Chicago - Post USDA Report
11/01/13 -- Soycomplex: Jan 13 Soybeans closed at USD14.24 3/4, up 7 1/4 cents; Mar 13 Soybeans closed at USD13.73 1/4, down 6 1/2 cents; May 13 Soybeans closed at USD13.64, down 7 1/2 cents; Jan 13 Soybean Meal closed at USD403.10, down USD5.60; Jan 13 Soybean Oil closed at 48.88, down 51 points. As expected it was a choppy session. Jan 13 beans closed near to the session highs and almost 23 cents above the lows of the day. Other old crop months were around 8 cents off the highs but 20 cents above the lows. New crop Nov 13 closed the weakest, at more than 20 cents off the highs of the day. The USDA raised 2012 US soybean yields from 39.3 bu/acre to 39.6 bu/acre, exactly as the trade guessed. That increased production in 2012 from 80.86 MMT to 82.06 MMT. Despite the recent very strong pace of US exports, they were only left unchanged at 36.6 MMT. The higher US production was offset in part by an increased domestic crush. Ending stocks were increased slightly from 130 million bushels to 135 million, again exactly in line with the average trade forecast. The Brazilian soy crop was increased from 81 MMT to 82.5 MMT, which was partially offset by a reduction for Argentina, from 55 MMT to 54 MMT. Brazil's export potential was increased from 37.4 MMT to 38.4 MMT and Argentina's reduced from 12 MMT to 11 MMT. This re-enforces Brazil as the world's top exporter of soybeans in 2012/13, usurping the US to the tune of around 1.8 MMT. The bottom line sees world 2012/13 ending stocks at 59.5 MMT, around half a million lower than last month and a bit more than that beneath the average trade forecast.
Corn: Mar 13 Corn closed at USD7.08 3/4, up 10 cents; May 13 Corn closed at USD7.07, up 9 1/2 cents. Corn jumped around 30 cents immediately after the USDA numbers came out pegging US 2012/13 ending stocks at 602 million bushels (15.3 MMT), which was well below the average trade guess of 667 million and 45 million lower than last month. US 2012 yields were raised by a bushel/acre more than anticipated to 123.4 bu/acre, with production increased from 10.725 billion bushels to 10.78 billion, contrary to expectations for a cut (due to a lower harvested area) to 10.626 billion. Ending stocks were cut however, due to an extra 300 million bushels of domestic US usage compared to last month. US export potential was cut, although maybe by more than some had expected, from 31 MMT to 26 MMT. Brazil's exports were forecast to rise 1.5 MMT from last month to 22.5 MMT and Argentina's were also increased, by 2 MMT to 22.5 MMT. Brazil's corn crop was increased by 1 MMT to 71 MMT and Argentina's by 0.5 MMT to a record 28 MMT despite planting delays. Other trade estimates, like Michael Cordonnier's 22.5 MMT, are still well below this level. China's import requirements were left unchanged at 2 MMT. US ethanol usage was left the same as in the December report. The tighter than anticipated US 2012/13 stocks number was the one that grabbed the attention, but even with a hefty reduction in US exports these still need to pick up from the recent pathetic pace to hit 26 MMT. Maybe that thought occurred to a few others as corn closed the day well off session highs.
Wheat: Mar 13 CBOT Wheat closed at USD7.54 3/4, up 10 1/4 cents; Mar 13 KCBT Wheat closed at USD8.07, up 10 1/2 cents; Mar 13 MGEX Wheat closed at USD8.45 1/4, up 6 cents. For wheat the headline grabber was winter wheat seedings right at the low end of the range of trade guesses of 41.7-44.7 million acres (with an average estimate of 42.6 million) at 41.8 million acres. Also of note were 2012/13 US ending stocks cut by 38 million bushels from last month to 716 million (19.5 MMT) versus trade expectations of 743 million and 754 million (20.5 MMT) last month. This was down to a 35 million bushel increase in domestic feed usage. US wheat exports were left unchanged at 29.5 MMT when many had been expecting a decrease. Argentine, Australian and Canadian export potential were all cut by 0.5 MMT each. This was partially offset by a rise of the same magnitude for both India and Russia. The bottom line saw world production trimmed by 800 TMT to 654.3 MMT, but global consumption was also cut by 500 TMT, meaning ending stocks are only seen 300 TMT lower than they were a month ago on an international level. No great reason for a huge rally there, by the end of the session CBOT wheat was around 20 cents off the intra-day highs. Funds were said to have been net buyers of around 6,000 contracts on the day. That would still leave them holding a sizable short in CBOT wheat however, which could stimulate buying interest on any further dips.
