Nogger's Blog

25/09/13 -- Soycomplex: Beans closed higher in what looks like positioning ahead of Monday's quarterly stocks report from the USDA, also garnering support from a sharply higher wheat market. The USDA announced the sale of 140 TMT of US beans sold to unknown for 2013/14 delivery. Sales commitments for the new season are already well ahead of schedule. Tomorrow's weekly export sales are expected to be around 2.5-2.8 MMT, given that they will include last week's large 1.93 MMT sale to China. Yet sales already only need to be 285 TMT to reach the USDA's target for the 2013/14 season. On Monday the USDA will report on US soybean stocks as at the end of 2012/13. The average trade guess for these is 124 million bushels, from within a range of estimates of 106-155 million and 169 million a year ago. The USDA have steadfastly stuck by their figure of 125 million for some time, so there is perhaps little reason to expect them to change now. These are the lowest in 9 years and the second tightest since 1977. South America waits for rain before planting gets going in earnest. Rain is in the forecast for southern Brazil, but Mato Grosso remains dry and also hot, with temperatures topping 100 F. Bizarrely there's frost in the forecast for Argentina. Lanworth today raised their world soybean production estimate in 2013/14 from 281 MMT to a new record 284 MMT and versus the USDA's current 281.66 MMT. They see production in Brazil and Argentina both at record levels. In Brazil they go for 88.3 MMT, up 7.7% on 2012/13. In Argentina they see the crop at 56.9 MMT, up 15.2% versus 2012/13. Both estimates are higher than the current forecasts from the USDA - 88.0 MMT and 53.5 MMT respectively - the latter considerably so. The Argentine Ag Minister would only say that he saw production there at "above 50 MMT" in 2013/14. Record canola yields are being seen in Saskatchewan, prompting some analysts to say that Canada’s 2013 canola crop could be as much as 17.0 MMT versus the USDA's current estimate of 15.15 MMT and 13.87 MMT last year. Nov 13 Soybeans closed at USD13.21 3/4, up 9 1/4 cents; Jan 14 Soybeans closed at USD13.24, up 9 1/4 cents; Oct 13 Soybean Meal closed at USD418.60, up USD4.50; Oct 13 Soybean Oil closed at 41.82, down 2 points.

Corn: The corn market was dragged higher by wheat, there may also have been some short-covering ahead of Monday's quarterly stocks report from the USDA after prices dipped to their lowest levels for a front month in 3 years this week. USD4.50/bushel seems to be a pivotal level. The trade is expecting the USDA to peg US 2012/13 corn ending stocks at around 680 million bushels on Monday, from within a range of estimates of 552-750 million and versus 989 million a year previously. These would be a 17 year low and the second tightest since 1976. There's a school of thought that the report could contain a bullish surprise for corn. Firstly, there wasn't much new crop corn around on September 1 to potentially swell these stocks, unlike last year. Secondly, some suggest that US corn for feed usage in the Q4 of 2012/13 may have been greater than the trade generally thinks. This could make the carryover into 2013/14 even smaller. Time will tell. Lanworth are bullish on production prospects for 2013/14, predicting a global corn crop of 949 MMT, up 7 MMT from their previous forecast, although below the USDA's current estimate of 956.67 MMT. "World corn production will easily exceed the 2011/12 record. World ending stocks could be among the highest since 2001/02," they said. They have corn production in Brazil at 75.9 MMT and in Argentina at 28.2 MMT, versus 72 MMT and 26 MMT respectively from the USDA. The Argentine Ag Minister said that his country's corn crop would be "at least" 30 MMT this year. Corn harvesting in Russia and Ukraine is only making slow progress, dogged by heavy rain. There's talk of some production and quality downgrades there. There's talk that private Chinese importers are seeking new crop US corn for Jan shipment. The US weather is beneficial for harvesting over the next two weeks, as rain is limited. There are no damaging cold temperatures in the forecast, most states are now said to be past the risk of yield loss. Better than expected continues to be the recurring theme on yields so far. Trade forecasts for tomorrow's weekly export sales are 400-700 TMT. Sales of 354 TMT are all that is needed to match USDA targets. Weekly US ethanol production fell 6,000 barrels/day to 832,000 bpd. Dec 13 Corn closed at USD4.54 3/4, up 6 cents; Mar 14 Corn closed at USD4.67 1/4, up 5 3/4 cents.

Wheat: Wheat rose on short-covering as the trade got all excited over talk of frost in Argentina. The idea is that any trouble with Argentina's crop could keep Brazil in the import market a while longer yet. They have been active buyers of US wheat over the past 6-8 weeks, although there's talk that they have been buying Canadian and Polish wheat in the past week. There's talk that Brazil was seeking US HRW wheat for Nov/Dec shipment yesterday. The trade is also thinking that China will soon be back in the market for wheat, and that US origin is well placed to service that need. Reuters today reported that domestic Chinese wheat prices are at all-time highs, which could stimulate imports further. The size of the fund short in CBOT wheat - 87,420 contracts as of last Friday's COT report - is approaching record levels which leaves the market vulnerable to an upside correction. We also have the fact that seasonally CBOT wheat rallies at this time of year once the northern hemisphere harvest is more or less done. Lanworth left their 2013/14 world wheat production forecast unchanged at 704 MMT - a record although not as high as the USDA's forecast of almost 709 MMT. Russia is making slow progress with it's wheat harvest, which is only around 75% complete so far at 46.3 MMT. Bangladesh cancelled a tender for 50 TMT of optional origin wheat for Oct/Nov shipment due to high prices. India are looking to sell wheat but their price ideas are too high. They are likely sell into any rallies though, capping upside potential, although they are not everybody's favoured supplier. Canadian wheat production is expected to be bumper this year, although protein levels are down at 12.4-13.1% in spring wheat as opposed to 13.1-14.2% last year. For Monday's report the USDA is expected to give us Sep 1 US wheat stocks of 1.913 billion bushels, from within a range of estimates of 1.819-1.999 billion and 2.269 billion a year ago. They will also report on US wheat production, with an average guess for all wheat at 2.108 billion bushels versus 2.114 billion in August and 2.269 billion last year. Trade estimates for tomorrow's weekly export sales report are 550-850 TMT. Sales of only 344 TMT are required to hit the USDA target for the season. Dec 13 CBOT Wheat closed at USD6.70 1/2, up 12 1/4 cents; Dec 13 KCBT Wheat closed at USD7.18, up 13 1/4 cents; Dec 13 MGEX Wheat closed at USD7.18 1/4, up 13 1/4 cents.