EU Grains: Rally, What Rally?
18/07/14 -- Blink and you might have missed it, yesterday's attempted rally in EU grains following the shooting down of the Malaysian passenger plane over Eastern Ukraine proved to be a very short-lived window of opportunity (if you can call 298 deaths due to an act of terrorism an opportunity). Not that much, if any, business was probably done on the back of it in the cash markets.
EU grains closed lower across the board with Nov 14 London wheat erasing all of yesterday's gains finishing GBP3.00/tonne lower at GBP129.00/tonne, Nov 14 Paris wheat was down EUR3.75/tonne to EUR179.25/tonne - closing back below the important EUR180/tonne level. Aug 14 Paris corn was down EUR2.25/tonne at EUR166.75/tonne and Aug 14 Paris rapeseed slumped another EUR5.50/tonne to EUR317.25/tonne.
For the week that puts front month London wheat down GBP1.55/tonne, with Paris wheat falling EUR1.25/tonne, corn down EUR2.25/tonne and rapeseed crashing EUR14.00/tonne.
Harvest pressure remains, although rains on the continent have slowed progress this week, and could also be doing some damage to quality it is thought. The UK too is bracing itself for the widespread thunderstorms and associated heavy rains that traditionally accompany the kids breaking up for their summer school holidays with near perfect timing.
That could ultimately mean less milling wheat and more feed grade wheat kicking around both here and on the continent, potentially increasing milling premiums, which will provide a welcome and needed little boost if it's milling wheat that you've got. It won't do a lot for feed wheat growers though, and could widen the gap between London and Paris wheat further. Talking of gaps, it's worth noting that the premium that Nov 15 London wheat now commands over Nov 14 has widened to GBP12.25/tonne compared to just 50 pence at the end of March.
Brussels confirmed that they'd issued 151 TMT of soft wheat export licences this past week, taking the new 2014/15 season total to 501 TMT so far. They've also granted 211 TMT worth of barley exports, taking the marketing year total to date to 569 TMT. As wheat goes out, corn comes in though, with 387 TMT worth of corn import licences issued, taking the new season total so far to 644 TMT.
The EU also granted 18,160 MT worth of duty free wheat import licences to Ukraine, taking the total issued so far to 145 TMT out of an agreed quota of 950 TMT that Ukraine is allowed to export to the EU by Oct 31 under a special preferential trade agreement.
The Russian grain harvest is gathering pace at 15.4% done producing a crop of 24.9 MMT so far. Yields are up sharply, averaging 3.51 MT/ha, an increase of 16.6% on last year at this time. Wheat accounts for 20.5 MMT of that total off 22.7% of the planned area.
FranceAgriMer said that the French wheat harvest was 5% done as of Monday versus 2% a week ago and 2% complete this time last year. The French winter barley crop advanced to 83% done versus 78% last week and 40% complete at this point in 2013. They said that 28% of the corn crop is silking, up from 7% a week ago and versus zero this time last year.
They said that 70% of the French wheat crop was rated to be in good/very good condition, unchanged on a week ago. Winter barley and corn rated good/very good were also unchanged on a week ago at 71% and 83% respectively.
Egypt said that reforms to their subsidised bread programme will cut their wheat import needs by around 30%.
Ukraine new crop corn offers are now said to be down to $188/tonne FOB, which is the equivalent of around GBP110/tonne. Oct/Dec optional origin corn CIF the Netherlands is said to be offered in the market at EUR165/tonne, which is around GBP130.60/tonne, with feed wheat offers around just EUR3/tonne higher.
Chicago Markets Stage Mixed Reaction To Ukraine News
17/07/14 -- General: News broke in late afternoon trade (London time) that a Malaysian passenger plane en route from Amsterdam to Kuala Lumpur had apparently been shot down over eastern Ukraine, possibly by pro-Russian separatists. That provided some volatility and prompted some short-covering with wheat the main beneficiary, just as it was when Russia seized Crimea. Chicago wheat quickly put on 30% back then, only to subsequently give up all those gains and more besides as the situation calmed. I find it difficult to believe that these latest developments will prove to be the catalyst that finally turned the wheat market around, but we shall see.
Soycomplex: Beans closed lower despite the news out of Ukraine, setting a new 2 1/2 year low. Weekly export sales came in at 37,700 MT of old crop and 561,000 MT of new crop - the latter being primarily for China (365,000 MT) and unknown destinations (149,500 MT). Separately the USDA announced 708,000 MT of new crop US beans sold to China under the daily reporting system. South Korea's MFG bought 110,000 -120,000 MT of US or South American soymeal for Dec-Jan shipment. South Korea's NOFI bought 55,000 MT of South American meal for Nov shipment. Lanworth forecast the US soybean crop at 99.8 MMT versus the USDA's 103.4 MMT, although still sharply higher (+11.5%) than 89.5 MMT a year ago. A strike at the leading Argentine grain export hub of Rosario has entered its second day. Reuters are reporting that truck drivers there have voted for a national strike starting Jul 21. The Buenos Aires Grain Exchange said that the Argentine 2013/14 soybean harvest is 99.2% complete at 55.3 MMT, forecasting final production at a record 55.5 MMT. The Argentine Ag Min estimated the 2013/14 bean crop somewhat lower at 53.0 MMT versus a previous estimate of 54.0 MMT. Persistent wetness has been Argentina's problem this year, delaying the harvest, but also casting a cloud over the quality and oil content of their 2013/14 soybean crop. Aug 14 Soybeans closed at $11.74 3/4, down 12 1/2 cents; Nov 14 Soybeans closed at $10.94, down 8 cents; Aug 14 Soybean Meal closed at $380.50, down $3.20; Aug 14 Soybean Oil closed at 36.37, down 46 points.
