USDA Crop Progress/Condition Summary
The USDA reported on US crop planting progress and conditions after the close tonight, here's what they had to say:
WINTER WHEAT
20% harvested, against 9% last week and 31% on the five year average.
SPRING WHEAT
4% poor/very poor, against 3% last week. 77% good/excellent against 76% last week.
CORN
7% poor/very poor, against 5% a week ago. 70% good/excellent, unchanged from last week.
SOYBEANS
91% planted, against 87% last week and 95% on the five year average. Conditions are 6% poor/very poor, the same as a week ago, good/excellent is up one point to 67%.
CBOT Closing Comments
Soybeans
July soybeans closed at $11.51 ½, down 27 ½ cents. A much drier forecast for the week ahead will help get the remainder of this outstanding soybean crop planted. Certainly for new-crop there isn't much bullish news about. The USDA is expected to confirm private analyst reports next week that there will be a record acreage of soybeans planted in the US this season, and by some considerable margin. Old crop still looks tight though, with China importing 3.519 MMT of beans in May, according to the government body there. A firmer dollar and weak crude did nothing to support soybeans today. This market looks very much like one that has peaked, although old-crop could still prove technical, I wouldn't touch new-crop with somebody else's barge pole.
Corn
July corn closed at $3.85 ¼, down 14 cents. There is not such a clearly defined argument to be bearish corn as beans. Some of the extra acres that the USDA are expected to find next week for beans will have come from corn. Until the USDA come out next week, we won't know how many. Next season's ending stocks are also likely to be revised lower, and the current season's exports continue to run along very well. From a demand point of view, IF the US government were to increase the ethanol blending mandate, then we could see a lot more off take coming in from that sector.
Wheat
July CBOT wheat closed at $5.46, down 9 ¼ cents. Wheat is paddling a different canoe to corn and beans, this market topped out a whole lot earlier than the other two and is influenced by some quite different factors, not least a completely different growing season. Next week's forecast for significantly higher temperatures than what we have been seeing will advance the harvest. Reports coming out of Kansas are mixed for early winter wheat which was just 5% harvested as of Sunday, meanwhile Texas was at 53% harvested and Oklahoma was at 63% done.
EU Wheat Ends Lower On Harvest Pressure
EU wheat futures closed lower yet again with Paris November milling wheat futures ending down EUR3.00 at EUR142.25/tonne, and London November feed wheat finishing down GBP2.75 at GBP114.50/tonne.
London wheat futures have only closed higher in two sessions during the entire month of June, with Paris futures only bettering that by one.
Over the course of the month London November is down GBP20/tonne, and Paris November EUR23/tonne lower.
Large carryover stocks and the impending harvest are weighing on prices. Although farmers are far from keen to sell at current levels, consumers believe that there will be some element of forced selling due to lack of storage.
In the US, wheat futures are also on the decline, along with corn and soybeans, as global economic uncertainty largely keeps buyers out of the market.
eCBOT Close, Early Call
The overnight grains closed lower, having traded under steady pressure throughout most of the morning. Beans closed 11 cents down on nearby July, and around 16-17 cents lower on new crop months. Corn finished around 10-12 cents lower and wheat down around 10 cents.
Private acreage estimates from Informa and Allendale released Friday are strongly bearish for beans, showing around 2.5-2.9 million more US acres being planted this season than the current US estimate.
Old crop stocks are still tight, and the delayed plantings could still potentially lead to some fireworks pre-harvest as availability potentially dwindles to a trickle.
For new crop though, things look undoubtedly bearish for beans unless we get a serious weather scare later in the summer. In addition to increased supplied from the US (which will likely double or even treble ending stocks for 209/10), Argentine farmers are expected to plant the highest acreage on record next season.
Punch-drunk and on the ropes from eighteen months of drought and crippled earnings from punitive export taxes, Argentine farmers are expected to have one last throw of the dice by planting 15-20% more soybeans than ever before next season.
They've got plenty of unplanted wheat acres to begin with, and will be keen to plant beans at these prices despite the export tax, assuming that they finally do get some decent rains before planting time comes around again. Planting wheat and corn are seen as riskier options as the government is far more likely to limit exports and depress local prices for these commodities.
US corn is a bit more of a conundrum, with Informa and Allendale miles apart on their acreage ideas. Informa seeing a sizable switch from corn into beans and Allendale saying the extra acres will come from double-cropping with winter wheat.
The wheat harvest in Kansas in underway, which will add a bit of pressure, as too will eastern Europe gearing up to get the wheat combines rolling.
Crude oil is back under $70/barrel, currently trading a tad over $68, and Wall Street is expected to open lower, which will add a bit of outside pressure.
Early calls for this afternoon's CBOT session: corn called 10 to 12 lower; soybeans called 10 to 15 lower; wheat called 8 to 10 lower.
Argentine Farm Leader Puts His Foot In It
Just days before the Argentine mid-term elections, Argy farmer leader Alfredo De Angeli, head of the Small Farmers' Association in Entre Ríós, has well & truly put his foot right in his mouth by publicly suggesting that farm owners should "put their employees on a pick-up truck and tell them for whom to vote for."