EU Wheat Closing Comments
11/01/13 -- EU grains closed mostly lower with Jan 13 London wheat unchanged at GBP207.00/tonne, May 13 was also flat at GBP207.00/tonne and new crop Nov 13 was GBP0.75/tonne easier to GBP183.00/tonne. New front month Mar 13 Paris milling wheat fell EUR1.25/tonne to close at EUR244.75/tonne.
It was a strange day, the first time that we've had a potentially market-moving USDA report released near the end of trading in Europe. Not just that, but near the end of European trade ON A FRIDAY. As a side issue, three of the next four USDA WASDE reports are also scheduled for release on a Friday night, so along with 21 hours/day trading this looks like something we are going to have to get used to.
It was relatively thin, low volume session for London wheat, but at least it did manage to close well off the intra-day lows. For May 13 these were down GBP2.25/tonne at one stage, and for new crop Nov 13 we were trading GBP3.75 down earlier in the day.
For wheat and corn the USDA numbers came in bullish, although not without the odd bearish element. It remains to be seen if they can hang onto what looks like being some initial upside momentum for much of next week.
For wheat, the main bullish impetus came from a US all winter wheat area of 41.8 million acres. That was 0.8 million below the average trade estimate, and only 0.1 million more than the lowest trade forecast.
US Dec 1st wheat stocks were also projected lower than the 1.674 million bushels anticipated at 1.66 million. US 2012/13 carryout was also below the 743 million expected, and the 754 million forecast last month, at 716 million bushels.
On a global level, world wheat production for 2012/13 came in 0.8 MMT less than last month at 654.3 MMT, although ending stocks were only reduced marginally from 176.95 MMT to 176.64 MMT.
On a world trade level, Argentine wheat exports were inexplicably left at 7.5 MMT (output was trimmed only modestly from 11.5 MMT to 11.0 MMT), with Australian exports cut 0.5 MMT to 19.0 MMT. There were rises in exports for India (up 0.5 MMT to 8.0 MMT), Russia (up 0.5 MMT to 10.5 MMT) and Ukraine (up 0.2 MMT to 6.2 MMT).
Corn got a boost from a US 2012/13 ending stocks estimate 65 million bushels below expectations at 602 million bushels (15.3 MMT - down 1.1 MMT from last month). Despite US corn exports seen falling 4 MMT from the 31 MMT predicted last month, the USDA essentially are forecasting increased domestic usage of both corn and wheat.
Chicago Closing Comments - Thursday
10/01/13 -- Soycomplex: Jan 13 Soybeans closed at USD14.17 1/2, down 2 1/4 cents; Mar 13 Soybeans closed at USD13.79 3/4, down 5 3/4 cents; Jan 13 Soybean Meal closed at USD408.70, down USD2.60; Jan 13 Soybean Oil closed at 49.39, up 15 points. Weekly old crop export sales of 321,800 MT were in line with expectations of 200-400 TMT, actual shipments topped 1 MMT for a record 15th consecutive week. Funds were estimated as net sellers of around 2,000 soybean contracts on the day heading into tomorrow's all important USDA report. The USDA reported a flurry of business under the daily reporting system: 180,000 MT of US soybeans to China; 126,000 MT of optional origin soybean sales to China; 281,500 MT of US soybean sales to unknown destinations. The trade is expecting the USDA to increase final US 2012 soybean yields from 39.3 bu/acre to 39.6 bu/acre in tomorrow's report, increasing availability. US exports could also rise, given the rapid pace of sales and shipments since the start of the season, that would negate any increase in production, leaving ending stocks around the existing 130 million bushel mark. Brazilian production could be in for an increase from the existing 81 MMT, Argentine output may be left on hold at 55 MMT for now. World ending stocks are seen holding steady around the 60 MMT mark.
Corn: Mar 13 Corn closed at USD6.98 3/4, up 4 1/2 cents; May 13 Corn closed at USD6.97 1/2, up 3 3/4 cents. Weekly export sales of 12,600 MT were very poor indeed, and well below even the modest trade expectations of 100-200 TMT. Weekly shipments were likewise at just 106,800 MT - a marketing year low. That sets the stage for a reduction in US exports for 2012/13 in tomorrow's USDA report, increasing US ending stocks a little from last month's 647 million bushels to around 667 million. World carryout is seen little changed around 117.6 MMT. US corn production in 2012 is seen at 10.626 billion bushels, from within a range of estimates of 10.1-10.801 billion. The December USDA estimate was 10.725 billion and 2011 corn production was 12.358 billion.
