Nogger's Blog

23/06/15 -- Soycomplex: Beans, meal and oil all closed with small losses on the nears, although there were some minimal gains in some of the deferred positions. The latter probably came as a result of concerns over the US weather. Whilst a reduction of 2 percentage points in the good to excellent category by the USDA last night was in line with market expectations, some states showed much sharper declines that that. Ohio was down 14% in the G/E category, Indiana fell 13% and Illinois was cut 10%, and of course these are not insignificant soybean producing states. As far as plantings go, 90% complete is the slowest pace since 1996, according to Bloomberg. Last night's report suggested that there were still around 8.5 million acres of soybeans still to be sown in the US this year, using the USDA's March planting intentions estimate. That includes around 4 million in Missouri/Kansas and Nebraska, plus approximately another 0.5 million in Illinois. Despite these problems, Allendale estimated US soybean plantings this year at 85.105 million acres versus the USDA's March figure of 84.635 million. Rabobank said that they still expect US plantings to beat the March USDA figure by around 1 million acres. Futures International forecast 2015 US soybean yields to average 44 bu/acre, which is 2 bu/acre less than the USDA. Oil World said that Europe imported 4 MMT of soybeans Mar/May, up 21% from a year ago. Meal imports were down slightly at 5.26 MMT. The largest bean supplier was Brazil with 2.37 MMT, followed by Paraguay at almost 1 MMT. China said that they'd imported 6.127 MMT of soybeans in May, up 3% from a year previously. Brazil at 5.427 MMT was easily the largest supplying nation. Rabobank estimated China's 2014/15 soybean imports at 73.5 MMT, rising to a record 77.5 MMT in 2015/16. They forecast Q4 2015 Chicago soybeans at an average of $8.90, rising to $9.00 in Q2 of next year. Meal prices were estimated averaging $295 in the final quarter of this year, rising to $310 in Q2 of 2016. If they are correct then the market is currently overvalued. Jul 15 Soybeans closed at $9.87 1/2, down 2 cents; Nov 15 Soybeans closed at $9.60 3/4, up 1 1/4 cents; Jul 15 Soybean Meal closed at $331.90, down $1.70; Jul 15 Soybean Oil closed at 32.82, down 10 points.

Corn: The corn market closed around 7-8 cents higher. Deteriorating crop conditions, especially in the eastern corn belt likely prompted some short-covering today. Last night's USDA report, whilst only cutting overall conditions by 2 percentage points in the good to excellent category on a national level, sliced 19% off the top two categories in Ohio, cut Indiana 15%, North Carolina was dropped 11% and Illinois decreased by 6%. Fund money was estimated as finishing the session a net buyer of around 16,000 contracts. Spillover support from surging wheat was likely another supportive factor today, although you could debate that a rain-ravaged, low quality US wheat crop is in fact more of a direct competitor with corn than if it came in of milling wheat standard. Rabobank estimated the US 2015 corn area at 89.2 million acres, the same as the USDA's March forecast. They said that yields could exceed 163 bu/acre if the weather "continues to be beneficial" - although some would argue that current conditions in some states such as those mentioned above aren't beneficial at all. Allendale estimated US corn plantings far higher at 91.742 million acres this year. The Australian Bureau of Meteorology said that this year's developing El Nino is displaying some characteristics of the previous record event of 1997/98. For the record US corn yields were down marginally that year (-0.4%) and soybean yields were up 3.6%. Rabobank added 2 MMT to their Brazilian corn crop estimate, taking that up to 81 MMT, saying that the safrinha crop looks in great shape. They forecast the Ukraine corn crop at 24 MMT, down 2 MMT on last year. They see China's imports at 3 MMT and said that the EU might import 3 MMT more corn next season due to a reduced domestic crop. They predicted US corn prices to average $3.70 in Q4 of this year, rising to $4.00 in Q2 of next year - slightly below where the market currently trades. Commerzbank are more bullish on corn, predicting US prices at $5.50 in the final quarter of 2015. China said that it had imported 403.9 TMT of corn in May, almost all of which (381.8 TMT) came from Ukraine. Argentine farmers are said to be set to increase sorghum plantings this year by 23%, eyeing China's revitalised interest in the crop, and switching away from wheat plantings. Jul 15 Corn closed at $3.67 1/2, up 7 1/2 cents; Dec 15 Corn closed at $3.81 1/4, up 7 3/4 cents.

Wheat: The wheat market closed with strong gains for a second session, doubtless helped by short-covering. Widespread reports of crop damage to winter wheat on the rain-sodden US Plains was certainly a supportive feature today. So too is the delayed harvest progress, particularly true in Kansas, Missouri, Indiana and Illinois. That is also holding back second crop soybean plantings in those states. Rabobank said that they have a neutral to slightly bullish price view on wheat prices following recent declines. Wheat prices will still face some harvest pressure, but should find a floor soon, they said. They predicted CBOT wheat prices to average $5.20 in Q4 of this year, and $5.30 by Q2 of 2016. The market is currently a little higher than this however. They added 1 MMT to their Russian wheat production estimate, taking that up to 56 MMT, saying that the country should export more than 20 MMT of wheat next season. The crop in Europe was reduced 1 MMT to 148 MMT on dryness in some areas, notably France and Germany. EU wheat exports could fall 10% to around 30 MMT in 2015/16, they said. US wheat exports may struggle to meet the current "optimistic" USDA forecast of 925 million bushels, they added. The Australian Bureau of Meteorology drew a parallel between current El Nino weather conditions and the record 1997/98 previous event. Australian wheat yields fell 12.4% that year. Dr Cordonnier said that Brazil could achieve a record 6.76 MMT wheat crop in 2015/16. Parana state is 82% planted and Rio Grande do Sul is around 33% done, he said. Near neighbours Paraguay are 100% sown, Uruguay is 85% done and Argentina 22% planted, and conditions in all four countries are currently favourable. That will likely reduce Brazil's import needs, and what they do buy will mostly come from their fellow Mercosur trade partners, rather than the US or elsewhere. China said that it imported 367.7 TMT of wheat in May, with Australia and Canada the largest suppliers. They also imported 726.2 TMT of barley, which came mostly from Australia and France. Reuters said that Indian millers had bought 500 TMT of Australian wheat so far this season, and might need to buy a further similar volume to compensate for a lower quality domestic crop this year. They said that new crop French or Russian offers were in line to take a large slice of this potential new business. Jul 15 CBOT Wheat closed at $5.27, up 20 1/4 cents; Jul 15 KCBT Wheat is at $5.39 3/4, up 18 3/4 cents; Jul 15 MGEX Wheat is at $5.81, up 16 3/4 cents.