Other farm leaders have been quick to round on De Angeli, saying his comments were "unfortunate" and "inappropriate".
The head of the FAA Argentine Small Farmers Association, Eduardo Buzzi, went a few stages further than that saying that De Angeli "has a little problem of excessive prominence" and recommended he should go to see a psychologist.
Being asked to retract his comments, De Angeli said that he had encouraged farm owners to take their employees to polling stations only because in many cases they "lacked any transport means" and that he meant farmers "who not to vote".
Not surprisingly, the government have been quick to seize upon De Angeli's remarks as "a model where farm workers aren't treated as citizens."
Peronist Victory Front Deputy, José María Bancalari, said that De Angeli's comments reminded him of the time "land owners, in 1946, seized their employees' documents and decided who they would vote for," so that Juan Domingo Perón wouldn't win the elections.
Have Soybeans Peaked?
A strong case can easily be made that soybean prices have peaked, certainly for new-crop months, for the time being.
Informa Economics and Allendale both issued sharply higher planting estimates for the US 2009/10 crop on Friday, the forma (ha ha!) coming out with 78.9 million acres and the latter with 78.484 million.
That puts plantings some 2.5-2.9 million acres higher than the USDA's March estimate of 76.024 million acres, and even that estimate was an all-time record for soybeans.
The current highest area ever planted was last season's 75.718 million.
Very early indications from Argentina are that they will plant a substantially increased acreage for their 2009/10 crop. With plenty of land not going into wheat this year, Argy farmers are expected to plant 19-20 million hectares of beans for next season, up 15-20% from the record 16.6 million planted last season.
Despite the controversial export tax, the soy market is not vulnerable to the political tinkerings with export permits that have until recently brought the trade in Argentine wheat and corn to a standstill.
All this rather makes $10/bushel beans look like one hell of a sale for new-crop positions, and has a strangely reminiscent feel to that of the wheat market twelve months or so ago.
Back then, the world & his wife planted wheat everywhere 'including their own backyard' leading to the bumper 2008/09 production that is still depressing the market even now.
It should come as no great surprise therefore that with spot beans over $12 and new crop over $10, US farmers decided to start readying their own back yards once again, this time for beans.
With spring wheat and corn plantings delayed in some areas, the carrot going for beans at $10+ instead seems to have proven to be a no-brainer.
Interestingly, despite broadly concurring on soybeans, Informa and Allendale are miles apart on corn acreage. Informa say 83.111 million and Allendale 84.775 million. in March the USDA came out with a surprisingly optimistic (even then, before the rain) 84.986 million.
Informa clearly see plenty of corn acres being switched into beans, either by virtue of some US farmers being unable to get their corn in on time, or the relatively high price of beans proving simply too tempting for others.
Allendale see it quite differently, with only a slight reduction in corn acres. Reduced plantings in Missouri, Illinois, Indiana, and North Dakota will mostly be made up by increases in Nebraska and Iowa, they say.
So where does their big soybean increase come from? Principally double cropping with winter wheat, although some spring wheat area (331,000 acres) will be switched into beans, the vast majority of these extra acres will come from newly harvested winter wheat, according to Allendale.
The USDA will be out on June 30th with their revised estimates, but before that we have planting progress and crop condition reports to look forward to tonight.
Last week the key soybean states of Illinois and Indiana, which together grow a quarter of the US soy crop, still had some 3.3 million acres (1.3 million hectares) of soybeans yet to seed.
Ukraine Grain Harvest Seen 27-29 Pct Lower
With its harvest now underway, the Ukraine will produce only around 38-39 MMT of grain in clean weight this season, according to various private estimates. That's a reduction of around 27-29% on last season's bumper crop of 53.3 MMT.
Alexei Blinov, economist at Astrum Investment Management, forecasts that output this season will come in at 'nearly 38 MMT' according to media reports. Local growers had only limited access to financial resources from the beginning of the credit crisis and have used significantly lower volumes of mineral fertilizers compared to 2008, he said.
The nation's grain crop was also hit by sharp frosts in April, which led the government to reduce the official estimate for this season's grain crop to 42-43 MMT at the beginning of the month, from it's earlier estimate of 48 MMT, warning that this revised figure was not final and that further downward revisions were likely.
Now that these eastern European countries are harvesting, or about to start, it is interesting to note that production estimates are suddenly getting cut quite sharply.
Russian Wheat Crop 58-61 MMT
This season's Russian wheat crop is seen by SovEcon coming in at around 58-61 MMT in clean weight, according to media reports.
That's down on last season's bumper crop of 63.7 MMT, but higher than earlier trade estimates of around 55-56 MMT.
Russia's western Volga region, where the bulk of the country's winter wheat is grown, has suffered from the dry conditions which have also affected many parts of Eastern Europe.
However, spring wheat plantings in Siberia have increased to an estimated 14.9m-15.2m hectares, up from 14.0m hectares last year, on the back of largely favourable weather.
Russia's harsh winters mean that spring wheat is much more widely grown than here in the West, typically accounting for around 40-45% of total national output.
