Nogger's Blog

15/11/13 -- Soycomplex: Beans and meal slumped to their lowest levels since the release of the November WASDE report in what looks like a knee-jerk reaction to the EPA announcement that it is proposing to lower the biofuel blending requirement in 2014. Whilst the news would mainly affect demand for corn-based ethanol, it would also lower the target for so-called advanced biofuels (produced from soyoil) to 2.0 billion gallons from 2.51 billion. Another reason being cited for today's sharp decline is chatter that China may end up cancelling some US soybean purchases in Q1 and Q2 of 2014 as South American beans come online. There's a suggestion that some of these purchases are "protection" against possible shipping delays once a deluge of new crop beans hits the ports in Brazil and Argentina, and may ultimately not be needed. For now, nobody seems to be thinking about the possibility that record production in Brazil could also equal record queues at the ports, particularly in the run up to the 2014 World Cup. Today's weekly export sales report was a little disappointing, showing bean sales of 848,500 MT for 2013/14 (plus 60,600 MT for 2014/15) versus trade expectations of around 800 TMT to 1.2 MMT. These were the lowest since late September, but still a very respectable total which easily beat the level required to hit the USDA target for the season which is less than 100 TMT/week - such has been the ferocity of early demand. Meal sales of 283,200 MT for 2013/14 shipment fall into the same category, below the 400 TMT expected, but far higher than the 76,400 MT needed to achieve the USDA goal for the season. The UK was a buyer of 20,600 MT of this week's meal sales incidentally. Strong international demand for US beans and meal, is mirrored in the domestic market, with the NOPA crush for October coming in at a record high for the month - 157.1 million bushels - which was 3.1 million more than the market anticipated - and the expected crush of 154 million bushels would have been the largest monthly grind since 2009. I'm hearing China is expected to import around 14 MMT of soybeans in Nov and Dec combined, some 4 MMT more than in the same period a year ago, and most of that will be coming from the US. Informa estimated US soybean plantings for 2014 at 83.81 million acres, down slightly from the 83.9 million forecast previously, but almost 10% higher than the estimated 76.5 million planted this year. Meanwhile, the Argentine soybean crop is 21.8% planted, according to the Buenos Aires Grain Exchange. That's around the same level as a year ago, and up from 10.8% a week ago. Brazil is well advanced with planting an anticipated record soybean area. Jan 14 Soybeans closed at $12.80 1/2, down 33 cents; Mar 14 Soybeans closed at $12.65 3/4, down 31 3/4 cents; Dec 13 Soybean Meal closed at $410.50, down $14.10; Dec 13 Soybean Oil closed at 40.47, down 50 points. For the week that puts Jan 14 beans 15 1/2 cents lower, with meal down $11.80 and oil gaining 24 points.

Corn: The corn market shed around 4-6 cents, and has closed lower for the past four sessions since its little post-WASDE rally staged last Friday and this Monday. We are now only 1 1/2 cents away from being back to where we'd fallen to prior to that report - the more than 3 year low of $4.20 1/2 set a week last Thursday. The EPA announced that it wants to cut the biofuels mandate, established by 2007 law, that 18.15 billion gallons of fuel from renewable sources must be included in fuel sold in the US (mainly utilising corn-based ethanol) to 15.21 billion next year. As far as ethanol is concerned this would cut the annual blending requirement to around 12.7-13.2 billion gallons. The existing law currently mandates that 14.4 billion gallons be blended into gasoline in the US next year. Using an extraction rate of around 2.8 gallons/bushel this potentially cuts the minimum required level of corn used for ethanol production in 2014 from 5.143 billion bushels to between 4.535-4.714 billion. The proposal is still subject to a 60-day public comment period, and would still need to be approved by the White House. It should also be noted that these are the minimum required levels, there is nothing to prevent ethanol companies producing more, and thereby utilising a greater volume of corn. The CEO of ADM apparently recently noted that the industry produced 14 billion gallons back in 2011 even though the mandate was only 12.8 billion. Whichever way you look at it thought, the news isn't bullish, especially when viewed against the backdrop of a huge increase in US corn production to record levels in 2013. Weekly export sales for corn beat trade estimates of around 700 TMT to 1 MMT, coming in at 1.2 MMT. Mexico (301,400 MT) and Japan (226,800 MT) were the largest buyers, although China (115,700 MT) also featured. Reuters carried a story saying that Chinese corn prices on the Dalian Exchange are currently running at around a $150/tonne (circa 40%) premium to those in the US. That's up from around the $115-120/tonne level of a year ago, which should stimulate strong imports going forward, it said. The Russian corn harvest is 66% complete at 8.5 MMT. The Ukraine corn harvest is 83% done at 24.87 MMT. Both are in line for record output in 2013, and expected to increase plantings significantly again in 2014. Informa said that US growers will plant 91.55 million acres of corn in 2014, down slightly from their previous forecast of 91.7 million, and down almost 4% from the 95.3 million that was said to have been planted this year. The Buenos Aires Grain Exchange said that the Argentine corn crop is making slow progress at 42% planted versus 38.8% a week ago. Dec 13 Corn closed at $4.22, down 4 1/2 cents; Mar 14 Corn closed at $4.30 1/2, down 6 cents. For the week that means Dec 13 corn lost 4 3/4 cents.