Wheat: Mar 13 CBOT Wheat closed at USD7.44 1/2, down 1 cent; Mar 13 KCBT Wheat closed at USD7.96 1/2, down 4 3/4 cents; Mar 13 MGEX Wheat closed at USD8.39 1/4, down 1 1/4 cents. Weekly export sales of 233,700 MT were below expectations of 325-425 TMT. Total wheat commitments now stand at 68 percent of the USDA target versus the 5-year average of 81 percent. Egypt was at least in the market, booking 55,000 MT of US soft red winter and 60,000 MT of Canadian soft red winter. Prices were well below European offers, with nothing forthcoming from Russia. The trade is expecting a rise in US wheat acres for the 2013 harvest tomorrow. US exports may also be lowered, but increased domestic usage may see ending stocks left unchanged.
EU Grains Close - Thursday
The market continues to tread water ahead of Friday's USDA report, hoping for some much needed direction. Will we get it?
Brussels reported that it had granted 603 TMT of soft wheat export licenses in the last fortnight of 2012, along with a further 373 TMT in the first week of January. That takes 2012/13 year-to-date exports to 10.1 MMT, which is more than a third up on a year ago despite reduced production.
Based on that evidence there are few signs yet of inflated EU prices restricting exports this season. The HGCA today referred to 2013 being a year of "tight global feed grain supplies" noting "the need for demand to be rationed".
Egypt confirmed that it had bought 115 TMT of US/Canadian wheat in a tender, with US wheat priced at USD24/tonne cheaper than the best French offer. Maybe that is a sign of things to come?
The HGCA went on to note that "EU values need to remain at premium levels to minimise exports due to thin availability".
Weekly export sales data from the USDA came in below expectations for wheat of 325-425 TMT at 233,700 MT. Shipments too were pretty insipid at 264,400 MT, although this does include the holiday period. Things will now need to buck up fairly dramatically for the rest of the season to get even close to the USDA's target volume of 29.5 MMT in 2012/13, although this isn't totally out of the question.
The market will also be conscious of the 2012 US drought being far from resolved this winter, with some reports suggesting abandonment rates amongst US winter wheat as high as 30 percent.
Chicago Closing Comments - Wednesday
09/01/13 -- Soycomplex: Mar 13 Soybeans closed at USD13.85 1/2, up 6 cents; Mar 13 Soybean Meal closed at USD409.60, down USD1.30; Mar 13 Soybean Oil closed at 49.64, up 11 points. The USDA announced China had bought 120 TMT of optional origin beans for 2013/14 shipment. The Rosario Board of Trade forecasts Argentine soybean production at 53 MMT and exports at 10 MMT in 2012/13 - both are 2 MMT lower than the USDA. CONAB increased their Brazilian 2012/13 soybean production estimate slightly from 82.6 MMT to 82.7 MMT versus 81 MMT from the USDA. Bean exports were estimated at 36.4 MMT, unchanged from previous estimate and 1 MMT less than the USDA's December forecast. CNGOIC estimated the 2012 Chinese soybean crop at 12.8 MMT, down 11.63% from a year ago. Their rapeseed crop was estimated at 12.2 MMT, down 9.13% from a year ago. China imported 2.71 MMT of rapeseed in Jan/Nov 2012 - up over 150% on same period in 2011. Trade estimates for tomorrow's weekly US export sales report for beans are 200-400 TMT.
Corn: Mar 13 Corn closed at USD6.94 1/4, up 5 1/2 cents; May 13 Corn closed at USD6.93 3/4, up 5 cents. Brazil's CONAB estimated the 2012/13 corn crop at 72.19 MMT versus a previous estimate of 71.94 MMT. The USDA currently predict a Brazilian corn crop of 70.0 MMT this year but will issue a revised estimate on Friday. China's CNGOIC estimated the 2012 corn crop there at 208.13 MMT, up 7.96% from a year ago. South Korea is buying optional origin corn, although the chances are that will ultimately come from South America. Estimates for tomorrow's weekly export sales report from the USDA are only a modest 100-200 TMT for US corn. Not a very impressive number compared to the 469 TMT required to hit the current USDA export target of 31 MMT in 2012/13. That number could be revised down on Friday. The weekly US ethanol grind rebounded from last week's holiday influenced number to 826,000 barrels/day, which is in line with the volume required to match the USDA forecast for demand from that sector in 2012/13.
