Nogger's Blog

13/12/13 -- Soycomplex: Beans closed with modest gains, just about managing to shake off tumbling wheat and corn. Ultimately nothing much has changed for beans, we still have very strong nearby demand for US beans supporting the market, but the negative influence of the prospect of record crops to come from South America getting ever closer. Oil World forecast the 2013/14 South American soybean crop at 159.8 MMT, up 10% versus last year and compared to their previous estimate of 158.5 MMT. Brazil will account for 89 MMT of that, along with a further 55.5 MMT from Argentina, they predict. That puts them in the middle of the range of popular trade estimates. The Buenos Aires Grains Exchange said that Argentine bean planting is almost two thirds complete. There's some speculation that the ongoing problems with some US corn shipments to China containing traces of a non-approved variety might lead to increased scrutiny, and therefore shipping delays, for US beans too. Independently of that there's the ever-present gossip that some of the outstanding US soybean sales will ultimately get switched to South America/cancelled. The USDA currently projects 2013/14 US soybean exports at just over 40 MMT, of which 19 MMT has already been shipped and a further 19.7 MMT is on the books waiting to go. Shipments have averaged 2 MMT/week over the last 6 weeks, so in theory all of the outstanding sales could be shipped in the next 10 weeks, or by the end of February, if things hold up at these levels. That's a fairly substantial IF, but one that doesn't make allowances for further sales between now and then, or the almost inevitable switching back to the US once the perennial Brazilian shipping delays start getting out of hand. Nevertheless the outlook for prices is certainly bearish longer-term, especially with US growers expected to mimic their South American compadres and significantly increase soybean plantings in the spring. Rabobank forecast 4th quarter 2014 US soybean prices to average at $10.70/bu, versus tonight's close on Nov 14 of $11.57 3/4. Jan 14 Soybeans closed the day at $13.27 1/2, up 3 3/4 cents; Mar 14 Soybeans closed at $13.13 3/4, up 2 1/4 cents; Dec 13 Soybean Meal closed at $462.90, up $3.50; Dec 13 Soybean Oil closed at 39.47, down 33 points - less than 40 points away from the lowest close for a front month since July 2010.

Corn: The corn market closed sharply lower as the dispute between China and the US over MIR 162 corn shows no sign of letting up. In fact it's getting worse. Yesterday's export sales report showed a further 370,700 MT of US corn heading for China, with seemingly little assurance that it will get through customs clearance when it gets there. Trade talk suggests that China’s strict checking for this unapproved strain of US GMO corn will continue into early next year. One trade commentator told Reuters that he didn't see any approval for MIR 162 happening until after the Chinese New Year festival in February. Some news services are now reporting that the problem has spread to DDGS, with some reports suggesting that traces of MIR 162 have been found in at least one such shipment, leading to fears that they could also start rejecting DDGS cargoes too. CNGOIC said that China's 2013/14 corn crop was a record 217.7 MMT this week, and that domestic consumption was likely to be over 20 MMT less at 197 MMT. Consider too that the reason that China has been buying more wheat than previously for 2013/14 is due to the relatively poor quality of it's 2013 harvest. That low grade surplus wheat is likely to replace some corn in Chinese feed rations. The Buenos Aires Grains Exchange said that corn plantings in Argentina are 55.5% done versus 60% a year ago and 47.7% a week ago. Rabobank forecast that 4th quarter 2014 US corn prices will average $4.10/bushel versus tonight's Dec 14 close of $4.52 1/2. Taiwan Sugar Corp bought 23 TMT of US corn in a tender yesterday. A group of 10 US senators proposed a bill to eliminate the 2014 ethanol mandate yesterday. Whilst most think it unlikely that the bill will get passed, it is nevertheless unsettling for the corn market given the fact that the US has a record large crop to shift, and it's probably only domestic demand from the ethanol industry that's stopped prices falling below $4/bu up until now. Factor in the ongoing problems with China and the only thing that corn has got going for it right now is the anticipated continued unwinding of fund short positions heading into the year end to keep the market from falling further. What will the new year bring? Some think new lows. Dec 13 Corn closed at $4.20 1/2, down 7 3/4 cents; Mar 14 Corn closed at $4.25 1/2, down 8 3/4 cents.

Wheat: Wheat fell particularly sharply on front month Dec 13 in both Kansas and Minneapolis, although note that the Dec 13 position went off the board on all three exchanges today. Even so, wheat was down around 3-6 cents on most other months too. Dec 13 Chicago wheat meanwhile went off the board at the lowest levels for a front month since just before the big price spike of the summer of 2012 when it became apparent that all was not well with the crop in Russia. Talk that India plans to move around 2 MMT of wheat onto the world market in the next two months ahead of their 2014 harvest adds to the bearish tone at the moment, despite buoyant EU sales. US wheat also faces stiff competition on the world export market from Europe, where we have a distinct price advantage into North Africa and the Middle East, due to freight considerations. There is also the threat on their own doorstep of this year's monster Canadian crop. Canadian wheat exports Aug 1-Dec 5 were up 26.5% on the same period in 2012, according to customs data. With a record 37.5 MMT crop to market, according to both Stats Canada and the USDA, they are likely to remain aggressive sellers right the way through until harvest 2014. We've already seen a significant shift away from US wheat and into Canadian origin from Japan lately. Australia's wheat crop also seems to be getting larger, and they and Canada are expected to slug it out in an Iraq wheat tender that closes over the weekend. The Buenos Aires Grains Exchange said that the Argentine wheat harvest is almost 40% complete, and stood by their forecast for a crop of 10.35 MMT this year. There's talk that Brazil bought one cargo of US HRW wheat this week, but that offers little bullish input. The cold snap that has gripped the US recently is seen giving way to much milder conditions in the week ahead "Temperatures in the High Plains are warming up. Moderating temperatures are predicted the next several days as a warm ridge of the high pressure builds into the southwestern United States. Well above normal temperatures are predicted the next several day on the High Plains. Wheat areas in Kansas would warm up into the mid and upper 50s by Monday, the moderate temperatures expected to persist most of next week. Growth in winter wheat is not expected, as the warm-up would not last long enough to coax wheat out of dormancy," said Martell Crop Projections. Dec 13 CBOT Wheat closed at $6.18 1/4, down 4 1/4 cents; Dec 13 KCBT Wheat closed at $6.57, down 12 1/4 cents; Dec 13 MGEX Wheat closed at $6.42 1/4, down 10 cents.