Corn: The corn market closed with token gains. Weekly export sales were good at 573,700 MT of old crop and 495,000 MT of new crop. The Commodity Weather Group (CWG), a US weather forecasting firm, estimated the 2014 US corn yield at 171 bu/acre versus 165.3 bu/acre from the USDA. CWG forecast record average corn yields in Illinois (190.1 bu/acre versus the previous record of 180.0 bu/acre set in 2004) and Iowa (184.1 bu/acre versus the previous record high of 182.0 bu/acre set in 2009). Allendale estimated US 2014 corn yields at a more conservative 167.8 bu/acre. Lanworth estimated the US corn crop at a record 370 MMT this year, well above the USDA's current 352.1 MMT forecast and 4.6% up on last year's 353.7 MMT output. MDA CropCast raised their forecast for US corn production this year by 3.2 MMT from last week to 357.4 MMT "due to favourable conditions." Strategie Grains estimated the EU-28 2014/15 corn crop at 66.4 MMT versus a previous estimate of 65.9 MMT. They also said that a lower proportion of this year's EU wheat crop would make milling grade than last year. Reports of the very early wheat harvest in France appear to confirm that this is likely. With a higher overall wheat crop expected in Europe, this potentially means a lot more feed wheat kicking around this year, which will be in direct competition to corn in feed rations. Argentina's Ag Ministry estimated their 2013/14 corn crop at 33.0 MMT versus 32.1 MMT previously. The Buenos Aires Grain Exchange say that the Argentine corn crop is 65.4% harvested and forecast production at only 25 MMT. Sep 14 Corn closed at $3.79 1/2, up 1 1/4 cents; Dec 14 Corn closed at $3.87 1/4, up 1/2 cent.
Wheat: The wheat market opened lower but jumped higher immediately following the news out of Ukraine, and managed to hold onto most of those gains by the close. Weekly US export sales came in at an unimpressive 320,700 MT, although interestingly there was a 60,000 MT sale in there to China. Japan bought 112,709 tons of milling wheat for Aug–Sep shipment, most of which was US origin. Turkey bought 235,000 MT of optional origin milling wheat and 200,000 MT of feed barley for Aug-Oct shipment, with the Black Sea the most likely provider. Israel bought 50,000 MT of Black Sea feed wheat. There's talk of better than expected HRW yields in Nebraska, South Dakota and parts of Colorado. Nevertheless, MDA CropCast cut their US all wheat production forecast by 0.9 MMT from last week to 55.6 MMT due to acreage reductions and earlier dryness. They raised their estimates for Russia (+0.6 MMT), Europe (+0.4 MMT), Ukraine and Australia (both +0.2 MMT) however. Strategie Grains estimated EU-28 soft wheat crop at 140.5 MMT versus previous estimate of 139.50 MMT. They see EU-28 durum wheat output down 0.7 MMT from last month to 7.2 MMT. The Buenos Aires Grain Exchange say that Argentine farmers will plant 4.2 million hectares of wheat for the 2014/15 harvest, that's down 100,000 ha from their original estimate due to persistent rains. That figure still represents a 16% increase on 3.62 million ha a year ago however. Sep 14 CBOT Wheat closed at $5.50 3/4, up 12 3/4 cents; Sep 14 KCBT Wheat closed at $6.49, up 11 3/4 cents; Sep 14 MGEX Wheat closed at $6.37, up 9 cents.
It Was Always Going To Be Unpredictable - Apparent Act of Terrorism Sends EU Grains Higher
17/07/14 -- EU grains markets reverted to type for much of the day, trading mostly lower again. Aug 14 Paris rapeseed had another particularly difficult day and slumped to the lowest levels for a front month in what is now more than 4 years.
However, showing how vulnerable these markets are to a sudden and without warning upside correction, breaking news very late in the day that a Malaysian passenger plane had been "shot down" on the Ukraine/Russian border suddenly sparked a wave of short-covering sending markets mostly higher.
The day finished with Nov 14 London wheat up GBP2.75/tonne at GBP132.00/tonne, Nov 14 Paris wheat ended EUR4.00/tonne higher at EUR183.00/tonne, Aug 14 Paris corn was up EUR1.00/tonne at EUR169.00/tonne, whilst Aug 14 Paris rapeseed still even couldn't manage a rally, falling EUR3.00/tonne to EUR322.75/tonne.
As far as fundamental news goes...
Strategie Grains raised their forecast for the EU-28 wheat, barley and corn crops versus last month, although they did warn that recent rains (and more in the forecast) might be doing some damage. For now they estimated that 67% of the EU wheat crop would make milling standard, that's down 4 points on a year ago and puts the EU-28 milling wheat crop at 94 MMT versus 97 MMT in 2013. However, "quality and even yields could deteriorate significantly" if heavy rain on the continent persists for much longer, they said. Very early French wheat cuts do suggest a reduced proportion of milling wheat there this year.