Wheat: Mar 13 CBOT Wheat closed at USD7.45 1/2, down 5 cents; Mar 13 KCBT Wheat closed at USD8.01 1/4, down 7 1/2 cents; Mar 13 MGEX Wheat closed at USD8.40 1/2, down 4 3/4 cents. China are said to have bought several cargoes of high-protein wheat from the US and Canada over the past few days. Their own crop is said to be low in quality this year. India’s Director of Wheat Research said that their 2012/13 wheat crop could beat last year's record 93.9 MMT. Japan is shopping for four cargoes of Australian noodle-making wheat for delivery by the end of February. Despite saying last week that they had enough wheat reserves to last nearly six months, Egypt's GASC tendered for wheat for end-February delivery after the close. Trade estimates for tomorrow's weekly export sales report for US wheat are 325-425 TMT. The US currently only has around 65% of the USDA's projected 29.5 MMT target for 2012/13 on the books at this stage. Many expect that estimate to be reduced on Friday.
EU Grains Mixed In Guarded Trade
09/01/13 -- EU grains were mixed with Jan 13 London wheat down GBP0.50/tonne to GBP205.90/tonne, May 13 up GBP0.15/tonne lower to GBP208.15/tonne and new crop Nov 13 falling GBP0.30/tonne to GBP183.25/tonne. Jan 13 Paris milling wheat was down EUR0.25/tonne to close at EUR254.50/tonne.
Trading remains guarded ahead of Friday's USDA report, FranceAgriMer pegged 2012 French soft wheat production at 35.815 MMT, virtually unchanged from last month and +5.4% on 2011. Exports within the EU-27 are seen at 7.135 MMT (-5.1% on last season) and exports outside the EU placed at 10.0 MMT (+17.4%). Ending stocks were revised up to 2.293 MMT from 1.961 MMT.
Corn production was estimated at 15.229 MMT, also almost identical to last month and 2.3% lower than in 2011. Exports are seen falling 7.6% on last year to 6.33 MMT and ending stocks are forecast to rise 13.7% to 2.767 MMT.
French barley output was pegged 29% up on 2011 to 11.363 MMT, with exports also rising sharply, up 24% to 5.335 MMT. Even so ending stocks will leap 81% to 1.737 MMT, they said.
China is said to have bought several cargoes of high-protein wheat from the US and Canada over the past few days as domestic prices hit record highs of over USD400/tonne in the top wheat producing province of Henan this week. Many are questioning the official winter wheat production estimate of 114.3 MMT in 2012. The quality of the Chinese crop is also in doubt.
US and Canadian wheat is well placed geographically to take advantage of any Chinese interest. Meanwhile Chinese think tank CNGOIC said earlier in the week that the coldest winter in 28 years was potentially damaging this year's crop also.
As well as buying much more wheat than normal, China is also importing ever larger quantities of rapeseed. They imported 2.71 MMT of rapeseed in the Jan/Nov 2012 period - up more than 150% compared to the same period in 2011.
Nearby EU rapeseed prices meanwhile, up EUR5.00/tonne tonight, have leapt by more than EUR20/tonne in the past week on technical tightness.
The Ukraine Ministry said that the country will harvest 50 MMT of grains this year versus 46.0 MMT in 2012. Winter crops has been planted on 8.1 million hectares, of which 6.7 million is wheat. The total grain area included spring plantings will rise 670,000 ha to 16.2 million ha in 2013, they added.
Ukragroconsult estimated Ukraine's 2013 wheat crop at 21.0 MMT versus the 2012 crop of 14.18 MMT. This year's corn crop is estimated at 20.0 MMT vs. 18.8 MMT last year, and the 2013 barley crop pegged at 8.0 MMT vs. 6.34 MMT in 2012.
Chicago Little Changed In Quiet Trade
08/01/13 -- Soycomplex: Jan 13 Soybeans closed at USD14.13 3/4, up 3 cents; Mar 13 Soybeans closed at USD13.86 1/2, down 2 cents; Jan 13 Soybean Meal closed at USD410.60, up USD2.10; Jan 13 Soybean Oil closed at 49.14, down 36 points. There wasn't a great deal of change on the day, maybe that means that pre-USDA report positioning is mostly done? The index fund rebalancing exercise doesn't seem to have created any fireworks yet either. I'm sure they will come by Friday. Michael Cordonnier estimated Brazil's soybean crop at 80.0 MMT, unchanged from his previous estimate and 1 MMT below the USDA. He placed the Argentine bean crop at 54.0 MMT, also unchanged from previous estimate and 1 MMT lower than the USDA predicted in December. He said 86% of the Argentine bean crop has been planted, unchanged from a year ago. CONAB come out tomorrow with their latest Brazilian crop report. Last report’s gave us soybean production of 82.6 MMT and exports of 36.4 MMT. Output in 2011/12 was 66.5 MMT and exports were 36.3 MMT, according to the USDA.
