Ukraine Harvest Latest
The harvest in Ukraine is progressing at a rapid rate, with 13.6% of the planted area already cut, producing 4.375 MMT of grain.
Yields are still running behind last season, with the wheat area harvested so far only producing 2.5 MT/hectare.
A final yield like that would see this season's wheat harvest come in at less than 17 MMT.
Dry spring growing conditions and reduced plantings are expected to cut Ukrainian wheat production this season. A lack of available credit has also forced Ukraine farmers to cut back on fertiliser and pesticide applications this season.
The Russians Appear To Be At It Again
Newswire reports suggest that Alexei Gordeyev, the ex-head of the Russian Ministry of Agriculture, and the current governor of Voronezh, is forecasting a Russian grain harvest of just 75-80 MMT this year.
That is substantially lower than last season's 108.1 MMT, 26-30% lower in fact, and also 10 MMT under the official Ministry estimate of 85-90 MMT, and well below the estimate of 96 MMT from the US attaché.
Drought and pests have had a significant effect on Russian crops this year, he says, noting that lack of credit has led to reduced agro-chemical and fertiliser application.
A shortage of combines may also cause problems and crop losses at harvest-time, he adds.
Well, I might be the only one around here who is bullish on wheat, but even I am going to reserve judgement on this one until we have some more evidence. Weren't they forecasting a crop of 85-90 MMT last year around this time, before pulling a 108.1 MMT rabbit out of the hat?
Canadian Drought 'Worst In 50 Years'
The worst drought in years has already caused nine counties in Alberta to to declare agricultural states of emergency, with farmers calling in the loss adjusters to claim on their crop insurance.
The last big drought to hit the Canadian wheat belt was in 2002 when production was slashed to 14.6 MMT, and Environment Canada are calling this one the worst drought in 50 years.
The most recent report available from the Canadian Wheat Board is dated June 11th, in which they cut their estimates of wheat, durum and barley production to 29.7 million tonnes in the 2009 crop year, down almost 20 per cent on last year.
"Production estimates have dropped significantly in the past two weeks from what had been average yield expectations," they warned.
And in many of the worst affected areas it hasn't rained since.
Links:
Crop outlook bleak as drought ravages Prairies
Farmers start to write off year as drought parches Prairie land
USDA Crop Progress Report
Corn
The USDA pegged the crop at 8% poor to very poor, 1% worse than last week and 71% good to excellent, also 1% lower than last week. That's a bit of a surprise although 71% G/E is better than the 65% we would normally have at this time of year. The later than usual crop is only 8% silking compared to the five year average of 16%.
Soybeans
Soybeans also posted a surprising decline in condition, also only 14% of the crop was blooming compared to the five year average of 24%, highlighting the lateness of this year's crop. Soybean conditions deteriorated from last week by 2% in the poor to very poor category and also dropped 2% from last weeks good to excellent rating.
Winter Wheat
Winter wheat is 90% harvested in Texas, 83% harvested in Kansas and 98% harvested in Oklahoma. The national total is at 56% harvested compared to 59% on the five year average.
Spring Wheat
The spring wheat crop condition deteriorated by 4% in the good to excellent category to 72% from 76% last week. And the poor to very poor increased to 8% from 6% last week. That's a pretty big deterioration in crop conditions in what the market thought was a pretty good week.
There's something bullish for corn, beans and wheat in tonight's report which may add a bit of support in the overnight session after some pretty steep losses today.
EU Wheat Closing Comments
EU wheat futures ended modestly lower Monday with Paris November milling wheat down EUR0.25 at EUR140.75/tonne, and London November feed wheat closing down GBP0.25 at GBP111.75/tonne.
Prices are drifting gently lower but seem to have arrested the steep declines witnessed during most of June.
Weaker crude oil and falling equities were bearish influences today, but a sharp rise in the dollar tempered losses.
The barley harvest is well advanced in Eastern Europe, with wheat cutting next on the agenda, that might bring some further pressure although farmers are reluctant sellers ar current levels.
According to Coceral the EU-27 will produce a wheat crop of 137.6 MMT in 2009/10, of which 128.6 MMT will be soft wheat. That's down 8.6% on an all wheat crop of 150.5 MMT in 2008. Yields for soft wheat are forecast at 5.6 MT/ha, 6.7% lower than 6.0 MT/ha in 2008.
