Nogger's Blog

03/06/14 -- Soycomplex: Beans closed lower, with the biggest losses at the front end, despite the fact that old crop is where the tightness is. That may have been due to fund money rolling out of their July longs, creating more sellers than buyers. Sooner or later, the market has to get away from the US old crop situation and begin to focus on 2014/15. The wall of bearish data for that is overwhelming. Oil World forecast 2014/15 global soybean production at 301.2 MMT, up 6% versus their 2013/14 estimate of 283.9 MMT. They see record production from the US (98 MMT), Brazil (90 MMT) and Argentina (56 MMT). Safras e Mercado say that Brazil will produce 93.45 MMT of soybeans next season, Agroconsult say 94 MMT. Oil World meanwhile have 2014/15 global soybean ending stocks estimated at 90.0 MMT, up 23% versus their 2013/14 estimate of 73.2 MMT and far higher than the USDA's current forecast of 82.2 MMT, which in itself is a record. US soybean plantings for 2014 are now ahead of schedule, and well ahead of how things were a year ago. US weather conditions remain non-threatening. "Strong cooling is predicted beginning tomorrow and continuing into early next week. Temperatures would drop back into the low-mid 70s F for highs compared to last week’s 80s F. Night temperatures would be sharply cooler as well with upper 50s F - to mid 60s F," said Martell Crop Projections. This pattern appears synonymous with what might be expected in an El Nino year, when US soybean yields are typically above average. Australia’s Weather Bureau says they see at least a 70% chance of an El Nino this year. Rabobank forecast CBOT soybean prices at $11.50/bu by the end of the year and $11.25/bu in Q1 of 2015. They added the caveat that they do not expect the futures inverse to collapse until Q3 of 2014, when US new crop availability is more certain or demand erodes. They forecast US 2014 soybean yields at 43.8 bu/acre, Dr Cordonnier has them at 44.5 bu/acre, the USDA are at 45.2 bu/acre - I wonder what Rabobank's price projections would be if they were that high on yields? The USDA are due to issue revised supply and demand forecasts next Wednesday. China sold 313 TMT of the 430 TMT of soybeans that they had up at auction today. Jul 14 Soybeans closed at $14.81 1/4, down 19 1/4 cents; Nov 14 Soybeans closed at $12.21 3/4, down 8 cents; Jul 14 Soybean Meal closed at $499.60, down $6.40; Jul 14 Soybean Oil closed at 38.35, up 4 points.

Corn: The corn market finished lower, with the largest declines also at the front end. Rabobank predicted CBOT corn prices at $4.30/bu by the end of the year and at $4.10/bu in Q1 of 2014. Whilst the current soy to corn price ratio of more than 3 is unsustainable over a protracted period, they expect corn prices to be supported until soybean prices start to drop. They forecast US 2014 corn plantings at 92 million acres, which is slightly higher than the USDA's 91.7 million estimate. They see yields at 161.0 bu/acre versus the USDA's more optimistic looking 165.1 bu/acre, although they say that yield expectations are increasing due to a build-up of soil moisture in the Midwest along with El Nino talk. Dr Cordonnier estimated 2014 US corn yields at 164.0 bu/acre, up from a previous estimate of 162.0 bu/acre. Ukraine and Russian corn planting is 97% complete, according to their respective Ag Ministries. Rabobank said that Ukraine yields could fall 10%, and production by 14-15% this year. China sold 1.8 MMT of the 3.5 MMT of corn it had up for auction. South Korea's Kocopia seeks 55,000 MT of optional origin corn for Sept shipment. Parts of southern Brazil were said to have had temperatures below freezing on Tuesday morning, which may have caused some damage to second crop corn in some areas. In the US: "Summer-like warmth last week boosted corn development. Minnesota corn “emergence” increased to 69% more than doubling in the week. Northern Midwest corn was virtually all sprouted making good progress after a slow start this spring. Heat units rapidly increased last week with temperatures 6-8 F above normal," said Martell Crop Projections. However, strong cooling is now expected as the jet stream sinks southwards, allowing cooler Canadian air to penetrate the northern United States, they added. Typically, the cooler temperatures and increased rainfall that would accompany an El Nino year in the US Midwest would not be as beneficial for corn as they would be for soybeans. Old crop US corn is currently said to be "priced to sell" into Eastern Med destinations, with offers around $240 C&F versus that sort of level on a FOB basis out of the Black Sea for Jul/Aug delivery. Black Sea corn for Sep/Oct is cheaper though, with Ukraine offers said to be down to $209 FOB. The US Energy Dept will release their regular ethanol production data tomorrow. Last week's output was 927k barrels/day. Jul 14 Corn closed at $4.58 1/4, down 7 1/4 cents; Dec 14 Corn closed at $4.54 1/4, down 4 1/4 cents.

Wheat: Chicago wheat sunk to its 18th defeat in 19 sessions, an alarming run. On May 6, CBOT wheat closed at $7.31 3/4, it's now fallen almost $1.20 since then for a drop of more than 16%. Rabobank predict a Q4 CBOT wheat price of $6.00/bu (which is actually 50 cents more than they predicted a month ago), falling to $5.60/bu by the end of the first quarter of 2015. The latter is around a dollar below where the Mar 15 future closed this evening, meaning that they still see a further 15% downside in that. "Improved growing conditions globally are driving an increasingly bearish wheat price outlook," they said. They increased their forecast for EU-28 wheat ending stocks next season by 1 MMT from last month to 14.7 MMT, which is well ahead of the USDA's current 12 MMT estimate. Australian wheat planting will be wrapping up a couple of weeks from now, with the majority sown into good soil moisture, they said. However, the potential for the widely-touted El Nino weather event later in the year could have an adverse effect on production there at the end of the day, they noted. Turkey cancelled a tender for 100,000 MT of durum wheat due to high prices. Jordan bought 50,000 MT of feed barley in a tender for 100,000 MT. Japan are in for 107,239 MT of food wheat for July-Aug shipment in its usual weekly tender. That consists of the regular combination of US, Canadian and Australian origins. Egypt sit on the sidelines, despite the recent sharp drop in global prices. That may be due to increased domestic buying by GASC, and/or credit issues. Either way, the world's largest wheat importer isn't buying on the international stage at the moment. Algeria have bought optional origin wheat this week, widely anticipated to be of French origin. US wheat remains uncompetitive to these sorts of destinations, and that is what the market is tying to adjust to. The cheapest source of new crop wheat appears to be Romanian origin at the moment, that is said to be even under-cutting Russian and Ukraine offers around the Med. Hearing of offers of new crop 11.5% milling wheat as low as EUR180/tonne FOB Constanta. Russian spring wheat planting is said to be 93% complete on 12.2 million hectares. The crop could do with some rain soon, although little is in the 14-day forecast. The outlook for bumper EU wheat production this year saw Paris wheat close below EUR190/tonne on a front month for the first time since September of last year tonight. China will auction wheat from reserves tomorrow. Recent auctions have met with a very tepid response. Jul 14 CBOT Wheat closed at $6.12 1/2, down 8 1/4 cents; Jul 14 KCBT Wheat closed at $7.07 3/4, down 11 cents; Jul 14 MGEX Wheat closed at $6.84 1/2, down 12 3/4 cents.