Corn: Mar 13 Corn closed at USD6.88 3/4, up 3 1/4 cents; May 13 Corn closed at USD6.88 3/4, up 3 1/2 cents. Corn too put in a relatively subdued performance, suggesting that the trade is hoping/needing some new direction from the USDA on Friday. Given the sluggish pace of US export sales since the 2012/13 season began there has to be a decent chance that the USDA will lower export potential this time round. What they will say with regards to 2012 US production, and therefore Dec 1 stocks is perhaps the biggest conundrum. A Bloomberg survey has a difference of 750 million bushels between the lowest trade guess and the highest with regards to Dec 1 US corn stocks. Michael Cordonnier pegged the Brazilian corn crop at 70.0 MMT, unchanged from previous estimate and the same as the USDA. He placed the Argentine corn crop at 22.5 MMT, also unchanged from previous estimate but way below the USDA's 27.5 MMT prediction. The latter may be revised lower on Friday. Cordonnier said that 84% of the Argentine corn crop had been planted, slightly lower than a year ago. IKAR said Russia’s 2012/13 corn crop was a record 7.9 MMT.
Wheat: Mar 13 CBOT Wheat closed at USD7.50 1/2, down 3/4 cent; Mar 13 KCBT Wheat closed at USD8.08 3/4, up 1 1/4 cents; Mar 13 MGEX Wheat closed at USD8.45 1/4, down 1 1/4 cents. Wheat also had little movement on the day. Where the USDA peg US winter wheat plantings for the 2013 harvest will be perhaps the most significant number for wheat on Friday. The trade is expecting an average increase on last year of around 1.3 million acres to 42.6 million acres. The range of estimates is rather wide however at 41.70-44.65 million, according to a Bloomberg survey. The slow pace of US exports during the first half of 2012/13 may see the USDA reduce their full season forecast from the current 29.5 MMT is how many analysts see it. A different survey estimates world wheat stocks at the end of 2012/13 coming in at 174.665 MMT versus the USDA's December estimate of 176.95 MMT. Again though, the range of forecasts is quite varied at 167.5–178.0 MMT, a number towards the lower end of this range would obviously be seen as bullish.
EU Grains Mostly Nervously Higher In Consolidation Trade
08/01/13 -- EU grains closed mixed but mostly higher with Jan 13 London wheat up GBP1.20/tonne to GBP206.40/tonne, May 13 was GBP1.25/tonne to GBP208.00/tonne and new crop Nov 13 was GBP1.00/tonne firmer to GBP183.55/tonne. Jan 13 Paris milling wheat rose EUR4.25/tonne to close at EUR254.75/tonne.
Today was a consolidation day from recent losses, although market remains nervous ahead of Friday night's USDA world supply and demand numbers and unsettled by the large scale fund liquidation in agri-commodities which has been ongoing for several weeks now.
Funds now hold their smallest long position in corn and soybeans for many months, along with a sizable short in Chicago wheat, all in a risk-off move combined with a widespread expectation for a mildly bearish report on Friday.
That leaves the market vulnerable to an upside correction, although few these days underestimate the USDA's capacity to spring a surprise. CBOT corn has staged a limit move in five of the last six years on the day of the January WASDE report.
From a fundamental viewpoint South American weather seems to be improving, albeit too late to help Argentine wheat production, the harvesting of which is more or less complete. Prospects for corn and soybeans do look brighter though in both Brazil and Argentina.
Even US wheat potential is looking up a little. "A slow-moving wave of low pressure may produce over 1 inch of rainfall in Texas and Oklahoma and .50 inch in southern Kansas, relieving drought in hard red winter wheat. This would be enough rain in the southern Great Plains to completely wipe out a October-December moisture deficit," say Martell Crop Projections.
"Today’s forecast is much wetter than yesterday now calling for 0.50-1.25 inch rains in West Texas and 4-6 inches in the eastern part of the state. Five-inch rains are predicted in Arkansas, and 2-3 inches in southern Illinois and much of Indiana," they add.
India's Ministry said that wheat stocks there are more than four times the government's recommended target at 34.4 MMT, explaining whey they have been unusually active in the export market of late. Harvesting of the 2013 crop which expected to be in excess of 90 MMT, around 5 MMT more than domestic consumption, begins in March.