That does of course mean more feed wheat around, posing further competition for barley, the price of which is already well below GBP110/tonne ex farm in most parts of the UK off the combine. There's also then the glut of cheap European and FSU corn to contend with too.
As far as the numbers go, the French analysts pegged the EU-28 soft wheat crop at 140.5 MMT, a 1 MMT rise on their June forecast and a 4% hike on last year's production. They raised their outlook on barley by 700 TMT to 56.2 MMT, which is still 6% down on last year, and increased their forecast for corn production in the Union by 500 TMT to 66.4 MMT, which is 3% more than a year ago.
Conversely there appear to be no such problems in Russia, where local analysts ProZerno said yesterday that the early harvest results are showing a larger proportion of this year's wheat crop is of milling standard than in 2013. Russian growers have harvested 22.2 MMT of gains so far, with average yields up 15.7% at 3.53 MT/ha, say the Ag Ministry. Wheat accounts for 18.5 MMT of that total off 20.4% of the planned area, with yields up 13.5% at 3.62 MT/ha. Barley adds a further 2.6 MMT off 8.3% of plan with yields up 24.5% at 3.40 MT/ha.
In Ukraine meanwhile, the early grain harvest (excluding corn) has advanced to 44% complete on 4.31 million hectares, producing a crop of 13.09 MMT as of Jul 15. This total doesn't now include Crimea. Average yields in Ukraine are said to be up 5.2% versus 2013 at 3.04 MT/ha. Wheat accounts for 8.4 MMT of the total and barley a further 4.48 MMT. In addition they've now cut 476k hectares of winter OSR, producing 958 TMT to date.
Kazakhstan said that they will produce an 18 MMT grain crop this year (in bunker weight), versus 18 MMT in clean weight last year.
At home, the HGCA said that early UK barley yields "are above average whilst the first winter oilseed rape yields are close to average." They did however note that this information is based on a very small sample size, even though the limited progress made so far is in line with typical harvest years. UK growers will be anxiously monitoring the weather in the days ahead then, with heavy and widespread thunderstorms forecast for the weekend.
Israel bought 108 TMT of corn and 50 TMT of feed wheat in a tender, both were said to have been of Black Sea origin.
The pound pared recent strong gains against the euro and US dollar, that pushed the UK currency to a 2 1/2 year high against the former and a 6 year high versus the latter this week. Nevertheless, the outlook for the BOE to be the first major central bank to break ranks and raise interest rates before too long continues to underpin sterling.
US interest rates meanwhile are stuck at zero, whilst European Central Bank president Mario Draghi has recently said that Eurozone interest rates will stay at 0.15% for an "extended period" of time.
A prolonged period of sterling strength will of course do nothing for UK export hopes/needs in 2014/15, whilst serving to only make imports of corn from Europe and the FSU even cheaper.
That leaves UK growers caught between a rock and a hard place, with cereal prices now below the cost of production and with them having what one domestic trader suggested was "the lowest percentage (forward) sold in living memory".
Back to "outside influences"....
The late and developing breaking news concerning the downed Malaysian airplane might govern price movements in the next few days, or even for longer.
How long that influence will last is anybody's guess, I personally suspect not for that long. It's a reminder that outside news, often totally unconnected with the grains markets, can ultimately have an influence on where prices go, at least in the short-term. Crimea, Chernobyl, Fukushima etc...
Chicago Corn Rebounds From 4-Year Lows, Soy Up From 2 1/2 Year Dip
16/07/14 -- Soycomplex: Beans closed higher, consolidating recent losses - last night's close had been the lowest for a front month since Jan 2012. The USDA announced a 120 TMT sale of old crop US beans to China under the daily reporting system, along with 240,000 MT of US new crop beans sold to unknown. Additional support came from news that in Argentina Rosario port workers will begin striking tonight. In the US Midwest "unseasonable coolness is expected to persist a few more days, before gradual warming on the weekend," according to Martell Crop Projections. Yet the market seems very relaxed about these cool and wet conditions, at least for the time being, viewing them as non-threatening and better than too hot and dry. "Very favourable crop reports from Midwest producers are surprising given the extremely wet field conditions. June rainfall ranked among the highest on record leading to lowland flooding in corn and soybeans," Martell Crop Projections added. South Korea's MFG are tendering for 55,000 MT of soymeal from the US, South America and/or China for Dec-Jan shipment. APK Inform said that Ukraine would produce a record 3.4 MMT of soybeans this year, up from 3.2 MMT estimated previously and 26% higher than 2.7 MMT a year ago. Aug 14 Soybeans closed at $11.87 1/4, up 6 3/4 cents; Nov 14 Soybeans closed at $11.02, up 15 3/4 cents; Aug 14 Soybean Meal closed at $383.70, up $4.60; Aug 14 Soybean Oil closed at 36.83, down 7 points.
