Nogger's Blog

30/09/13 -- Soycomplex: Having steadfastly stood by a 2012/13 US soybean carryout estimate of 125 million bushels for months, the USDA decided to go one better and increase that number today, coming out with a new figure of 141 million versus the 124 million average trade guess. They managed to do that courtesy of an increase in production last year, thanks to higher harvested acres and a 0.2 bu/acre hike in average yields. That takes the 2012 US soybean crop to 3.034 billion bushels versus the previous estimate of 3.015 billion. That was enough to panic the funds into dumping an estimated further 12,000 lots of their length in beans. Friday's Commitment of Traders report showed them cutting their long position by more than 17,000 lots for the week through to last Tuesday night. Adding to the bearish tone were weekly export inspections of 14.288 million bushels falling short of the expected 15-20 million. The marketing year to date total is now 35.911 million bushels, less than half the 76.958 million accrued this time last year. After the close the USDA raised soybean good/excellent crop ratings 3 points to 53%, far higher than 35% a year ago, when the crop we are now told yielded 39.8 bu/acre. They have the US soybean harvest at 11% done versus 4% a week ago and what I believe is 20% normally. I say that as whilst the USDA website appears to be fine, the NASS website which carried copies of he weekly crop progress reports currently consists of a holding page saying "Due to the lapse in federal government funding, this website is not available. We sincerely regret this inconvenience." It appears that no eleventh hour face-saving budget deal has got done this time, which could weaken the dollar further, supporting the US grains sector. In other news, Abiove estimated Brazil’s 2013/14 soybean crop at a record 86.0 MMT versus the current 2012/13 record crop of 81.6 MMT. They pegged Brazil’s 2013/14 soybean exports at 44.0 MMT versus their 2012/13 estimate of 41.5 MMT. The improved crop ratings and repeated reports of "better than expected" yields may be enough to encourage some follow-through selling in the morning. Note that the seasonal chart indicates the soybean market frequently, but not always, puts in a mid-harvest low in October - that low often comes in the first week of October. Tonight's Nov 13 Soybean close of USD12.82 3/4, down 37 cents, was the lowest for a front month since February 2012; Jan 14 Soybeans closed at USD12.85, down 36 1/2 cents; Oct 13 Soybean Meal closed at USD409.90, down USD10.00; Oct 13 Soybean Oil closed at 40.83, down 68 points.

Corn: The corn market also took a nose dive as the USDA raised 2012/13 US ending stocks at 824 million bushels versus the average trade guess of 681 million and 661 million in the September WASDE report. This was far higher than anticipated and above even the highest trade estimate. So, despite being reported as now holding a record short in CBOT corn in Friday's Commitment of Traders report, funds were given credit for selling a further net 9,000 corn contracts on the day. The magnitude of this short does leave the market highly vulnerable to a sharp upside correction at some point, although the seasonal chart indicates a bit more downside yet for corn. Weekly export inspections for corn came in at 21.192 million bushels, in line with expectations. That takes the 2013/14 marketing year to date total to 68.252 million bushels versus 82.653 million this time last year. After the close the UDSA left good/excellent crop ratings unchanged from last week at 55%. Maturity has improved to 63% compared to the 5 year average of 70%, even if it does lag 93% at this time last year. Harvesting is 12% done versus the 5 year average of 23% and a bit less than the 15% that the trade was expecting. This is a record crop that the US grower is trying to harvest so progress is slow. Note also that the 5 year average does of course include last year's exceptionally early harvest when half the crop was cut by now. US growers will be pleased, in more ways than one, that they aren't in the FSU. There are no cold weather threats in the forecast for the Midwest and good US harvest weather is generally in the forecast for the next 5-10 days. As with beans, early yields keep getting reported back as being better than anticipated. Russia and Ukraine on the other hand continue to make very slow progress with their corn harvests. Russia is 13.5% complete at 1.6 MMT, and Ukraine 11% done at 2.77 MMT. The Ukraine Ag Ministry said that they'd exported 5.7 MMT of grains in 2013/14 so far, of which only 640 TMT is corn as they await the new harvest. Dec 13 set a new contract low, and closed at the lowest level for a front month in 3 years. Dec 13 Corn closed at USD4.41 1/2, down 12 1/2 cents; Mar 14 Corn closed at USD4.54 1/2, down 12 cents.

Wheat: Wheat closed mixed across the three exchanges. The USDA pegged the US all wheat crop at 2.128 bullion bushels, up 20 million from last month and above the average trade guess of 2.114 billion. For Sep 1 US stocks they came out with 1.855 billion bushels, which was well below the average trade estimate of 1.913 billion, so the report contained both bullish and bearish elements. The lower stocks number appears to reflect increased wheat usage in feed earlier in the summer due to low domestic corn stocks, and also the strong early pace of US wheat exports. Friday's Commitment of Traders report shows funds reducing their net CBOT wheat short for the week through to Tuesday night, although their holding is still sizable. As with corn that leaves this market vulnerable to upside correction, but can wheat divorce itself from corn below USD4.50/bu? There are certainly legitimate concerns surrounding problems wrapping up the corn and oilseeds harvests in Russia and Ukraine. The same extremely wet weather conditions that are causing this problem have also brought winter grain plantings to a virtual standstill too. Russia has less than half it's planned winter crop area sown so far, and in Ukraine it's less than a quarter. The vast majority of what is waiting to go in is wheat. There's talk, but no official confirmation, that China has been buying Australian wheat for Jan/Mar shipment in the past few days. They are also said to be eyeing US spring wheat. South Korea millers bought 78,600 MT of US wheat for Jan/Feb shipment. They are also said to have bought 80 TMT of Australian wheat for Jan shipment. Australia will begin harvesting their crop very shortly. Brazilian millers are said to be continually shopping for wheat of both US, Canadian and European origin. Weekly US wheat export inspections came in at 32.973 million bushels, slightly below the expected 33-37 million. Even so, the marketing year to date total is now at 496.5 million bushels versus 355.8 million a year ago. The Canadian harvest is progressing well. In Alberta they are 71% done versus 62% this time last year and 48% for the 5 year average. Yields are said to be 20-25% up on last year. Dec 13 CBOT Wheat closed at USD6.78 1/2, down 4 1/2 cents - its first lower close in more than a week; Dec 13 KCBT Wheat closed at USD7.39 1/2, up 7 3/4 cents; Dec 13 MGEX Wheat closed at USD7.28 3/4, down 2 3/4 cents.