Asian buyers are said to be snubbing Indian wheat offers in favour of South American origin material, even though the latter is a bit more expensive, due to persistent quality issues with Indian wheat. A Bangladeshi deal to barter wheat to Iran in exchange for iron ore, fertiliser and other commodities is also said to be in jeopardy over quality. Bangladesh wheat it would seem isn't even good enough for relatively friendless Iran.
Friday's upcoming USDA report is expected to reveal US winter wheat plantings at a 4-year high of 42.6 million acres, according to a Bloomberg survey. That's around 3% up on plantings for the 2012 harvest and almost 5% up on those for 2011.
UkrAgroConsult say that grain production in Ukraine this year will total 51.85 MMT, an increase of nearly 15% on this season. The Ministry say that 92% of winter grains are in good or satisfactory condition versus only 60% a year ago.
Chicago Close - Monday
07/01/13 -- Soycomplex: Jan 13 Soybeans closed at USD14.10 3/4, up 21 3/4 cents; Mar 13 Soybeans closed at USD13.88 1/2, up 21 1/4 cents; Jan 13 Soybean Meal closed at USD408.50, up USD10.30; Jan 13 Soybean Oil closed at 49.50, up 8 points. Fund buying in beans was estimated at around 3,000 lots on the day. Weekly export inspections were robust at 39.652 million bushels, and in line with trade estimates of 37-43 million. That makes year-to-date inspections 36 percent ahead of last year at 814 million bushels vs. 599.1 million. Based on a Bloomberg survey Argentina’s 2012/13 soybean crop is estimated at 54.6 MMT vs. the USDA's 55.0 MMT. Clarivi estimated the 2012/13 Brazilian soybean crop at 83.11 MMT vs. their previous estimate of 83.0 MMT and almost 25 percent up on last season. They pegged the 2012/13 Brazilian bean area at 27.5 million ha, up 10 percent from 2011/12. CNGOIC estimated China’s January bean imports at 4.6 MMT, down 14.8 percent from December. They estimated China’s 2012 bean imports at over 58.0 MMT, up 10 percent from a year ago.
Corn: Mar 13 Corn closed at USD6.85 1/2, up 5 1/4 cents; May 13 Corn closed at USD6.85 1/4, up 4 1/2 cents. Weekly export inspections were poor at just 7.171 million bushels versus trade ideas of 9-13 million. Year-to-date inspections are now running 55 percent behind last year's levels. The USDA announced the sale of 102 TMT US corn to unknown for 2012/13 delivery. Based on a Bloomberg survey Argentina’s 2012/13 corn crop is estimated at 25.9 MMT vs. the USDA's previous estimate of 27.5 MMT. Clarivi estimated Brazil’s 2012/13 corn crop at 72.06 MMT vs. a previous estimate of 73.57 MMT and the USDA's 70 MMT December forecast. South American weather prospects are improving along with crop production potential it would seem. "Very dry soybean farms in Mato Grosso are expecting generous rainfall this week while Buenos Aires in southern Argentina is expecting sunshine and warmth - the opposite of December," said Martell Crop Projections.
Wheat: Mar 13 CBOT Wheat closed at USD7.51 1/4, up 4 cents; Mar 13 KCBT Wheat closed at USD8.07 1/2, up 3 cents; Mar 13 MGEX Wheat closed at USD8.45 3/4, up 4 3/4 cents. Weekly export inspections of 13.363 million bushels were above trade estimates of 9-12 million. Year-to-date inspections are 528.745 million bushels, down 13 percent compared to 607.562 million a year ago. CNGOIC said that China’s coldest winter in 28 years may hurt the wheat crop there. Things are looking a little brighter for US winter wheat: "Precipitation was very limited this past weekend, with only a light wintry mix noted on Friday in central Texas. However, the tranquil pattern is about to change, as a significant storm system is poised to develop across the southern Plains and Delta Tuesday and Wednesday, then spread into the southern and eastern Midwest late
Wednesday and Thursday. The significant upturn in rains will help to improve soil moisture and river levels a bit," said MDA CropCast.
EU Grains Give Up Early Gains In Cautious Trade
US grains were trading in positive territory for much of the day, supporting EU grains, on bargain hunting and ideas that the recent demise in prices may have been overdone. However, a bit of price erosion Stateside as European markets drew to a close saw EU grains give up early session gains.