Corn: The corn market closed around 4-5 cents higher, recovering most of yesterday's losses that took prices down to 4 year lows. There are question marks over exactly how benign/non threatening Midwest cool and wet conditions are for corn. "A large cool air mass dominates the Midwest. Temperatures this morning bottomed out in the low 40s F in the northern Midwest, threatening to break records. Typical night minimums in mid July would be low 60s F. Corn development would be set back by coolness, most concerning in the northern Midwest where the growing season is short," said Martell Crop Projections. The USDA announced 210,448 MT of US new crop corn sold to unknown. South Korea's Kocopia bought 55,000 MT of optional origin corn for Dec shipment. US ethanol production hit 943,000 barrels per day last week, up 16,000 bpd on the week prior. The EU announced that it was increasing the EU corn import tariff from zero (where it has been since 2010) to EUR5.32/tonne (around $7.20/tonne). Ukraine currently have a duty-free quota to export 400 TMT of corn to Europe that lasts until the end of October. There's some talk that the EU duty increase will trigger some buying of Ukraine corn, although the cheapest new crop offers are for the Nov/Dec shipment period (now down to around $190/tonne FOB). It may be that the EU will grant Ukraine a further duty free quota beyond the existing Oct 31 deadline, or that EU buyers will simply wait for Ukraine prices to fall another $7.20/tonne to absorb the difference. They've already dropped $20/tonne in the past week, according to Agritel. Sep 14 Corn closed at $3.78 1/4, up 4 1/4 cents; Dec 14 Corn closed at $3.86 3/4, up 5 cents.
Wheat: The wheat market closed narrowly mixed. Jordan passed on a tender for 100 TMT of hard wheat and immediately re-issued another one. Algeria were said to have bought 810 TMT of EU wheat, most if not all of it probably of French origin, for Oct-Nov shipment. They are also now tendering for optional origin barley for Nov shipment. There should be plenty of sellers, Reuters are reporting that Strategie Grains will "significantly raise" its estimate for the 2014 EU barley crop in it's regular monthly production update due out tomorrow. Turkey’s TMO bought 235,000 MT of wheat for Aug-Oct shipment, along with 200,000 MT of barley for Aug-Sep. Japan seeks 112,709 MT of wheat for Aug–Sep shipment of US and Australian origin. The Russian Ag Minister said that their 2014 grain harvest could exceed the 100 MMT mark, versus 92.4 MMT last year and up from a previous forecast of 97 MMT. Other analysts are not quite so optimistic, although SovEcon and IKAR did both also raise their estimates today as well. SovEcon now go for a figure of 92-93 MMT and IKAR 98 MMT. ProZerno said that 84% of the 2014 wheat harvest in Russia's Krasnodar region is of milling quality, up from 73% a year ago. New crop Russian 11.5% milling wheat FOB the Black Sea is said to be offered around $239/tonne FOB, with 12.5% milling wheat at around $10/tonne more. Ukraine offers are typically a few dollars below those levels, but buyers seem to have more faith in Russian quality for the time being. Sep 14 CBOT Wheat closed at $5.38, up 1/4 cent; Sep 14 KCBT Wheat closed at $6.37 1/4, down 1 3/4 cents; Sep 14 MGEX Wheat closed at $6.28, down 2 1/2 cents.
EU Grains Attempt Modest Recovery Following Recent Rout
16/07/14 -- EU grains closed mostly higher for once, in consolidation/bargain hunting following the recent rout.
The day ended with new crop Nov 14 London wheat closing GBP0.45/tonne firmer at GBP129.25/tonne, Nov 14 Paris wheat was EUR2.00/tonne steadier at EUR179.00/tonne, Aug 14 Paris corn was up EUR0.50/tonne to EUR168.00/tonne and Aug 14 Paris rapeseed was EUR4.25/tonne easier at EUR325.75/tonne - another new 4 year low.
It's still far to premature to call this a recovery. The pound rose to it's highest levels against the euro in almost 2 years today, which will hinder the chance of any UK cereal exports in 2014/15. Despite the weaker euro, Paris wheat also remains anchored below key support at EUR180/tonne.
The Spanish Ag Ministry said that wheat production there (excluding durum) would only total 5.5 MMT this year. That's down from their previous estimate of 5.9 MMT and 18% lower than 6.7 MMT a year ago. The 2014 Spanish barley crop will only total 6.7 MMT versus 7.9 MMT previously and 10.1 MMT a year ago, they added.
On the flip side, Russia's Ag Ministry now estimate the 2014 grain crop there at over 100 MMT versus 92.4 MMT a year ago. Is this at least partly due to a bout of "my Dad is bigger than your Dad" bravado following the recent spat with Ukraine? SovEcon opt for a more modest 90 MMT, including 50 MMT of wheat and 12 MMT of corn - even if the latter is a record volume. APK Inform estimate the Russian grain crop at 93.6 MMT, of which 52 MMT will be wheat, 16 MMT barley and 11.8 MMT corn.
Rusagrotrans said that Russia will export 2.0-2.3 MMT of grains in July, up from a previous estimate of 1.8-2.0 MMT, but less than the 2.53 MMT exported in the same month in 2013. That's probably due to the Russian harvest being delayed by rain.
The Russians have harvested 22.2 MMT of grain so far versus 26.1 MMT a year ago, although average yields are reported to be up nearly 16% at 3.53 MT/ha by the Russian Ag Ministry.
Wheat now accounts for 18.5 MMT of that total, off 20.4% of the planned area, they say.
At home, the Farmers Weekly website said that the UK harvest was underway in the south west, where early yields and quality are "reasonably promising" for barley and OSR. The OSR harvest in Essex is already estimated to be 50% complete, with "rapid progress" being made. The wheat harvest in the county though is probably still 7-10 days away, they added.
