Chicago Grains Dragged Lower By Falling Crude, Demand Switch To South America

13/03/15 -- Soycomplex: Beans closed lower on the day and lower for the week. Today saw a general broad-based commodity sell-off, led by crude oil falling back below $45/barrel on bearish comments that the worst might not be over yet for crude from the US Energy Dept. Goldman Sachs remain bearish on soybeans too, they forecast US prices at $8.75/bushel a year from now - the best part of a dollar below where the March 16 future currently trades. The Buenos Aires Grain Exchange estimated the 2015 soybean crop there at a record 57 MMT, unchanged from it's previous forecast. They indicated that they are still assessing any possible crop losses sustained from the recent flooding in Cordoba and Santa Fe. Lanworth think that the Argentine crop could come in at more than 60 MMT. Brazil's crop is also expected to be a record this year, at somewhere in the 93-95 MMT region versus 86.7 MMT a year ago. The alarming slump in value of the Brazilian real makes selling at current prices for the Brazilian grower a relatively attractive proposition. The real closed at around 3.28 to the US dollar tonight, down sharply from 2.84 just two weeks ago at the end of February and down 40% versus 2.34 a year ago. They haven't even started planting soybeans in the US this year yet, but analysts are already lining up to predict a record area getting sown. Allendale went for 86 million acres earlier this week versus 83.7 million a year ago. Farm Futures Magazine are due out with their estimates next week, before the USDA themselves reveal their planting intentions numbers at the end of the month. The US grower may not be as enamoured with current prices as his Brazilian counterpart, but he won't like the look of corn levels too much either, and be conscious that beans are a less input hungry crop that costs less to grow. Mar 15 Soybeans closed at $9.68 1/4, down 18 1/4 cents; May 15 Soybeans closed at $9.74, down 16 1/2 cents; Mar 15 Soybean Meal closed at $338.00, down $5.50; Mar 15 Soybean Oil closed at 30.19, down 57 points. For the week, front month beans shed 11 cents, meal was $1.00 firmer and oil slumped 95 points.

Corn: The corn market ended sharply lower, encouraged by crude falling back close to the multi-year closing low of $44.45/barrel set in late January. Goldman Sachs are no keener on the price of corn twelve months from now than they are of that for soybeans. Whilst they see beans 8.8% lower than where the Mar 16 future currently trades, their prediction of $3.75 for corn prices twelve months hence is 9.4% lower than tonight's close of the Mar 16 future. "With recently improved weather conditions in South America, global production for 2014/15 should remain ample and we continue to expect prices to moderate from current levels," they said. The Buenos Aires Grain Exchange were unchanged on their forecast for the Argentine 2014/15 corn crop at 22.5 MMT, a 16.6% fall on the 27 MMT collected last year. Harvesting of that is underway, but remains hampered by rain. They estimated the harvest at 3.4% complete, up only 0.7 points on a week ago. The US dollar rallied to its best levels since April 2003 today, which will continue to hamper US export prospects going forward. The plight of the Brazilian real meanwhile will keep helping their exports right in the middle of harvesting of the first corn crop. Dr Cordonnier says that the sharp drop in value of the real is encouraging some Brazilian farmers to take a second look at their planting intentions for safrinha corn. "Some analysts, who were anticipating a reduction of safrinha corn acreage in 2015 due to low prices, have now re-evaluated the situation and are estimating an slight increase in safrinha corn acreage due to improving prices," he says. "This week generally marks the end of the ideal window for planting safrinha corn in Parana. Any corn planted past mid-March runs the risk of cold weather or dry conditions impacting the crop during the important grain filling phase of development resulting in reduced yields," he added. Mar 15 Corn closed at $3.74, down 8 1/4 cents; May 15 Corn closed at $3.80 1/2, down 8 cents. For the week the front month Mar 15 corn fell 5 1/4 cents.

Wheat: The wheat market closed lower, reversing a run of five days of straight gains. Prices still posted decent gains for the week however, which is probably best attributed to short-covering. Talk of dryness on the Southern Plains, and possible significant winterkill issues in northern Kansas are doing the rounds, which has maybe encouraged one or two to get out of their short positions. With the US dollar so firm though, this isn't likely to be a demand-led rally, even if weekly export sales this week were better than expected. Protracted euro weakness keeps driving the bulk of the global wheat buyers to look at Europe as a first option. Strategie Grains forecast the EU-28 soft wheat crop down 5.6% this year at 140.4 MMT, although the still see 2015/16 ending stocks rising to a 10-year high. With most analysts seeing the dollar remaining strong, and the euro weak, world demand looks likely to keep focused on Europe for some time to come. Tunisia bought 92 TMT of optional origin soft milling wheat and 75 TMT of optional origin barley in a tender. Pakistan's 2015 wheat harvest is underway and could reach 26 MMT this year, up 1 MMT from a year ago. The Pakistan government said that they aim to buy 6.6 MMT of wheat for state-owned stocks on the domestic market this year. India's wheat harvest will get going very soon, and is expected to maybe be around 1 MMT lower than last year. India's state-owned stocks are still more than ample. Goldman Sachs predicted Chicago wheat prices at $5.30 three months from now, which is more than 25 cents better than tonight's close of the July 15 future. In Brazil, the weak real means that "the domestic price of wheat has also increased, but not nearly as dramatically as corn due to burdensome supplies of wheat carried over from last year's production. Farmers in the state (of Parana) are still holding 900,000 MT of last year's 3.8 MMT wheat production," said Dr Cordonnier. Mar 15 CBOT Wheat closed at $5.08 3/4, down 4 1/2 cents; Mar 15 KCBT Wheat closed at $5.41 3/4, down 4 3/4 cents; Mar 15 MGEX Wheat closed at $5.54 1/2, down 2 1/4 cents.