Caution is still uppermost in traders' minds with the USDA's January WASDE report scheduled for Friday. Incidentally, new tinkerings with the timings of USDA reports to facilitate recent adjustments to the electronic Globex market trading 21 hours/day, mean that this report now won't be released until 17.00 GMT - leaving the European grains little time to react to the data before the markets close.
Opinion is divided on whether the recent dip, which has seen London wheat fall almost GBP20/tonne in front month Jan 13 since early December, presents a buying opportunity or is merely just part of a major capitulation in the international grain market.
It would help if we knew exactly where Europe stood as far as wheat exports are concerned, but the European Commission seems to be having trouble getting the numbers out saying that today's scheduled release is delayed "for technical reasons".
A report on Reuters suggests that France may have exported around 1 MMT of soft wheat in December, a third more than in the same month in 2011. FranceAgriMer are due to release their revised supply and demand estimates on Wednesday.
Across the Pond: "drought stressed areas of Texas and Oklahoma are expecting heavy rainfall this week that would improve field moisture for winter wheat development. By Wednesday morning, a broad trough of low pressure would develop across the Southern Great Plains. West Texas is expecting 0.50 – 1 inch of rainfall, and Oklahoma 0.75-1.50 inches. Southern Kansas would be relatively drier with expected rainfall from 0.15 to 0.55 inch. Any moisture is beneficial in the wake of historic summer-fall drought," say Martell Crop Projections.
Nevertheless, large accumulated moisture deficits still exist across much of the Great Plains and crop conditions have worsened in the top producing winter wheat states like Kansas and Oklahoma since the USDA's last weekly crop progress report before spring at the end of November.
Meanwhile, Chinese think tank CNGOIC said today that the country's coldest winter in 28 years may hurt the world's largest wheat crop.
Bullish fundamentals like this appear to carry little clout when the funds want out however.
Is The Downside Getting Overdone?
For what it's worth at the beginning of June corn was below USD6/bu, soybeans were around USD12.50/bu in mid-Feb and wheat was bubbling under USD6/bu mid-May. All three took off like a rocket shortly after.
The CFTC numbers do not include trades since the New Year break. According to Agrimoney funds have sold an estimated additional 9,000 Chicago wheat lots, 16,000 soybean lots and 23,000 corn contracts since then.
Whilst our mates the funds are regularly guilty of over-egging the pudding to the upside, there is certainly reason to suggest that they do likewise on the downside too. Is this one such occasion? It may be prudent to wait for a clear sign that they market has turned before diving in and filling your boots IMHO.
Chicago Slides On Further Fund Liquidation
04/01/13 -- Soycomplex: Jan 13 Soybeans closed at USD13.89, down 14 cents; Mar 13 Soybeans closed at USD13.67 1/4, down 19 1/4 cents; Jan 13 Soybean Meal closed at USD398.20, down USD7.40; Jan 13 Soybean Oil closed at 49.42, down 79 points. Fund selling was estimated at 6,000 soybean contracts on the day. For the week overall beans were down 35 cents, meal down USD28.50 and oil up 48 points. Beans and meal have both closed lower every day this week. Weekly export sales for soybeans were towards the upper end of trade expectations of 250-450 TMT at 435 TMT for 2012/13, plus 61,400 MT for 2013/14. Considering the recent Chinese cancellations that was a pretty decent performance in a holiday week. So too were weekly exports of over 1 MMT once again, now for a record breaking fourteenth week in row. Informa Economics revised it's 2012 US soybean yield estimate up from 38.6 bu/acre to 40.1 bpa, with production increased from 2.925 billion bushels to 3.04 billion. The USDA, who issue revised estimates next week, currently have yields at 39.3 bpa and production at 2.971 billion bushels. Brazilian production estimates are creeping higher, and with every week that passes a full-swing harvest grows ever closer. Offers of Feb shipment beans from Brazil are now under-cutting those from the US. Argentine plantings meanwhile have caught up at 90% complete from 84% last week and 89% a year ago.
Corn: Mar 13 Corn closed at USD6.80 1/4, down 9 cents; May 13 Corn closed at USD6.80 3/4, down 10 1/4 cents. For the week overall front month corn was 13 3/4 cents lower. Fund selling was estimated at 8,000 contracts on the day. Weekly export sales were described by one analyst as "pitiful" - even for a holiday week - at just 49 TMT versus trade expectations of 200-350 TMT. Sales need to average around 470 TMT to meet the USDA's export target of 31 MMT this season, and they've only managed to beat that total once so far this marketing year. That would appear to set the stage for a reduction in next week's USDA January WASDE report. Informa Economics raised their 2012 US corn yield estimate from 122.4 bu/acre to 123.3 bpa, and upped production slightly from 10.738 billion bushels to 10.8 billion. The USDA currently project 10.725 billion and 122.3 bpa. If the USDA concur then, along with reduced export potential, we might see an upward revision in US 2012/13 ending stocks in next week's WASDE report. The weekly ethanol grind fell 27,000 barrels/day from the last week taking it below the 825,00 bpd level required to meet USDA targets for 2012/13, although this may be due to holiday factors more than anything else. The recent reinstatement of the blenders tax credit should underpin demand from the ethanol sector going through to the end of the year.
