Nogger's Blog

18/12/13 -- Soycomplex: Beans closed sharply lower on fund selling, possibly linked to year-end profit-taking and long liquidation, and as weather forecasts for Argentina adopted a wetter look than yesterday. Chinese industry analysts forecast the country's soybean imports declining over the coming months. They see Dec bean imports at 6.65 MMT (unchanged from previously), falling to 5.8 MMT in January (but up from previous estimate of 5.6 MMT), followed by Feb imports of 4.8 MMT (up versus a previous estimate of 4.5 MMT), with March imports at 4.7 MMT (down from a previous estimate of 4.8-5.0 MMT). Celeres estimated Brazil’s 2013/14 soybean crop at 87.2 MMT, unchanged from previously, and although a record generally below other trade forecasts which centre around 88-90 MMT. Informa reduced slightly their estimate for US 2014 soybean plantings, down from the 83.8 million acres forecast last month to 81.93 million, although that's still a sharp increase on the 76.5 million said to have been planted this year. They have the 2014/15 US soybean crop estimated at a record 3.603 billion bushels, up 10.6% from 3.258 billion this year. Trade estimates for tomorrow's weekly export sales report for beans are 700,000-900,000 MT. Jan 14 Soybeans closed at $13.24, down 22 1/2 cents; Mar 14 Soybeans closed at $13.13 3/4, down 21 cents; Jan 14 Soybean Meal closed at $441.20, down $6.80; Jan 14 Soybean Oil closed at 39.06, down 25 points and the lowest close for a front month since July 2010.

Corn: The corn market closed around 1-2 cents lower on a less threatening tone to the weather outlook in Argentina and a firmer US dollar after the Fed announced that they are to begin tapering QE. The ongoing, and so far showing little sign of getting resolved, dispute with China over MIR 162 corn in shipments from the US is also a bearish influence. Reuters reported that China has rejected "more than" 10 cargoes of US corn since mid-November. Bloomberg put the figure at "at least" 9 cargoes, so either way we are talking somewhere in the region of half a million tonnes or more. Buyers in Japan and South Korea are said to be holding off purchasing US corn in anticipation of picking up cheap "distressed" cargoes of rejected corn. The Energy Dept reported that US ethanol production fell to 928,000 barrels/day from 944,000 bpd the previous week. Informa estimated the 2014 US corn area at 91.846 million acres, up from a previous estimate of 91.5 million but behind the 95.3 million planted this year. They see production at 13.741 billion bushels, down only 1.8% from this year's record 13.989 billion. That's not such a large drop as you might have expected, and would potentially lead to a further significant build in US corn stocks in 2014/15 if true. Celeres estimated Brazil’s 2013/14 total corn crop at 75.6 MMT - far higher than the USDA's 70 MMT forecast. Weekly export sales for corn tomorrow are expected to come in at around 550-750 TMT. Last week's sales were 695 TMT. Mar 14 Corn closed at $4.25, down 1 3/4 cents; May 14 Corn closed at $4.33 1/2, down 1 3/4 cents.

Wheat: Wheat slumped to fresh lows for this latest move, closing around 3-7 cents lower across the 3 exchanges. Jan 14 Chicago wheat posted the lowest close for a front month since June 2012 on the continuous chart for a second successive day. Informa estimated the US all wheat area for the 2014 harvest at 57.9 million acres, down slightly from a previous estimate of 58.105 million, but up 3% from the 2013 acreage of 56.16 million. They have US 2014/15 all wheat production estimated at 2.339 billion bushels, up almost 10% versus the 2013/14 estimate of 2.130 billion. Brazil are said to have bought 50 TMT of US HRW wheat for Jan shipment as "insurance" against Argentina blocking exports. A story on Reuters says that Argentina’s exporters are still waiting for the government to approve shipment of 1.6 MMT of 2013/14 wheat that's already been sold. The 2013/14 Argentine wheat harvest is around halfway through. Dr Cordonnier said that Rio Grande do Sul will be Brazil's largest wheat producing state this year with a crop of 2.9 MMT, a 56% increase on last year. Brazil's traditional leading producing state is Parana, but frost damage is likely to have cut their crop to around 1.8 MMT this year. Nevertheless, Conab forecast Brazil's national crop 22% higher in 2013/14 at 5.3 MMT. Trade estimates for tomorrow's weekly export sales report for wheat are around 300-500 TMT. Mar 14 CBOT Wheat closed at $6.12 3/4, down 7 cents; Mar 14 KCBT Wheat closed at $6.53 3/4, down 6 3/4 cents; Mar 14 MGEX Wheat closed at $6.46 3/4, down 3 1/4 cents.

General: It now remains to be seen how the market reacts to the news that the Fed is to begin tapering QE. On the one hand, the news should be supportive for the US dollar, making it bearish as far as US exports are concerned. On the other though, the announced $10 billion cut is relatively modest in the overall scheme of things, so the difference to the markets could be negligible.