UK customs data shows that we imported over 182 TMT of wheat in May, a seven month high, along with close to 200 TMT of corn. That takes the 2013/14 seasonal total to almost 2MMT of wheat and nearly 2.3 MMT of corn, beating Defra forecasts for both with one month's worth of figures still to come.
Falling world grain prices mean that the EU Commission have set the import duty on corn, rye and sorghum at EUR5.32/tonne versus zero previously. Currently 400 TMT of Ukraine corn is still allowed to be imported into the EU levy free (to Oct 31 of this year) under a beneficial agreement with Kiev.
Ukraine are also forecasting a second bumper crop production program in a row. Again, could there also be a political motivation behind this? Whether the answer is yes or no, for the time being at least this is driving local prices lower.
Agritel report that new crop Nov/Dec Ukraine corn is currently offered in the market at $183-188/tonne FOB the Black Sea (the UK equivalent of around GBP107-110/tonne), with prices having fallen $20/tonne in the past week. They also say that Ukraine 11.5% milling wheat is offered at $235-238/tonne, circa GBP138-139/tonne, with 12.5% milling wheat at $250/tonne which is around GBP146/tonne.
Reuters reported that Algeria's state grains agency has purchased 810,000 MT of milling wheat, likely from France, at $268-269.50/tonne C&F (circa GBP157/tonne including freight).
US Grains Markets Mostly Lower
15/07/14 -- Soycomplex: Beans closed mixed, lower nearby to flat further forward. The USDA announced the sale of 120,000 MT of US beans sold to China for 2014/15 shipment, although this is just routine business. The USDA says that China will import 73 MMT of soybeans in 2014/15. To do that they need to buy 280,000 MT each and every day of a 5-day week for the entire year (no holidays allowed!). The Chinese government only sold 59,692 MT of the 352,740 MT of soybeans on offer at auction. Dr Cordonnier estimated the 2014 US soybean yield at 45.0 bu/acre, unchanged from his previous estimate. He said that he expects Brazil’s 2014/15 soybean planted area to increase by 2-4%. Aug 14 Soybeans closed at $11.80 1/2, down 16 1/2 cents; Nov 14 Soybeans closed at $10.86 1/4, unchanged: Aug 14 Soybean Meal closed at $379.10, down $9.50; Aug 14 Soybean Oil closed at 36.90, up 2 points.
Corn: The corn market closed around 5-7 cents lower, setting fresh 4-year lows. Dr Cordonnier estimated 2014 US corn yields at a record 167.0 bu/acre versus his previous estimate of 165.0 bu/acre and the USDA's 165.3 bu/acre. Morgan Stanley went for a figure of 165.6 bu/acre. Dr Cordonnier said that he expects Brazil’s 2014/15 total corn planted area to decrease by 2-4%. He said that corn prices in Mato Grosso are way below the cost of production at the equivalent of around $2.33/bu, and that local growers are asking the government for help. The supposed minimum price guaranteed by the government is around $2.80/bu, although the cost of production is said to be somewhere in the $3-3.50 range. IMEA estimated Mato Grosso's 2013/14 corn output at 17.09 MMT versus a previous estimate of 15.41 MMT. There's talk that rather than support farmers in the state, that the Brazilian government may start auctioning off up to 5 MMT of it's own stocks as early as next month. Sep 14 Corn closed at $3.74, down 7 1/2 cents; Dec 14 Corn closed at $3.81 3/4, down 6 1/2 cents.
Wheat: The wheat market closed flat to 8 cents lower across the three exchanges. Russian wheat was the best priced in an Iraqi tender for hard wheat. US wheat was comfortably out-priced. Russia's grain harvest is progressing quite well, with average yields significantly ahead of year ago levels. Ukraine yields are also up on a year ago. Ukraine's statistics office said that the country's July 1st grain stocks were at 7.0 MMT, down 20% from a year ago. The total including 2.4 MMT of wheat, 2.1 MMT of barley and 2.2 MMT of corn. The Canadian Wheat Board estimated that 3.5- 4.0 million acres of all crops in Canada may have been lost due to flooding. The market seems to largely be ignoring this issue for the time being. Jordan is closing a tender for 100,000 MT of optional origin milling wheat tomorrow. An Israeli wheat tender also closes tomorrow. US origin wheat is unlikely to feature in either. Sep 14 CBOT Wheat closed at $5.37 3/4, unchanged; Sep 14 KCBT Wheat closed at $6.39, down 7 1/4 cents; Sep 14 MGEX Wheat closed at $6.30 1/2, down 8 3/4 cents.
EU Grains Mostly Lower Again
15/07/14 -- EU grains closed mostly lower, as the fall out from last Friday's bearish USDA report continues.
New crop Nov 14 London wheat finished GBP0.90/tonne lower at GBP128.80/tonne, Nov 14 Paris wheat was down EUR1.75/tonne to EUR177.00/tonne, Aug 14 Paris corn was unchanged at EUR167.00/tonne and Aug 14 Paris rapeseed finished EUR1.50/tonne weaker at EUR330.00/tonne.
Paris wheat slumped to a fresh 2 1/2 year low as an attempt to rally back up above the psychologically important EUR180/tonne level failed, whilst for London wheat this was a new 4 year low.