CBOT Closing Comments
Soybeans
July soybeans settled 43 cents lower at $12.00 a bushel, and November soybeans also finished 43 cents lower at $9.63. Beans were under pressure from the start following a sharply weaker overnight session following the holiday weekend. Favourable weekend weather, and a promising forecast for the week ahead, combined with a firm dollar and weak crude oil to send beans crashing lower. The USDA announced 14.12 million bushels of soybeans were inspected for export on Friday, slightly above the 13.30 million bushel needed to meet USDA’s estimates for the year.
Corn
July closed down 2 1/2 cents at $3.43 1/4 a bushel, and December corn closed down 13 1/4 cents at $3.44 1/4. Largely ideal weekend weather and a promising outlook for the week ahead kept corn on the defensive throughout the day. Crude oil prices fell to their lowest levels in over a month today, whilst a flight to the safe-haven of the dollar also weighed on prices.
Wheat
September wheat closed down 9 3/4 cents at $5.19 1/4 a bushel. Weakness from soybeans spilled over into wheat, with the strong dollar also a bearish factor. Funds are heavily short wheat, and sold a further estimated 3,000 contracts today, leaving this market vulnerable to a technical correction at some point. The US harvest is progressing reasonably well and export demand remains slack which is also depressing prices.
EU Grain Production/Stocks Estimates
According to Coceral the EU-27 will produce a wheat crop of 137.6 MMT in 2009/10, of which 128.6 MMT will be soft wheat. That's down 8.6% on an all wheat crop of 150.5 MMT in 2008. Yields for soft wheat are forecast at 5.6 MT/ha, 6.7% lower than 6.0 MT/ha in 2008.
Barley production is seen at 59.7 MMT, that's 9% down on last season's 65.6 MMT.
Corn production is pegged at 56.1 MMT, 7% lower than the 60.5 MMT produced in 2008.
Overall the total EU-27 cereal crop will be 285.3 MMT, 8% down from the 310.2 MMT produced last season.
eCBOT Close, Early Call
The overnights closed lower, with soybeans leading the way crashing around 30 cents easier, corn closed around 6-10 cents lower and wheat down around 6 cents. It is worth noting that the day after the 4th July holiday there is often a strong sell-off on beans and corn.
Beneficial weekend weather and a favourable forecast for the week ahead were bearish influences this morning, as too was a firmer dollar and weak crude oil.
US jobs data late Thursday is still weighing on the market today. US job losses surged by more than expected to 467,000 in June, pushing the unemployment rate to a new 26-year high of 9.5 per cent, that indicates that demand for crude oil from the world's largest consumer is unlikely to pick up anytime soon.
Crude has been as low as $63.40/barrel this morning, almost $10 below it's recent high set only last Tuesday, and currently resides at $64.19/barrel.
The jobs data also prompted a flee to safety on ideas that the recession is far from over and that those green shoots are really banana skins. That gave the dollar a boost, further hurting the grains sector.
Tonight we get the latest crop progress and condition reports from the USDA, with things generally expected to be in pretty good shape, expect increases in good/excellent for both corn & beans. We will also get to know just how far the winter wheat harvest has progressed.
After that attention will shift to Friday's WASDE report.
Old crop beans keep pouring out of America, and Brazil too for that matter who exported over 6 MMT in June alone. Meanwhile late last week the USDA reported 600,000 MT of new crop sales to China plus 152,400 MT sold to 'unknown'.
Clearly current prices aren't rationing demand too much just yet, and a late US harvest could still see a sting in the tail from old-crop.
The potential is there for ending stocks to dip below a very tight 100 million bushels on beans, although I think it unlikely that the USDA will be able to bring themselves to come out with a number that low.
The wheat market is heavily oversold, leaving it vulnerable to a corrective bounce at some point. Harvesting is underway in Russia and Ukraine and parts of Europe which will undoubtedly bring some pressure, although lower production is expected across much of the region.
In a widely expected move, India removed its 20-month ban on exports of wheat, saying it will allow 900,000 MT of exports by state-owned trading companies.
Saudi Arabia bought 440,000 MT of EU, US and Canadian wheat over the weekend.
European equities are lower, and Wall Street is expected to follow suit after closing 223.32 points down on Thursday.
Early calls for this afternoon's CBOT session: corn called 8 to 12 lower; soybeans called 30 to 35 lower; CBOT wheat called 5 to 7 lower.
