Nogger's Blog

01/04/15 -- Soycomplex: Beans closed with decent gains, as did the rest of the grains complex. Whether this was simply a case of "new month, new money" remains to be seen. It was also of course a new quarter. Some are already pointing to the fact that there is a seasonal trend for soybean prices to rise in the month of April, having done so in each of the last three years. They added 4.4% in April 2014, 4.5% in April 2013 and 7.1% in April 2012. Was it more of a continued reaction to the fact that the USDA didn't predict such a large switch into beans and away from corn as the market was expecting? The market got a near 1 million extra soybean acres versus 2014, not the 2-3 million it was anticipating, but that's not to say that they won't ultimately end up with the acreage thought. The USDA have underestimated US soybean plantings by between 2-3 million in two of the last three Mar 31 reports. Yet fund money is short beans, and doesn't appear comfortable being so. "Funds were short 44,000 contracts a week ago Tuesday and with additional daily selling into yesterday’s report, it was thought the spec funds were short close to 48,000 to 50,000 contracts," estimate Benson Quinn. The equivalent of 50,000 bushels is 6.8 MMT. Tonight's new crop spread between Nov 15 beans and Dec 15 corn has a price ratio of 2.39:1 versus a 1 1/2-year low of 2.24:1 on the evening prior to the USDA planting intentions report, when the market was seemingly confident it had got it's sums right and was simply awaiting confirmation from Washington. Rabobank don't seem to think that new crop bean prices have a future where they currently lie, estimating the average Q4 2015 price to be below $9/bushel. Dr Cordonnier said that in the leading Brazilian soybean state of Mato Grosso, harvesting is winding down. The west of the state is about 98% done, and the slowest region - the north east - is 77% complete, he said. He says that growers in the state are already 60% sold on this crop, and have even committed to 2% of their 2015/16 production, encouraged by the weak Brazilian real. He estimated this year's crop at 93.0 MMT, unchanged from his previous estimate. He now sees the crop in Argentina at 57 MMT, up 1 MMT from previously. May 15 Soybeans closed at $9.89 3/4, up 16 1/2 cents; Jul 15 Soybeans closed at $9.94 1/2, up 16 3/4 cents; May 15 Soybean Meal closed at $331.90, up $5.10; May 15 Soybean Oil closed at 30.69, up 30 points.

Corn: The corn market ended around 5-6 cents higher. If the market does believe the USDA planting numbers, then presumably it also thinks that the corn acreage is probably correct. It's worth noting then that the USDA have over-estimated the size of US spring corn plantings in 4 of the last 5 years in the Mar 31 planting intentions report. Only in 2012 were they on the low side. In each of the past two seasons they've been 1-2 million acres on the high side. The fact that very early plantings in the Delta region are already way behind normal/last year could lend some weight to the argument that this could indeed be the case again this year. The drifting of the soybean:corn price ratio back towards the 2.4:1 level also is starting to favour later planted, and less input costly beans. It also seems entirely possible that the new Chinese appetite for sorghum could steal a few more acres away from corn that currently predicted by the USDA. Dr Cordonnier now has the Brazilian corn crop estimated at 75.0 MMT, versus a previous estimate of 74.0 MMT. He goes unchanged on Argentina at 23 MMT. The Buenos Aires Grain Exchange raised their forecast for Argentina, also to 23 MMT. They said that harvesting of this year's crop is now 11.4% complete, up 3.9 percentage points in a week. South Korea's KFA bought 63,000 MT of optional origin corn for Nov shipment. South Korea's MFG bought 134,000 MT of optional origin corn for October shipment. Rabobank forecast US corn prices in the final quarter of 2015 to average $3.90/bushel, which is around 4% below tonight's close of the Dec 15 future. The US Department of Energy reported that ethanol stocks fell to 20.5 million barrels in the week ending March 27, down from 21.3 million the previous week. This was the 4th consecutive week of lower stocks, and the 5th in the last 6 weeks. US ethanol production was down slightly at 952,000 barrels/day versus 953,00 bpd the previous week. Also of note "was a rally of around 6% in crude spurred by the EIA reporting its first cut in weekly production since January, output fell by 36,000 barrels," observed Benson Quinn. With a holiday weekend looming, a market correction could be on the cards for tomorrow. May 15 Corn closed at $3.81 3/4, up 5 1/2 cents; Jul 15 Corn closed at $3.90, up 5 3/4 cents.

Wheat: The wheat market continued with it's seesaw ride, posting strong gains that more of less reversed yesterday's losses, which had more or less balanced out Monday's near 20 cent gains! US weather concerns continue to be much talked about. "Much of Kansas is now harmfully dry. Midday forecasts continue to show the same pattern of moisture passing over dry areas, though central Oklahoma saw moisture yesterday and northern areas could see some rain tonight," said Benson Quinn. Wheat in western Nebraska is showing signs of winterkill, according to the Nebraska Wheat Board. The low level of US wheat exports remains a bearish factor, but whilst fund money is heavily short Chicago wheat they continue to buy the dips, adding support. Russia's intervention purchases are finally picking up, as domestic prices decline following the introduction of the wheat export duty on Feb 1. The Russian Association of exporters are warning that current prices and the lack of easily available credit, combined with high seed prices could lead to "mass bankruptcies" in the agri-sector, and sharply lower Russian cereal production this year. One thing grabbing my interest today, although this doesn't seem to have been given much attention elsewhere, was news that India bought 70,000-80,000 MT of Australian wheat for April-May shipment. The delivery period being right in the middle of the Indian harvest. You may recall that there were some reports around a week or two back that unseasonably heavy March rains and hail had caused widespread damage to the Indian wheat crop. The Kazakhstan Ag Ministry estimated the country’s 2015 grain crop at 17.2 MMT, unchanged from last year. They see exports at 7.0 MMT in the current marketing year. Reports out of Ukraine suggest that winter crops in the west of the country are looking promising. It looks like, with Easter coming up, Brussels have brought forwards by a day the release of the latest round of EU soft wheat export licences. Bloomberg are reporting these at 1.07 MMT this past week, up 48% from a week ago. That would take the season to date total to 25.5 MMT, and mean that they've granted over 4 MMT worth of export licences in March alone. Impressive stuff, aided of course by the weak euro. May 15 CBOT Wheat closed at $5.28 1/2, up 16 3/4 cents; May 15 KCBT Wheat closed at $5.72, up 12 3/4 cents; May 15 MGEX Wheat closed at $5.90 1/2, up 14 1/2 cents.