Nogger's Blog

06/09/13 -- Soycomplex: Aside from front month gains there wasn't a lot of change to end the week. Today was maybe more about a bit of book squaring ahead of the weekend, and the market will regroup on Sunday night/Monday morning and take in the latest revised weather forecasts. There may have been some unwinding of long new crop beans against short wheat/corn spreads going on today by the looks of things. Informa Economics trimmed their 2013 US soybean yield estimate from 42.6 bu/acre to 42.4 bu/acre, only 0.2 bu/acre less than the August USDA forecast. Informa are however frequently optimistic with their crop estimates. A Bloomberg survey came up with an average soybean yield of 41.2 bu/acre, which may be nearer the mark next week (the USDA are out on Thursday). Informa estimated the USDA pegging the US soybean crop at 3.239 billion bushels barely changed versus 3.255 billion last month. The average trade forecast in the Blomberg survey was predictably less than that at 3.134 billion. The range of trade estimates is still fairly wide, remember that Allendale earlier in the week pegged yields at only 39.0 bu/acre and production below 3 billion bushels, both less than last year's drought riddled crop. Macquarie yesterday estimated 2013 US soybean yields at 40.9 bu/acre, but said that if rains come within the next few weeks yields then they could finish up above 42.0 bu/acre. Another Bloomberg survey pegged world 2012/13 soybean stocks at an average 61.83 MMT versus the USDA's 62.22 MMT last month, with 2013/14 carryout at 71.07 MMT versus 72.27 MMT from the USDA in August. CNGOIC estimated China's August soybean imports at 6.0 MMT, but said that full season imports may fall below the USDA's current record large 69 MMT forecast. Once next Thursday is out of the way the market will also start to look at South America. Brazilian soybean plantings will begin the middle of this month. Many analysts see plantings 4-6% higher. FC Stone yesterday estimated Brazil’s 2013/14 soybean crop at a new record 87.5 MMT, up 7.4% on 81.5 MMT in 2012/13. The current soybean/corn price ratio heavily favours beans. Today's weekly export sales report showed old crop soybean sales of 5,100 MT and new crop sales of 844,100 MT versus trade expectations of 600-800 TMT. Meal sales were 57,800 MT of old crop and 84,300 MT of new crop against trade ideas of a combined 100-200 TMT. Sep 13 Soybeans closed at USD14.37, up 14 cents; Nov 13 Soybeans closed at USD13.67 3/4, up 1/4 cent: Sep 13 Soybean Meal closed at USD482.10, up USD2.60; Sep 13 Soybean Oil closed at 43.36, up 17 points. For the week Sep 13 beans added 13 cents, meal USD13.90 and oil fell 53 points. Macquarie said they are bearish on soybeans at current levels.

Corn: The corn market was mostly higher in pre-weekend activity, but still showed a net loss for the week. Weekly export sales were disappointing, showing net cancellations of 113,200 MT of old crop and new crop sales of only 328,300 MT versus trade expectations for combined sales of 400-650 TMT. Essentially the US looks set to have a record corn crop this year, the trade just can't decide exactly how big it's likely to be. Mid-session Informa Economics surprisingly said that they expect the USDA to raise their forecast for the 2013 US corn crop from the 13.763 billion bushels predicted last month to 14.013 billion. They see yields at 157.2 bu/acre versus the USDA's August estimate of 154.4 bu/acre. If they are right then that would put a very bearish spin on corn and we could go from current levels of just under USD5/bu closer to the USD4.50/bu range that many have been predicting. Some are now even looking at USD4.00-4.25/bu as being a realistic downside target. Informa are however, as previously noted, regularly towards the top end of the market with their production estimates. Indeed, in the same Bloomberg survey referred to above the highest trade estimate was 14 billion (and the lowest 13.36 billion although even that is still a record crop). The range of estimates on corn yields was 150-158 bu/acre however, so somebody out there is even more bullish on yield potential this year than Informa. The average trade guess on yields was 153.9 bu/acre, incidentally. There could still be some significant harvest pressure to come on the corn market if the reality of the situation turns out to be that we have production and yields close to some of the higher estimates in the market. And early US yields ARE said to be coming in higher than anticipated in southern US states. The FAO yesterday estimated the 2013/14 world corn crop at a record 983 MMT, substantially higher than the USDA's current forecast of 957 MMT, yet they only see usage 4 MMT more than the USDA at 934 MMT. The bottom line from the FAO is world ending stocks in 2013/14 26 MMT more than the USDA predicted last month at 176 MMT, 30% up on a year previous, with US carryout rising 146%. The Bloomberg survey came up with very little change for 2012/13 world corn ending stocks at 123.53 MMT versus the USDA's estimate of 123.11 MMT last month. For 2013/14 they came up with an average trade guess of 148.97 MMT, well below the FAO and just over 1 MMT less than the USDA said in August. South Korea NOFI bought 60 TMT of optional origin corn for Feb shipment. In their first estimate of the season FranceAgriMer forecast the 2013/14 French corn crop at 15.6 MMT, up 1.9% from a year ago, largely thanks to a sharp rise in planted area. Ukraine will soon begin harvesting its own record corn crop and domestic prices there are on the floor at little more than USD150/tonne, or less than GBP100/tonne. Sep 13 Corn closed at USD4.91 1/2, up 2 cents; Dec 13 Corn closed at USD4.68 1/4, up 7 1/4 cents. For the week Sep 13 corn was 3 1/2 cents lower and Dec 13 fell 13 3/4 cents.