The minutiae of Friday's USDA report reveals improved crop production prospects for parts of Europe, including the UK and Germany, along with Ukraine.
The USDA raised their forecast for the UK wheat crop in 2014 from 15.15 MMT to 15.30 MMT, a 28% jump on last year. They also increased the potential size of the German wheat crop from 24.3 MMT to 25.6 MMT and raised Ukraine by 1 MMT to 21 MMT.
Although they left their estimate for the UK 2014 barley crop unchanged from last month at 5.9 MMT, they raised their outlook on Germany's barley production from 10.22 MMT to 10.58 MMT, and increased Ukraine's barley output from 7.0 MMT to 7.8 MMT.
Russia said that it had now harvested over 20 MMT of grain, with average yields coming in at 3.55 MT/ha, a rise of over 15% versus 3.08 MT/ha this time a year ago.
On a national level the Russian wheat harvest is said to be 16.4% complete at 14.9 MMT, with the barley harvest 7.7% done producing a crop of 2.4 MMT so far.
The Ukraine 2014 grain harvest has produced more than 12 MMT so far, including 7.6 MMT of wheat where yields are averaging 3.2 MT/ha, and 4.3 MMT of barley at 2.77 MT/ha. Average grain yields this time a year ago were only 2.7 MT/ha.
Yields should improve as the harvest progresses into the generally more productive areas, said Agritel. They raised their forecasts for both Russian and Ukraine wheat production this year, although suggested that around only 50% of the Ukraine crop might make milling standard as opposed to 70% last year.
Russian origin grain was said to be the cheapest offer in an Iraqi tender for 50,000 MT of hard wheat at $308.58/tonne CIFFO. Ukraine wheat was offered at $311.15/tonne versus Canadian at $324.59/tonne, Australian at $343/tonne and US wheat at $362.96/tonne.
Ukraine new crop corn prices continue to tumble, with FOB offers now said to be around $192/tonne, the equivalent of around GBP112/tonne.
Chicago Markets Recover Some Of Friday's Steep Losses
14/07/14 -- Soycomplex: Beans closed higher, with the best grains on the deferred positions. This could probably be attributed to a correction from Friday night's steep looses. Weekly export inspections of 115,280 MT beat expectations of 30,000 – 75,000 MT. Year to date inspections are now 42.8 MMT. Safras e Mercado said that as of Friday Brazil has sold 82% of their 2013/14 bean crop versus 84% a year ago and in line with the five year average. A Porto Alegre marketing analyst was said to have estimated Brazil’s 2014/15 soybean planted area at 76.5 million acres, up 2.9% versus 2013/14. CitiGroup forecast the Q4 average price of US soybeans at $10.50/bushel. The USDA held pat on their soybean crop condition ratings, pegging 72% of the crop as good/excellent (although there was a subtle one point increase in the excellent category). This is said to be the highest rating in 20 years. A year ago 65% of the crop was rated good/excellent. They said that 41% of the crop is blooming versus 24% a week ago and the 5-year average of 37% and compared to 24% this time last year. "With beans blooming earlier, we could be adding more pods yet this will put a little more pressure on end of July weather to see normal rainfall to support early pod fill," said Benson Quinn Commodities. Jul 14 Soybeans closed at $12.95, down 3/4 cent; Nov 14 Soybeans closed at $10.86 1/4, up 11 1/4 cents; Jul 14 Soybean Meal closed at $421.50, down $0.30; Jul 14 Soybean Oil closed at 36.75, up 4 points.
Corn: The corn market closed mixed, lower at the front end but a little higher on new crop. Weekly export inspections of 926,329 MT were in line with trade expectations. Year to date exports are now 40 MMT. A Porto Alegre marketing analyst was said to estimated Brazil’s 2014/15 total corn planted area at 38.8 million acres, down 0.1% versus 2013/14. Israel are tendering for 108,000 MT of optional origin corn for Sept-Oct shipment. CitiGroup forecast the Q4 average price of US corn at $3.70/bushel. The USDA increased their estimate for the proportion of the 2014 US corn crop rated good/excellent from 75% to 76%, up 10 points versus 12 months ago. As with soybeans, this is the highest rating for corn at this point in the season since 1994, and one that Benson Quinn said was "almost unimaginable for this time of the year." The USDA said that 34% of the crop was at the silking stage, up from 15% last week (and also compared to 15% this time last year). This is one point ahead of the 5-year average. China continues it's "hard line" stance on GMO corn. The China Times apparently reported over the weekend that China may reject new types of GMO corn this year due to safety concerns. The USDA forecast a record Chinese corn crop of 222 MMT on Friday. The Chinese government continue to attempt to "clear the decks" of substantial volumes of state-owned corn reserves. Their stance on GMO will likely remain tough whilst they try to offload these. Jul 14 Corn closed at $3.90 1/4, down 9 1/2 cents; Sep 14 Corn closed at $3.81 1/2, up 3 1/4 cents.