Wheat: Mar 13 CBOT Wheat closed at USD7.47 1/4, down 8 1/4 cents; Mar 13 KCBT Wheat closed at USD8.06 1/4, down 5 cents; Mar 13 MGEX Wheat closed at USD8.42 1/2, down 4 cents. Front month CBOT wheat was down 31 1/2 cents on the week, with Kansas wheat down 19 3/4 cents and Minneapolis falling 25 1/4 cents. Fund selling in CBOT wheat was placed at 4,000 lots. Trade ideas that fund rebalancing next week will constitute buying of Kansas wheat and selling of Chicago wheat supports the former relative to the latter. Weekly export sales of 400 TMT were in line with trade estimates of 350-550 TMT, but well below last week's bumper 1 MMT plus week. We can maybe forgive that due to seasonal factors, but the trade will be looking for a much stronger showing in the weeks ahead. Year-to-date shipments of 13.35 MMT plus outstanding sales of 5.73 MMT mean that the US currently only has around 65% of the USDA's projected 29.5 MMT target for 2012/13 on the books at this stage, 30 weeks into the marketing year. Some suggest that the USDA may lower this target again next week. Informa Economics cut their Argentine wheat production estimate to 9.5 MMT, some 2 MMT less than the USDA's December forecast. The USDA currently have Argentina down to export 7.5 MMT of wheat in 2012/13, which is beginning to look like an extremely tall order.
EU Wheat Post Further Declines Friday
04/01/13 -- EU grains closed the week on the defensive once again with Jan 13 London wheat down GBP1.10/tonne to GBP205.30/tonne, May 13 was also GBP1.10/tonne lower to GBP207.40/tonne and new crop Nov 13 fell a more modest GBP0.75/tonne to GBP182.25/tonne. Jan 13 Paris milling wheat was down EUR2.50/tonne to close at EUR251.00/tonne.
For the week that puts Jan 13 London wheat GBP1.45/tonne lower and new crop Nov 13 down GBP4.30/tonne. Jan 13 Paris wheat is EUR0.25/tonne easier versus last Friday.
US grains in general continue to fall as fund money exits the complex, dragging European grains lower with them. The extremely short "relief rally" that followed the eleventh hour deal to, at least temporarily, prevent the US tumbling off the edge of the fiscal cliff has quickly run out of steam this week.
As we have seen on numerous occasions before in recent years, price movements in the grain markets these days frequently owe more to money inflows, or in this case outflows, than fundamental factors.
Whilst some of this selling appears to be a result of an outright "risk-off" move, Index funds are also said to be starting to rebalance their commodity portfolios for 2013. Strange as it might sound, this essentially means them selling commodities that have performed particularly well for them in 2012, in favour of those that haven't.
The reason for that is that these better preforming commodities ie wheat, soybean and corn now constitute a larger percentage of their overall portfolio than fund managers would like. For example whilst CBOT wheat values appreciated by more than 19% during 2012, NYMEX crude oil dropped by 7%. A commodity fund that therefore wants say 10% of it's holding in crude and 5% of it's holding in wheat now finds that it needs to sell wheat and buy more crude to get back to this desired percentage.
There are also reports of some portfolios being restructured to include some Kansas wheat, and therefore less CBOT wheat in the mix in 2013, along with others suggesting that some bean exposure will be replaced by meal length.
Various trade estimates kicking around suggest that this fund rebalancing will lead to further fund selling in CBOT wheat, soybeans and corn next week versus buying in KCBT wheat and CBOT soymeal. Some numbers I have heard put potential CBOT wheat selling in the 50-70,000 contracts region, which would certainly be a bearish volume to come onto the market.
It is unclear how much, if any, of the recent selling we have seen forms part of this restructuring. It may also be that some of it can be attributed to other spec money looking to make a quick profit by establishing short positions ahead of this anticipated fund selling.
That could make for a choppy week ahead, especially with the USDA's January WASDE report due out next Friday.
