Nogger's Blog

23/08/13 -- Soycomplex: Beans and meal closed sharply higher on a renewed forecast for hot and generally dry weather to dominate the US Midwest in the week ahead. "Midwest temperatures are trending hotter. Highs in the mid 90s F are predicted Monday in the Upper Midwest, when a ridge of high pressure builds up over the central United States. Minneapolis would reach 97 F Sunday continuing with mid 90s F the rest of the week. Mid 90s F are also in the new forecast for Nebraska, Iowa and Illinois," said Martell Crop Projections. The trade seems to believe that the US soybean crop is more at threat from these conditions than the corn crop is. The final results from the Pro Farmer crop tour would appear to go along with this, with pod counts in the top three US soybean producing states all down versus the 3-year average. After that, three of the next top four highest producing soybean states are only showing modest gains versus the 3-year average, with only Ohio showing anything like a decent gain where pod counts are up 10% versus the 3-year average. When we consider that this average also includes last year's poor result then it this year's late planted, late maturing crop faces an uphill struggle to attain anything like a "normal" yield. The market is particularly concerned about that given that the USDA slashed potential 2013/14 US soybean ending stocks from 295 million bushels to 220 million earlier this month. Any further cuts to production would tighten this carryout further, unless the USDA reduce their projected 2013/14 exports that is, but these are already running well ahead or normal for this time of year - a fraction under 50% of the USDA's target for a season that hasn't even started yet! The normal volume forward sold at this point in time would be 31.5%. A decline of one bushel/acre from the USDA's current yield estimate of 42.6 bu/acre would take 2013/14 ending stocks down to 143 million bushels without any adjustments to demand, that isn't much higher than the 125 million that the USDA insist will be left over at the end of 2012/13, a number tight enough to see prices peak above USD16/bu only last month. Pro Farmer came up with a final US soybean yield in the range of 41.0-42.6 bu/acre and estimated the harvested area at 800,000 acres below the USDA's August number (remember the news that came out after the Aug USDA report that 1.6 million acres of intended US soybean area never got planted this year?), with production at 3.158 billion bushels versus the USDA's 3.255 billion. The latest Commitment of Traders report shows managed money more than doubling their net soybean long in the week through to Tuesday night to just shy of 100,000 contracts. Sep 13 Soybeans closed at USD13.65 1/4, up 43 1/4 cents; Nov 13 Soybeans closed at USD13.28, up 41 1/4 cents; Sep 13 Soybean Meal closed at USD433.20, up USD19.90; Sep 13 Soybean Oil closed at 42.64, up 21 points. For the week front month beans gained 82 cents and meal USD24.40, whilst oil was down 17 points versus last Friday.

Corn: Corn got some support from the revised US weather outlook, although the trade seem to think that this is more of an issue for beans. "Prolonged cool weather has slowed corn development in Iowa (the leading US corn state) and across the Upper Midwest. Cedar Rapids, Iowa, was 5.4 F below normal the past 30 days, setting back corn development. Only 24% of Iowa corn had reached the 'dough' stage by August 18th, the second slowest progress in 28 years. Delayed planting dates and cool summer temperatures are responsible for the slow development. Producers are worried about potential freeze damage in the fall. The forecast is hotter with intense heat predicted beginning Sunday and continuing through next week. This is a mixed blessing spurring corn development, but also worsening moisture stress on dry farms," said Martell Crop Projections. The Pro Farmer crop tour found much better potential corn yields this year than last, with Iowa coming in 25% up on 2012 and 9% above the 3-year average. Indeed, all the states in the survey had yields up on last year and the 3-year average, with SD showing the biggest improvement, up 118% versus 2012 and 35% above the 3-year average. The bottom line was surprisingly low then, showing an estimated US corn yield of 154.1 bu/acre, which is 0.3 bu/acre below than the USDA's August forecast. Final production was estimated at 13.46 billion bushels versus 13.763 billion from the USDA. Part of the reason that the production number was so far below the USDA was the Pro Farmer decision to peg US harvested acres at 1.8 million below the USDA's estimate - again this could be down the 3.4 million acres of "prevent plant" US corn, including 613,257 acres in the top producing state of Iowa, that was revealed subsequently be the USDA's Farm Service Administration. I guess that now we go back to trading the weather. Certainly cool temperatures in July and August don't seem detrimental to corn yields. Historical data shows that the record yields achieved in 2009 followed a July that was the coolest on records going back to 1960 along with the 7th coolest August. The 04/05 crop year had the 6th coolest July and the 2nd coolest August which resulted in a yield 13.3% above trend and is the second highest on record. In other news, the Buenos Aires Grains Exchange said that the Argentine corn harvest is very nearly complete at 99.3% done. They estimated Argentine production at only 24.8 MMT versus the Argentine Ag Ministry's estimate of 32.1 MMT. The weekly Commitment of Traders report shows managed money decreasing their net short position in corn by 31,443 contracts to 91,778 contracts for the week through to Tuesday night. Sep 13 Corn closed at USD4.95 1/2, up 8 cents; Dec 13 Corn closed at USD4.70, up 5 1/2 cents. For the week that puts Sep 13 corn up 18 3/4 cents, with Dec 13 up 6 1/2 cents.

Wheat: Wheat was mixed, up a little in Chicago and Kansas and down in Minneapolis. The latter continues to give up some of its premium over the other two following the Stats Canada news from earlier in the week that Canadian spring wheat production will rise 17% this year. Dec 13 MGEX wheat has subsequently set a new contract low on the back of this news and spring wheat now trades at levels not seen since May 2012. Fresh news is generally lacking for wheat and it remains a follower of corn. Saudi Arabia issued an tender to purchase 660 TMT of hard wheat over the weekend, with the results expected on Monday. German wheat should be in with a good shout of winning at least some of that business. Bangladesh are also tendering for 50 TMT of optional origin wheat for Sep/Oct shipment. Ukraine could be the favourites for that order. South Korea are said to be buying corn instead of feed wheat due to the recent decline in corn prices. China continues to be absent from the market and US wheat doesn’t price up into the Middle East and North Africa. Russia said that it expects to export 15 MMT of wheat in 2013/14, an increase of 36% versus last season. Their wheat harvest is now past the halfway mark, producing 36.8 MMT so far. FranceAgriMer said that their wheat and barley harvest is just about done. There's some talk of wheat on South Australia's upper Eyre Peninsula being hit by frost. Brazil's wheat crop certainly does seem to have been badly affected by frost, and they have been active buyers of US wheat of late. Argentina are sold out until new crop comes along at the end of the year. The Buenos Aires Grains Exchange said that winter wheat planting in Argentina is now complete. They have the planted area at 3.9 million hectares, similar to the Ag Ministry's forecast. They said that winter barley planting is also complete, with the area at 1.27 million ha, down 19.1% from a year ago. The latest Commitment of Traders report shows managed money decreasing their net short position in Chicago wheat by 1,055 contracts to 42,941 contracts. Further short-covering on any subsequent dips could be a feature going forward. Chartists say that there is solid resistance in Sep 13 Chicago wheat at around USD6.63 and that USD6.19 is the next downside target. Strong resistance for Chicago December wheat is holding at USD6.57 1/2. Sep 13 CBOT Wheat closed at USD6.34 1/2, up 4 cents; Sep 13 KCBT Wheat closed at USD6.95 1/2, up 1 1/4 cents; Sep 13 MGEX Wheat closed at USD7.16 1/4, down 3 cents. For the week that puts front month Chicago wheat 3 1/2 cents higher, with Kansas 2 3/4 cents weaker and Minneapolis down 21 cents.