Wheat: The wheat market closed higher, with the thinly traded and expiring Jul 14 contracts putting in some "off the wall" closes. Weekly export inspections were a bit disappointing at 377,520 MT versus 470,372 MT a week ago. The marketing year to date total is now 2.7 MMT versus 3.75 MMT this time a year ago. Israel are tendering for 50,000 MT of optional origin wheat for Aug-Oct shipment. Lebanon bought 7,000 MT of Black Sea origin milling wheat. Indonesian buyers were also said to have bought Black Sea milling wheat. Russia, Ukraine and Romania all remain active in the new crop export market. CitiGroup forecast the Q4 average price of US wheat at $5.10/bushel. China’s National Bureau of Statistics estimated China’s 2014 summer grain crop at 136.6 MMT, up 3.6% versus 131.85 MMT in 2013. Russia's grain harvest now stands at 17.9 MMT, including 13.3 MMT of wheat. Russian wheat yields are said to be averaging a 12% increase on this time last year. The USDA estimated the 2014 US winter wheat harvest at 69% done versus 57% a week ago, 66% a year ago and 68% for the 5-year average. They said that the top producing state of Kansas is now 90% done. Spring wheat rated good/excellent was left at 70%, the same as last week and also matching that of a year ago. They estimated that 69% of the crop was headed, up from 47% a week ago, one point ahead of the 5-year average and two up on a year ago. Sep 14 CBOT Wheat closed at $5.37 3/4, up 11 3/4 cents; Sep 14 KCBT Wheat closed at $6.46 1/4, up 10 cents; Sep 14 MGEX Wheat closed at $6.39 1/4, up 11 1/4 cents.
EU Grains: Same Story Different Day
14/07/14 -- EU grains markets finished mostly lower again, extending the recent theme. Nov 14 London wheat set a fresh contract lifetime low, and also finished at a fresh lowest close for a front month in almost 4 years.
The day finished with Nov 14 London wheat down GBP0.85/tonne at GBP129.70/tonne, Nov 14 Paris wheat ended EUR1.75/tonne lower at EUR178.75/tonne, Aug 14 Paris corn was down EUR1.50/tonne at EUR167.50/tonne, whilst Aug 14 Paris rapeseed managed a EUR0.25/tonne rise to EUR331.50/tonne although all other months were lower.
As well as London wheat setting various significant lows, this was also the lowest front month close on Paris wheat since November 2011 as the future ended the day below critical long-term support at EUR180/tonne. A sustained period below this level would be seen as very bearish. In addition this was the lowest front month close on Paris corn since November 2013.
Harvest pressure, and the outlook for bumper EU and global grain and oilseed production in 2014/15, together with a delayed reaction to Friday night's sharply lower close in Chicago, all conspired to drive European markets to fresh lows.
The Russian grain harvest now stands at 17.9 MMT, with average yields up 14% on this time a year ago at 3.53 MT/ha. Wheat accounts for 13.3 MMT of that total off 14.8% of the intended area, with yields of 3.6 MT/ha representing a 12% increase on 2013. Barley accounts for a further 2.4 MMT off 7.4% of the planned area. Russian growers have also harvested 246 TMT of rapeseed off 12.4% of the planned area.
Belarus forecast that they would harvest a record 10 MMT grain harvest this year.
Oil World estimated the 2014 EU-28 rapeseed crop at 22.7 MMT versus a previous estimate of 22.4 MMT and up 7% compared to the 2013 crop of 21.2 MMT.
They see production in Germany at 5.9 MMT versus 5.8 MMT in 2013, with France contributing a further 5.2 MMT, up 18% versus 4.4 MMT a year ago.
The 2014 Polish rapeseed crop this year will amount to 2.8 MMT, the same as last year. The UK will be Europe's fourth largest producing nation with a crop of 2.5 MMT, a 19% rise on 2.1 MMT a year ago, they added.
Grain exports out of the Black Sea are starting to pick up. The Ukraine Ag Ministry said that the country had exported 586,000 MT of grain between Jul 1st – Jul 11th. Russian grain exports for the period Jul 1st - Jul 9th were 466,000 MT.
Ukraine corn was said to be offered at EUR164/tonne CIF Northern Spain for November shipment, that's the equivalent of around GBP131/tonne including shipping costs. Ukraine new crop corn offers FOB the Black Sea are now said to be down to $195/tonne, which is less than GBP115/tonne.
Chicago Markets Crash Lower Following USDA Report
11/07/14 -- Soycomplex: Beans crashed below USD13/bushel for the first time on a front month since the early days of February. The USDA report was expected to be bearish, and they didn't disappoint. Yet, despite front month Jul 14 closing 34 cents lower, it actually ended up in the middle of the day's trading range. The contract was over 80 cents down at one point, and Aug 14 meal, despite ending with losses of $11.50, was actually more than $10 off the lows of the day. The main bearish surprise for beans was a rise in old crop ending stocks to 140 million bushels versus the 128-130 range expected. New crop ending stocks were pushed sharply higher, to 415 million. The trade had been looking for a number in excess of 400 million, so whilst not a surprise as such, actually seeing it on paper maybe added a bit more of a bearish tone as these would be the highest since 2006/07. US 2014 soybean yield potential was left unaltered at 45.2 bu/acre. They implied that production last year may have been understated. They raised their projections for the US crush "reflecting increased domestic soybean meal disappearance in line with adjustments for 2013/14 and higher US soybean meal exports" and also their estimate for US soybean exports. World 2014/15 soybean ending stocks were estimated at a record 85.3 MMT. The US 2014 soybean crop was raised from 98.93 MMT to 103.42 MMT, reflecting the increased plantings forecast in the Jun 30 Acreage Report. Chinese demand in 2014/15 was raised from the 72 MMT forecast in June to a new record 73 MMT, which is 4 MMT higher than in 2013/14. Price expectations for beans and the by-products were all reduced, with 2014/15 soybeans forecast trading in the range $9.50 to $11.50, with meal prices at $350 to $390 and oil in the region of 36-40 cents/pound. "Global oilseed production for 2014/15 is projected at a record 521.9 MMT, up 5.8 MMT from last month with soybeans and rapeseed accounting for most of the change," they said. The bulk of the increase for soybeans came from the US. Canada's and Australia's rapeseed production potential was also raised. Jul 14 Soybeans closed at $12.95 3/4, down 34 cents; Nov 14 Soybeans closed at $10.75, down 18 cents; Jul 14 Soybean Meal closed at $421.80, down $12.50; Jul 14 Soybean Oil closed at 36.71, down 68 points. For the week, that puts front end beans 92 cents lower, with meal down $25.20 and oil losing 185 points lower.
