one more month of relatively benign weather and this potentially monster crop could be home and hosed. "Very heavy rainfall is predicted in the updated GFS model targeting the driest corn states Nebraska and southern Iowa, 1.5 to 2.5 inches. Strong thunderstorms would be fuelled by a moist air stream from tropical Mexico, the southwest monsoon. Very cool temperatures would continue several more days, considered beneficial conserving available soil moisture. Corn especially needs rainfall in the key pollination period, which is now underway," said Martell Crop Projections. The weekly ethanol grind offered no support whatsoever, with production down from 881,000 barrels/day two weeks ago, to 876,000 bpd last week and now 853,000 bpd this time round. Taiwan bought a combo of 23 TMT of US old crop corn and 12 TMT of US old crop beans for Aug Sept shipment to fill a little gap until new crop comes along. South Korea bought 120 TMT of optional origin corn for Dec/Jan shipment at around USD236-237/tonne C&F. South Korea also bought 69 TMT of South American corn for Jan shipment. Trade estimates for tomorrow's weekly export sales report for corn are 600-950 TMT. Last week's sales were 152,900 MT of old crop and an impressive 1,590,800 MT of new crop. Sep 13 Corn closed at USD5.08 1/4, down 14 1/4 cents; Dec 13 Corn closed at USD4.80 1/4, down 5 1/4 cents.

Wheat: The wheat market was only modestly lower, and now seems to be attempting to re-establish the historic premium over corn that we would normally expect. At tonight's closing levels Sep 13 CBOT wheat is a premium of USD1.45 over Sep 13 corn. As recently as last Friday the difference was only USD1.20 1/2. Potentially much more demand from China than was envisaged a couple of months ago, and the re-emergence of Egypt back into the market are adding support to wheat. There's now talk that China may need to buy 10-15 MMT of wheat in 2013/14, just last month the USDA only had that number down as being 3.5 MMT. Egypt were back in the market tendering for wheat today, buying 240 TMT of Russian, Ukraine and Romanian origin material to add to the 300 TMT of similar origin wheat that they bought last week. It might not be US wheat that they are buying, but it mops up some of the cheaper Black Sea offers that are around at least. Algeria have also been active, buying "at least" 400 TMT of optional origin wheat today to add to the 575 TMT that they were said to have bought earlier in the month. Iraq are tendering for 50 TMT of US, Canadian, or Australian wheat. Meanwhile the jungle drums are starting to suggest that Russia's 2013 wheat harvest, currently officially progressing well, is about to run into trouble once the combines get stuck into the spring planted crop (which typically accounts for around 40% of national production). Trade estimates for tomorrow's weekly export sales report are 400-600 TMT versus 996,600 MT last week. The trade will be looking to see if China features there. Sep 13 CBOT Wheat closed at USD6.53 1/4, down 1/2 cent; Sep 13 KCBT Wheat closed at USD6.97 1/4, down 1 3/4 cents; Sep 13 MGEX Wheat closed at USD7.43 1/2, down 1/2 cent.