Wheat: Wheat followed corn higher on the day, but closed lower on the week - in Chicago and Minneapolis at least. Weekly export sales were strong at 668,000 MT for 2013/14 plus a further 79,000 MT sold for 2014/15. Trade expectations were for sales of 450-600 TMT and sales of only 365,700 MT were needed to keep on track to hit the USDA target for the season. Brazil was back again as the largest buyer, where it has now featured for three of the past four weeks, booking 187,000 MT. Actual shipments of 954,800 MT were also robust, a marketing-year high in fact, and included 185,900 MT to China and 172,100 MT to Brazil. So demand for US wheat has been impressive so far in 2013/14, although a large chunk of the reason for that is this "new" demand from China and Brazil. How long that sticks around for remains to be seen. Brazil will be harvesting their own wheat crop soon, and many would expect US sales to dip off in the second half of the season given the premium that US wheat holds compared to other world origins. Egypt was back in the market again today, although on this occasion only booking one cargo of Romanian wheat at USD251/tonne FOB for Nov 1-10 shipment, well below US levels. Pakistan bought 25 TMT of Ukrainian wheat for October shipment. South Korea's Nofi cancelled a tender for 60 TMT of optional origin feed wheat due to high prices. Tunisia also cancelled a tender to import 42 TMT of durum wheat of optional origin for Oct shipment. French customs data shows that France exported 829 TMT of soft wheat in July, up 7% from a year ago as demand for EU wheat remains strong. EU soft wheat export licences issued so far this season stnad close to 4.5 MMT versus only 2.1 MMT this time a year ago. Germany head the table with 1.4 MMT of soft wheat export licenses attributable to them, with France in second at 1.25 MMT and Romania in third with a strong 910 TMT. US winter wheat growers in Kansas are starting to think about getting their 2014 winter wheat crop sown. Rain would be useful, although only the western half of the state is expected to see better than normal rainfall over the next couple of weeks, almost the entire state should get 0.75-1.5 inches of rain in the next fortnight. The Canadian wheat harvest is moving along briskly under sunny skies and unseasonably warmer than normal temperatures. Stats Canada today said that Jul 31 all wheat stocks were 5.06 MMT, down 14.7% on a year ago but comfortable enough with a bumper harvest expected for 2013/14. Canadian barley stocks were pegged at 0.98 MMT versus 1.2 MMT a year previously. Wheat harvesting in Russia and Kazakhstan is moving along slowly, with late season rains hampering progress. Russian wheat is almost 60% done, with only around 20% of the Kazakh wheat crop cut. IKAR suggest that a larger than normal proportion of this year's Russian wheat crop may only be of feed grade as rains have damaged quality. Sep 13 CBOT Wheat closed at USD6.35, up 7 3/4 cents; Sep 13 KCBT Wheat closed at USD7.08 1/2, up 7 1/4 cents: Sep 13 MGEX Wheat closed at USD7.07 3/4, up 1 3/4 cents. For the week that means that Chicago wheat lost 8 1/4 cents and Minneapolis 12 1/2 cents, whilst strong demand from Brazil saw Kansas wheat rise 7 cents.