Nogger's Blog

08/09/15 -- The overnight grains trade mostly higher this morning, resuming business after US markets were closed for Labor Day yesterday. Will the same vein continue when US traders awake and sit at their desks later? I'm not convinced.

Outside markets offer little in the way of re-assurance this morning. News that Chinese imports dropped 14.3% in August, and that exports fell 6.1% means that the jitters over their economy haven't gone away. Crude oil is down more than a dollar/barrel too this morning.

So where's this morning's support coming from? Bargain hunting I guess, prices are at multi-year lows for wheat, corn and soybeans after all, but that doesn't mean that they can't go lower still.

The combines will be rolling in the US pretty soon, and historically we don't see the US corn or soybean markets bottom until early October. A bit of harvest pressure there could yet be to come, especially if early yields come in anything like decent.

In contrast, the EU harvest is winding down - for wheat, rapeseed and barley at least - and production of all three is looking better than expected. There's still the corn harvest hurdle to get over, but it seems at least like conditions there have at least stabilised, even if production is going to be sharply lower this year.

For sure it looks like the EU will import more corn in 2015/16 - the USDA have it at 15 MMT versus 9 MMT in 2014/15 - but that doesn't help wheat much does it?

French silos are full of wheat, and despite dropping their pants to the tune of $11/tonne in 24 hours that still wasn't low enough for Egypt last week.

Ukraine will be more than happy to supply us with our corn needs, and so too will South America. Meanwhile 11.5% milling wheat prices FOB the Black Sea are only around a dollar or two over those of feed barley.

There's talk of dryness in southern Russia possibly being detrimental to winter crop development, but we won't know much about that until the spring.

ABARES yesterday raised their forecasts for Australia's wheat, barley and rapeseed crops this year too - El Nino, what El Nino? Production of all three will now be higher than year ago levels, they said.

So, with the Northern Hemisphere growing season more or less over that leaves only Argentine wheat as pretty much the one area of real global concern across the next few months.

Why can/could soybeans go lower? If you are a Brazilian grower current prices in the local currency are actually pretty good thanks to the fact that the real has fallen 40% versus the USD since the turn of the year and is down 70% against the US currency in the last 12 months.

Data out today shows that Brazil exported 45.7 MMT of soybeans in the first 8 months (Jan-Aug) of this year. That's more than the volume shipped out in the whole of the 2014 calendar year. And where will most of that have headed? China of course.

Yet another record soybean crop could be on the cards in Brazil again in 2015/16, with plantings forecast to rise around 3%. They'll worry about whether China actually wants it all later.

I'm not getting my bullish head on for anything just yet therefore.

In other news, the BBC and Reuters report this morning that the Egyptian Ag Minister has been arrested on suspicion of corruption immediately after being "told" to resign yesterday.