Corn: The corn market ended around 7-8 cents lower, save for front month Jul 14 which finished with only nominal losses. Even so that was still enough to take it below $4/bu. A front month hasn't finished that low since August 2010. In fact the first four months on the board are now all sub-$4/bu. The USDA report wasn't as bearish for corn as it was for soybeans and wheat, with most of the numbers coming in at around (or even below) trade estimates. For a start they didn't raise their forecast for US corn yields this year. Whilst the unchanged figure of 165.3 bu/acre is a record, the average trade guess was for a tweak upwards to around the 166 bu/acre level. "Favourable early July crop conditions and weather support an outlook for record yields across most of the Corn Belt, however, for much of the crop, the critical pollination period will be during middle and late July," they noted. Maybe that was a hint that yield potential could eventually be increased in future reports if the weather continues to co-operate for the rest of the month? They dropped their forecast for the US 2014 crop by 75 million bushels, reflecting the lower planted area already reported at the end of June. That sees production at 13,860 million bushels, which is 65 million bushels below last year’s record. Old crop US ending stocks were expected to rise to 1.233 billion bushels, with new crop stocks at something like 1.8 billion. The actual numbers given today were 1.246 billion and 1.801 billion. World corn ending stocks were raised to 188 MMT versus 182.65 MMT a month ago. China's corn crop was raised 2 MMT to a record 222 MMT, their import needs were seen unchanged at 3 MMT, with their ending stocks rising more than 2 MMT to 80.36 MMT. "The projected range for the season-average US corn price is lowered 20 cents on each end to $3.65 to $4.35 per bushel," they forecast. Jul 14 Corn closed at $3.99 3/4, down 3/4 cent; Sep 14 Corn closed at $3.78 1/4, down 8 cents. For the week that puts Jul 14 corn down 17 1/4 cents, with Sep 14 falling 31 1/4 cents.
Wheat: The wheat market closed lower, save for the extremely thin and about to expire front end Jul 14 Minneapolis future. Essentially the USDA said that the short-comings in winter wheat production in the US this year would be more than made up for by a bigger spring wheat crop. "Projected US wheat supplies for 2014/15 are raised this month with a sharp increase in forecast Hard Red Spring (HRS) wheat more than offsetting a decrease for Hard Red Winter (HRW). The HRW crop was damaged by drought and April freezes in the Southern and Central plains; however, the HRS crop in the Northern Plains has benefitted from abundant soil moisture and cooler than normal early summer temperatures. Yields for Durum and other spring wheat are forecast to be
above average," they said. The average trade guess for US all wheat production was 1.964 billion bushels, with ending stocks seen around the 590 million level. The actual numbers given were 1.992 billion and 660 million, both therefore well above trade expectations. The USDA painted a picture of lower domestic wheat usage, reduced exports and therefore higher ending stocks. "Feed and residual use for all wheat in 2014/15 is lowered 15 million bushels to 145 million as tight supplies of HRW wheat and relatively more attractive prices for feed grains reduce expected feed and residual use. All wheat exports for 2014/15 are lowered 25 million bushels reflecting expectations of large world supplies and strong competition in export markets. Ending stocks are projected 86 million bushels higher," they said. World wheat production was raised 3.6 MMT from last month to 705.2 MMT. The Australian wheat crop was raised 0.5 MMT to 26 MMT, although Canada's was lowered a similar amount to 28 MMT. Ukraine's crop was increased 1 MMT from last month to 21 MMT, although again this was matched by a 1 MMT reduction for Kazakhstan to 13.5 MMT. Europe's crop was increased from 146.3 MMT to 147.9 MMT, with a rise of 1 MMT in EU feed usage to 54.5 MMT. The projected season-average farm price range was lowered 40 cents at the midpoint to $6.00 to $7.20 per bushel. Jul 14 CBOT Wheat closed at $5.14 3/4, down 22 cents; Jul 14 KCBT Wheat closed at $6.34 1/4, down 21 1/4 cents; Sep 14 MGEX Wheat closed at $6.28 3/4, down 13 cents. For the week Jul 14 Chicago wheat was down 53 1/4 cents, with Kansas falling 62 3/4 cents.
