Nogger's Blog

31/07/15 -- Soycomplex: Beans closed lower, following a USDA announcement that China had cancelled 200,000 MT of US old crop soybean purchases. Not that that should really make much difference, US exporters have already shipped more than the USDA's current target for the season anyway. China's appetite for specifically US beans for 2015/16 delivery is a different matter, and that is what the trade is most concerned about right now. New crop soybean sales are off to the slowest start in six years, down 50% on where they were a year ago, according to Reuters. Concerns over the state of the Chinese economy have been to the fore this week. The Shanghai Composite Index ended the month 15% lower than it began it, the largest monthly fall since August 2009, according to Bloomberg. Weakness of the Brazilian real and Argentine peso mean that what beans China does buy for 2015/16 delivery will be more likely to be of South American origin. With another record Brazilian crop expected to be planted later this year, and at least a near record Argentine crop being forecast, the pressure will be on US beans to compete. Of course the Chinese won't put all their business that way, there are quality and logistical considerations to take into account. Some US purchases will be a useful hedge against potential problems like strikes, shipping delays etc, and we are still talking about a crop that isn't even in the ground yet in Latin America. It remains a fact though that Chinese soybean imports in the first half of this year included more beans from South America and less from the US than they did in 2014. Two successive years of bumper production will keep Brazil and Argentina in the export market for much longer this year than might normally be the case. A serious weather problem in South America later in the year could change all that of course, but forecasts for a continued El Nino weather pattern to remain in place lean away from that at the moment. Aug 15 Soybeans closed at $9.80 3/4, down 9 1/2 cents; Nov 15 Soybeans closed at $9.40 1/4, down 9 3/4 cents; Aug 15 Soybean Meal closed at $354.60, down $2.50; Aug 15 Soybean Oil closed at 29.98, down 30 points. For the week that puts nearby beans 10 1/2 cents lower, with meal down just 20 cents and oil 30 points easier. A Bloomberg survey into trader/analyst sentiment was very even split, finding 8 bulls, 9 bears and 8 neutral on soybean prices.

Corn: The corn market closed a couple of cents or so lower on the day, but well down on the week. The trade seems to be coming to the conclusion that talk of severe crop damage due to excessive wetness a month or two back was just that, talk. Trade belief that the old adage "rain makes grain" will prove to come true again this year seems to be growing. July is the crucial month for US corn, and this one has proven to be relatively benign temperature-wise. The immediate outlook is for that to continue through until the middle of August. Various crop tours are lined up for next month, so we should have more information on potential yields to go on then. The USDA give us their latest take on production prospects on Aug 12. Prior to that we will get the usual rash of predictions from the likes of Informa, FCStone and Lanworth next week. The USDA announced 108,204 MT of US old crop corn sold to Mexico today. That's just routine business. South Korea seeks 195,000 MT of optional origin corn. FranceAgriMer cut French corn good to very good ratings by 3 points from a week ago to 59% - making for a 22 points decline in the past 4 weeks. This time last year 84% of the crop was rated in the top two categories. The proportion of the crop rated poor to very poor is 16%, which is four times what it was a year ago. The French authorities have now put water restrictions in place in 67 of the country’s 96 mainland departments due to drought, say Bloomberg. "31 departments had restrictions at crisis level, meaning that the authorities had implemented the most severe level of curbs including a ban on the use of water for agriculture," they said. Although the outlook for the French corn crop has been the one that has deteriorated the most in July, they are not alone. Rainfall in Hungary has been almost 30 percent below normal in the past three months, according to a separate Bloomberg report. The EU Commission today trimmed their forecast for this year's EU corn crop by 4.3% from their June estimate to 65.49 MMT. A Bloomberg survey earlier in the week provisionally came up with an average trade estimate of only 63.3 MMT. In Brazil, IMEA said that the safrinha corn crop in the leading producing state of Mato Grosso is 65% complete, up 15 points for the week, although still 3 points behind a year ago. They forecast this year's second crop for the state at 20.3 MMT. They said that the weak Brazilian real means though that production costs are up around 13% with regards to plantings for 2015/16, which may have a negative impact on output next year. Sep 15 Corn closed at $3.71, down 2 1/4 cents; Dec 15 Corn closed at $3.81 1/4, down 2 1/2 cents. For the week, both contracts shed 21 1/2 cents. The Bloomberg survey into trader/analyst sentiment on corn prices found 6 bulls, 13 bears and 6 neutral.

Wheat: The wheat market closed mixed on the day, but lower for the week. Support from yesterday's better than expected weekly export sales total was only fleeting. At just under 700 TMT, apart from the "technical" first week of the new 2015/16 marketing year when the books are switched around, these were amazingly the best outright sales total for 44 weeks! The strong US dollar continues to hamper export sales in general, and the hint this week that a US interest rate rise is on the cards later this year looks likely to see that trend continue. Meanwhile the respective currencies in competing exporting nations, such as Europe, Russia and Ukraine are all weak. US wheat therefore appears caught between a rock and a hard place. The EU has issued 1.6 MMT of soft wheat export licences in the first four weeks of the new marketing year. That's an increase of 23% on the same point last year, when as we all know exports went on to break all previous records. The heat and dryness issues that appear to be a problem for EU corn this year seem to have come just a little too late to be too detrimental for the wheat crop. FranceAgriMer said today that this year's French wheat crop was 70% harvested as of Monday, 5 points ahead of this time last year. The winter barley crop is already fully harvested and the spring crop is 75% done compared to 59% complete this time last year. Quality is said to be pretty good, in the case of wheat certainly better than last year's extremely variable crop that required the rule book concerning futures specifications to be re-written. The wheat harvest is slowly underway in Germany, and production could fall 15% from last year's record 27.75 MMT to 23.58 MMT, according to the government's Stats Office. Russia said that their 2015 grain harvest is 23.5% complete on 11.0 million ha, producing a crop of 37 MMT to date. Wheat accounts for 29.4 MMT of that total and barley a further 4.3 MMT. Ukraine said that their early grains harvest is 78% complete on 8.0 million ha producing a crop of 27.3 MMT to date. That includes 19.8 MMT of wheat and 6.9 MMT of barley. The Ukraine Meteorological Office forecast this year's grain crop at 59 MMT, which is 1.5 MMT below their previous estimate. The Ukraine Ag Ministry predict output at 60 MMT and exports in 2015/16 of a record 37 MMT. Sep 15 CBOT Wheat closed at $4.99 1/4, up 2 3/4 cents; Sep 15 KCBT Wheat closed at $4.92 1/4, up 1 1/4 cents; Sep 15 MGEX Wheat closed at $5.23 1/2, down 3 1/4 cents. For the week that puts Chicago wheat 12 1/2 cents, with the Kansas market down 15 cents and Minneapolis losing 21 1/2 cents. The Bloomberg survey into trader/analyst sentiment on US wheat prices found only 5 bulls, 11 who were bearish and 9 that were neutral.