Nogger's Blog

12/09/13 -- Soycomplex: The USDA came out with a 2013 US soybean production estimate of 3.149 billion bushels, and pegged yields at 41.2 bu/acre, just about exactly in line with the average trade guess. The thing that got the market really excited was cutting 2013/14 US ending stocks to 150 million bushels. That was down sharply for a second month, and below trade expectations which on average were 165 million. This means that they USDA have now slashed 135 million bushels off their projected ending stocks for the coming season in the past two WASDE reports. That takes us from being in a comfortable surplus situation to potentially another year of tightness and price rationing. They left 2012/13 US ending stocks unchanged at 125 million bushels. Firstly, the trade thinks that this "line in the sand" number is too high, just that the USDA is too afraid or stubborn to admit it. That means that beginning stocks for 2013/14 are probably too high. Second, the trade thinks that final yields may well end up lower than today's 41.2 bu/acre estimate. Thirdly, the USDA didn't include any reduction in harvested acres for this year in today's report. The trade thinks that these will come in subsequent reports. All three of those add up to making 2013/14 ending stocks far tighter than today's 150 million bushels estimate suggests. Essentially, the USDA have transported us all back in time 12 months. The South American cavalry ARE coming to save the day, don't you worry your pretty little head about that. It's just that they haven't even started saddling the horses up yet. The USDA increased their forecast for Brazil's 2013/14 soybean crop from 85 MMT to a new record 88 MMT, which is in line with what other analysts have been saying recently, today's price hike might even encourage them to plant a little bit more than they've indicated thus far. Argentina's crop was left unchanged from last month at 53.5 MMT, not quite a record, but more than 4 MMT up on this year and again there's plenty of time for upward revisions based on higher plantings than currently anticipated. Paraguay's crop estimate was increased from 8.4 MMT to 9.0 MMT. It's just that none of this has even been planted yet. One subtle difference between this year and last is perhaps that at least Brazil and Argentina do have something left to sell of their 2012/13 crop, this time 12 months ago the "sold out" signs were already hanging in the shop windows down in South America. From a global demand perspective the USDA left China's import requirement in 2013/14 unchanged at a record 69 MMT, that could still be a bit too high. US exports were trimmed a little, as too were Argentina's. Brazil and Paraguay picked up the slack. Sep 13 Soybeans closed at USD14.42, up 36 3/4 cents; Nov 13 Soybeans finished at USD13.96, up 37 3/4 cents; Sep 13 Soybean Meal closed at USD480.90, up the daily USD20.00 limit; Sep 13 Soybean Oil closed at 42.69, up 4 points. All Sep 13 contracts go off the board tomorrow.

Corn: For corn this was a bearish report, with 2013 US production increased from last month's 13.763 billion bushels to 13.843 billion. The average trade guess was 13.646 billion. Yields were estimated at 155.3 bu/acre, up from 154.4 bu/acre last month and above the average trade estimate of 153.9 bu/acre. The upward revision for the US corn crop was balanced by downward adjustments for Argentina (down 1 MMT to 26 MMT), the EU, Canada and Serbia. World corn consumption in 2013/14 was revised over 2 MMT lower, taking ending stocks to 151.4 MMT, which is 1.2 MMT more than estimated last month and 28.8 MMT, or 23.5% up on carryout at the end of 2012/13. The USDA actually slightly increased US harvested acres in this report, which was a bearish surprise. The trade may think that some cuts to the harvested area will ultimately have to be made, and these may come somewhere down the line. IKAR estimated Russia's 2013 corn crop at 10.0 MMT, SovEcon said 9.7 MMT versus 8.2 MMT last year and 9.0 MMT from the USDA. IKAR pegged Russian corn exports at 3 MMT which is 1 MMT above today's USDA forecast. To date Russia has harvested just under 600 TMT of corn off less than 5% of the planted area. Strategie Grains cut their forecast for the EU-28 corn crop from 65.7 MMT to 64.0 MMT, although that is still an 11% rise on last year. Adverse summer weather conditions have taken the shine off yield potential in some of the key growing zones like France, Germany and central Europe. "The hot, generally dry conditions throughout the summer in these countries have caused water stress for the plants, and decreased yield potentials," they said. The USDA are a million tonnes higher than that. Argentina approved a further 3 MMT of 2012/13 corn for export. The harvest there is just about done and the Ministry are very bullish on production prospects with an estimate in excess of 32 MMT. That's far higher than the USDA's 25.5 MMT and outstrips their domestic requirement of 8.0 MMT very comfortably indeed. The USDA left their 2013/14 Brazilian corn production estimate unchanged from last month at 72.0 MMT, down 9 MMT on last year's record output. MDA CropCast forecast a Brazilian corn crop of 73.6 MMT next year. Weekly corn export inspections came in below expectations of 400-600 TMT at 332,600 MT. By the close about to expire Sep 13 Corn stood at USD4.79, down 3/4 cent, with Dec 13 Corn at USD4.66 1/4, down 6 1/4 cents. In the case of Sep 13 that was almost 13 cents off the lows of the day and Dec 13 ended 10 cents off the lows on spillover support from soybeans.

Wheat: The USDA report was always expected to be more about corn and soybeans than it was for wheat, and so it proved. CBOT wheat subsequently traded both sides on the day, but ultimately closed a little higher. The USDA raised their world wheat production estimate for 2013/14 from 705.4 MMT to a new all-time high of 708.9 MMT. Canada's wheat crop was raised 2 MMT from last month to 31.5 MMT, a near 16% increase on a year ago. The EU-28 wheat crop was raised 1.5 MMT to 142.9 MMT, a 7.4% increase on last year. Ukraine got a 0.5 MMT rise to 22.0 MMT, more than 39% up on last year. World wheat consumption was trimmed slightly to 706.5 MMT, taking global 2013/14 ending stocks to 176.3 MMT, up 3.3 MMT on last month and a very comfortable 25% stocks to use ratio. US wheat exports in 2013/14 were left unchanged at 30 MMT. Stiff competition from Canada and Europe was noted by increasing exports there by 0.5 MMT to 20.5 MMT and 1 MMT to 23.0 MMT respectively. Exports from Russia (17 MMT) and Ukrane (10 MMT) were left unchanged from last month although both offer significant increases on last season's performance (Russia 2012/13 exports were 11.3 MMT and Ukraine's 7.2 MMT). Egypt's imports were raised 0.5 MMT, also to 9.5 MMT, making them joint top with China in the world wheat import table. Iran's imports were raised 0.5 MMT to 4.5 MMT. French Analysts Strategie Grains raised their forecast for EU soft wheat production by 1.3 MMT to 135.5 MMT, 8% up on a year ago. Add in 8.1 MMT of durum wheat too and we have a European all wheat crop of 143.6 MMT, which is 700 TMT higher than today's USDA estimate. Weekly US wheat export sales came in at 543,900 MMT for shipment in 2013/14 and a further 2014/15 sale of 8,000 MT to Mexico (5,500 MT) and Malaysia (2,500 MT). These were in line with trade expectations were 400-650 TMT. Brazil was again a featured buyer for 2013/14, booking 210,800 MT. They've been the leading buyer of US wheat now for four out of the past five weeks, which is providing a welcome boost for US exports. Corn continues to offer a bearish bias to the wheat market, although the seasonal trend says that for wheat the lows should now be in. Sep 13 contrcts expire tomorrow. Sep 13 CBOT Wheat closed at USD6.41 3/4, up 6 3/4 cents; Sep 13 KCBT Wheat closed at USD7.06 3/4, down 1 1/2 cents; Sep 13 MGEX Wheat closed at USD7.05 1/2, unchanged.