Nogger's Blog

09/10/15 -- Soycomplex: Beans closed with small gains on the day and for the week. The USDA pared back it's forecast for this year's US soybean harvested area from 83.55 million acres to 82.4 million. The average trade estimate was for a smaller reduction than that, to "only" 82.9 million. The average trade guess of an increase in average yields this year to 47.2 bu/acre proved to be spot on, but the larger than anticipated acreage cut meant that production of 3.888 billion bushels was below the average trade estimate by 20 million bushels. Elsewhere, they raised Brazil's projected 2015/16 soybean production by 3 MMT from a month ago to 100 MMT. "Brazil’s exchange rate is having a significant impact on domestic and global soybean production and trade. Since early October 2014, the value of the real has declined 37 percent relative to the dollar. The current exchange rate, at roughly 4 reals per dollar, means that Brazilian producers are operating under a different set of price signals than their counterparts in the United States," they said. "While US producers have seen the dollar value of soybeans decline 8 percent since last October, Brazilian producers have seen the price in reals rise to near record levels, equivalent to the nearly $15/bu US producers experienced in May 2014," they lamented. Against this backdrop, Brazil's 2015/16 exports were raised almost 2 MMT to 56.45 MMT, whilst America's were lowered by almost 1.4 MMT to 45.6 MMT, now some 10 MMT less than Brazil's. Chinese imports were unaltered at a record 79 MMT. Global 2015/16 carryout was virtually unchanged at a little over 85 MMT (record). They also increased the size of the world rapeseed crop by more than 1.5 MMT to 66.23 MMT, with a 1 MMT hike for Canada and a 0.25 MMT rise for Europe. CONAB estimated Brazil's 2015/16 soybean crop at 100.1-101.9 MMT today, with exports at 53.0 MMT. The USDA announced 360,000 MT of US soybeans sold to China for 2015/16 shipment under the daily reporting system. Nov 15 Soybeans closed at $8.85 3/4, up 4 1/2 cents; Jan 16 Soybeans closed at $8.90 1/2, up 4 1/4 cents; Oct 15 Soybean Meal closed at $306.90, up $3.10; Oct 15 Soybean Oil closed at 28.17, unchanged. For the week front month beans added 11 1/2 cents, with meal gaining $8.40 and oil adding 33 points.

Corn: The corn market closed around 8 cents lower on the day, erasing entirely previous gains during the week. The USDA put 2015/16 US corn production at 13.555 billion bushels, using an 80.7 million harvested acres estimate and a national average yield of 168 bu/acre. The trade was expecting production of 13.504 billion bushels versus 13.585 billion previously, acreage at 80.826 million (down from 81.101 million previously) and yields at 167.1 bu/acre versus 167.5 bu/acre in September, so all three numbers were above trade ideas heading into this report. Corn production in Brazil was raised 1 MMT to 80 MMT, whilst Argentina was lowered by a similar amount to 24 MMT. Ukraine's crop was cut 2 MMT to 25 MMT, although on current evidence that still seems too high (Agritel today cut their forecast to just under 23 MMT). The USDA see global ending stocks almost 2 MMT lower than a month ago at 187.8 MMT. Brazil's exports were increased by 2 MMT to 31 MMT, with Argentina's cut 0.5 MMT to 15 MMT and Ukraine's lowered 1.5 MMT to 17 MMT. Brazil's export figure of 31 MMT would be a new record due to "higher crop prospects and record old crop exportable supplies. Trade has been boosted to a new record each of the last 4 months as production estimates have risen," they said. Saudi corn demand was lowered 500,000 MT to 4.0 MMT based on weaker-than-expected trade last year; however the trade and consumption forecast still reflect robust growth in poultry production, they said. Separately, CONAB said that Brazil's corn planted area would fall 1.7-2.7% this year. They see production at 82.6-83.6 MMT versus last season's corn crop of 85.5 MMT. They have 2015/16 corn exports estimated at 28.0 MMT versus 27.2 MMT in 2014/15. In other markets, crude rallied above $50/barrel at one stage today (in fact almost reaching $51/barrel). Although it couldn't manage to hang onto all of those gains, it did at least finish in positive territory and at the best closing level since Jul 21. Dec 15 Corn closed at $3.82 3/4, down 8 1/2 cents; Mar 16 Corn closed at $3.93 1/2, down 8 1/4 cents. Dec 15 closed the week 6 1/2 cents lower than it began it.

Wheat: The wheat market closed with small losses on the day, but mixed for the week across the three exchanges. Sharply lower corn wasn't a helpful factor today. Neither was the USDA raising the size of the global wheat crop to a new record near 733 MMT, and pegging world 2015/16 ending stocks at an all time high 228.5 MMT. The report also painted a bearish view for US wheat exports. "US 2015/16 marketing year exports (June-May) are forecast to drop to the lowest level since 1971/72 because of high relative prices, abundant competitor supplies, and a strong US dollar. International prices are being pressured downward by projected record global production and ample exportable supplies in Australia, Canada, EU, Kazakhstan, Russia, and Ukraine. Although US wheat export prices have fallen, the United States remains largely uncompetitive, even into some traditional markets. Currently, US FOB prices are about $35/MT above both French and Black Sea wheat," they noted. US wheat export potential was trimmed back 2 MMT to 23 MMT. "Russian and Ukrainian exports are forecast at record levels. EU exports are projected to be the second highest on record. EU and Black Sea exports have displaced the United States as the primary supplier in many major importing countries in North Africa and the Middle East based on low prices as well as freight and logistical advantages. Furthermore, the United States has recently lost market share in some traditional markets and the trend is expected to continue. For example, Mexico has recently begun importing from France, Russia, and Ukraine. Compared to last year, US export commitments to Mexico are down 27%. Additionally, US market share in Nigeria declined from a five-year average of 76% to 43% last year as lower-priced Russian and EU supplies entered the market. US export commitments to Nigeria are down 38% from last year, further dimming prospects for market share recovery," they added. On a more friendly note, US all wheat production this year was cut from 58.1 MMT to 55.8 MMT, meaning that despite the bleak outlook for exports US ending stocks were also pared back a little, down from the 23.8 MMT estimated a month ago to 23.4 MMT. CONAB cut Brazil's 2015/16 wheat production forecast to 6.6 MMT versus a previous estimate of 7.1 MMT. Dec 15 CBOT Wheat closed at $5.09 1/4, down 2 1/4 cents; Dec 15 KCBT Wheat closed at $5.00 1/4, down 3 1/4 cents; Dec 15 MGEX Wheat closed at $5.29 1/2, down 1 1/2 cents. For the week, Chicago wheat was 4 cents lower, Kansas was down just 1/4 of a cent and Minneapolis gained 2 1/4 cents.