Wheat: Wheat was lower on the day, and lower for the week on all three exchanges. For Minneapolis wheat this was the lowest close on a front month in more than 3 years. Weekly export sales were disappointing at 287,800 MT, versus the expected/hoped for 300-600 TMT, and there was no sign of Brazil in the line-up. "The drop-off in export demand has been severe over the last month and helps justify the recent price move," said Benson Quinn Commodities. The current price structure in the market clearly encourages US farmers to plant more wheat and soybeans for the 2014 harvest, and less corn. Informa increased their forecast for the US all wheat area for next year's harvest from the 57.7 million acres estimated last month to 58.1 million today. That's a 1.9 million, or 3.4%, rise versus the area sown for this year. The Russian grain harvest is 93.8% done at 93.2 MMT in bunker weight. This includes 53.9 MMT of wheat, off 97.8% of the planned area, along with 16.3 MMT of barley, off 95.1% of plan. The Ukraine grain harvest is 95% done at 58.2 MMT as of Nov 13. The Ukraine PM today raised his forecast for production this year to a new record 61 MMT, up 32% on last year. The Buenos Aires Grain Exchange said that the Argentine wheat harvest 6.9% complete versus 3.6% a week ago and 14.5% a year ago. They held their 2013/14 wheat crop estimate unchanged at 10.35 MMT. The Argentine Ag Ministry came in much lower at 8.8 MMT, the same level that they suggested and subsequently withdrew as being from incomplete data a few weeks ago. It may be that they are looking to justify an export ban not too far down the line. The latest Commitment of Traders data for the period to Nov 12 shows managed money having a change of heart and swiftly re-establishing, and building on, a fresh short position in Chicago wheat. They are now net short 47,251 contracts. FranceAgriMer said that 84% of the French winter wheat crop is now sown (about the same as a year ago). Maturity is advanced with 74% of the crop "lifting" versus 51% a year ago. They say that 18% of the crop is at the early tillering stage compared to only 4% at this date in 2012. Winter barley is 97% sown, in line with last year. They say that 92% of the crop is "lifting" (versus 73% a year ago) and that 36% of the crop is at the early tillering stage compared to 7% in 2012 at this time. Winter wheat rated good/very good fell from 91% last week to 87%, although that's still much better than 76% a year ago. Winter barley good/very good also fell, from 88% to 85%, although again that compares favourably with 76% in 2012 at this time. Dec 13 CBOT Wheat closed at $6.44 1/2, down 1/4 cent; Dec 13 KCBT Wheat closed at $6.98 1/4, down 4 3/4 cents; Dec 13 MGEX Wheat closed at $6.96 3/4, down 3 1/4 cents. For the week that puts Chicago wheat 5 1/4 cents lower, with Kansas wheat down 10 1/4 cents and Minneapolis falling 11 1/4 cents.