Market Snippets
Crude oil is around USD79/barrel, despite US stocks rising yesterday by 1.7 million barrels according to the American Petroleum Institute. The market seems to be focusing more on a drawdown in US gasoline and distillate stocks instead. The US Energy Dept will report on crude inventories this afternoon, they usually concur with the API around 75% of the time. The current cold snap gripping the US should help demand, the pundits are saying.
Those two old supermarket sluggers of Tesco and Asda (hums theme tune from Rocky) have both announced that they won't be raising the VAT rate back up to 17.5% on "thousands" of lines come Jan 1st. Exactly how long the offer will last is unclear, will it go the distance and end on a cliff-hanging split decision? Meanwhile Waitrose, played by Burgess Meredith, say that they've had a great Christmas -its most successful ever - with sales up over 20% for the w/e Dec 26th.
UkrAgroConsult peg the 2009 Ukraine wheat crop at 20.8 MMT, corn production at 9.5 MMT and barley output at 11.3 MMT. Their figures for 2008 production were 24.2 MMT, 10 MMT and 11.8 MMT respectively. They estimate 2010 wheat output at 18.7 MMT, up 700,000 MT on their original October forecast. Meanwhile, the local Ag Ministry say that the country have exported 12.2 MMT of grain during the current marketing year (to 10th Dec).
According to the Conab, many Brazilian farmers chose to plant soy instead of maize this season, due to lower production costs and greater resistance of the grain to drought. If the weather conditions are favourable in the main growing areas, then the soybean harvest fpr 2009/10 may increase 12.9% over the 2008/09 crop, which totalled 57.16 MMT, coming in at a record 64.56 MMT, they say.
Uruguay is expecting a record wheat crop for the second year running in 2009/10 while the barley harvest is forecast as the largest in the last ten years according to the Statistics Office from the Ministry of Agriculture, Livestock and Fisheries. Winter crops area was estimated in 721,000 hectares of which 546,000 was wheat (70,000 more than last year). To find similar areas planted with wheat Uruguay must look back over thirty years, to 1976/77 when 543,000 hectares were sown. The estimated crop will be above 1.8 MMT, an all time record and for the second year running. The yield of 3.336 kilos per hectare is also a historic record, say the Ministry. Barley covered 140,000 hectares this year, 8% more than the previous crop and the largest area in the last ten years. Yields so far are in the range of 3.294 kilos per hectare, second only to the 2006/07 crop record. Meanwhile summer crops in Uruguay this season are estimated to cover a million hectares, 30% higher than last year, with soybeans taking the highest share at 848,000 hectares.
CBOT Closing Comments
Soybeans
Jan soybeans closed at USD10.38 up 9 cents, Jan soymeal at USD314.90, up USD4.50 and Jan soyoil at 39.43, down 20 points. Beans managed to follow through from Monday's gains, and has now reversed more than half of December's losses. Fund buying was estimated at around 4000 contracts on the day. Volume was thin as participants stand aside in typical holiday trade.
Corn
Mar corn closed at USD4.17, up 1 cent, December corn ended at USD4.45 1/4, down 1/2 cent. US corn losses could amount to as much as 100 million bushels this season, with a severe winter storm meaning very little has been harvested this week, analyst say. Normally the US corn harvest would be well over and done with by now.
Wheat
Mar CBOT wheat ended at USD5.41, down 9 3/4 cents, Mar KCBT wheat at USD5.38, down 8 cents and Mar MGEX wheat at USD5.49, down 7 3/4 cents. Speculative funds increased their net short positions in CBOT wheat futures and options to 37,258 contracts as of Dec. 22 from 19,530 contracts a week earlier, the CTFC revealed. Analysts estimate that a further 2,000 contracts were added to that short today.
EU Wheat Closing Comments
Paris March milling wheat futures closed Tuesday unchanged at EUR133.75/tonne, and London March feed wheat ended GBP0.55 higher at GBP108.85/tonne.
As was widely expected it was a quiet, uneventful day in what promises to be a subdued week's trade. Even a sharply higher close in US wheat futures last night failed to ignite much interest today.
The EU granted export licenses for 374,000 MT of soft wheat for the week ended Dec. 22, according to customs data. That brings total exports for the marketing year to date to 8.2 MMT, 25% down on the 11 MMT worth granted this time twelve months ago.
It still seems that wheat's best chance of pushing significantly higher in the new year rests with fund/spec money re-entering the market.
Russia remain the most aggressive seller in the market, and logistical problems caused by harsh wintry conditions might be Europe's best hope of picking up a few spare export orders over the next few months.
CBOT Closing Comments
Soybeans
Jan Soybeans closed at USD10.29 up 29 ½ cents and November Soybeans at USD10.10, up 20 ¾ cents; Jan Soy meal was at USD310.40, up USD9.00, and Jan Soy oil at 39.63, up 117 points. Strong weekly export inspections (51.9 million bushels), a weaker US dollar, and firmer outside markets helped beans reverse half of December's losses. Fund buying was estimated at around 4000 contracts.
Corn
Mar corn closed at USD4.16, up 7 ½ cents and December corn at USD4.45 3/4, up 5 ½ cents. A winter snowstorm bringing up to two feet of snow was helped propel corn higher with 5% of the crop in the field. That equates to around 38% of carryover. The weaker US dollar and higher energy prices were also supportive.
Wheat
Mar CBOT Wheat was at USD5.50 3/4, up 26 ¼ cents, Mar KCBT wheat at USD5.46, up 24 ½ cents and Mar MGEX wheat at USD5.56 3/4, up 25 ¼ cents. Most contracts closed at their highest levels since early December. Weekly export inspections were only 10.7 million bushels, highlighting the slow pace of US exports following last week's sales of little more than 200,000 NT.
Paris Wheat Closes Higher Monday
Paris wheat futures closed higher in thin holiday trade Monday with January milling wheat ending up EUR2.50 at EUR131.25/tonne.
Trade was understandably quite with London shut for the Bank Holiday, but Parisian futures managed to edge higher, supported by a firmer US market on the overnight eCBOT market.
A recent cold wave in Europe that spread across Ukraine into Russia produced a light blanket of snow (1-5 centimeters) that now covers most northern hemisphere countries above 45 N latitude, says Gail Martell of Martell Crop Projections.
Winter kill may have occurred in Russian wheat, especially the Volga District, where extremely cold conditions were observed for several days. Snow cover was not sufficient to insulate wheat from bitterly cold weather. The fact that Russia's wheat crop was also affected by drought increases the chances for winter crop damage, she concludes.
It will be some considerable time before we know the extent of any significant damage however.
One early report suggests that the Ukraine wheat harvest for 2010 will total 18.7 MMT, around 2 MMT lower than 2009's production.
CBOT Early Call
CBOT corn and wheat are called 5 to 10 higher, with soybeans called 8 to 12 higher. A weaker dollar and firmer crude oil and metals are supportive elements from the outside markets, as too is an anticipated steadier opening on Wall Street.
News that the US Treasury will provide unlimited capital support to mortgage lenders Fannie Mae and Freddie Mac over the next three years, sees shares in both trading 20%+ higher.
A severe winter storm across large parts of the US over the weekend brought 10-15 inches of snow to many parts, hardly a help for corn still (just about) standing in the fields.
Cold high pressure will dominate Central United States this week dropping temperatures 3-9 F below average, says Gail Martell of Martell Crop Projections. That will keep corn feeding rates elevated on cattle ranches in the Great Plains. December weather has been much colder than anticipated with El Nino in effect. Typically, El Nino winters are mild in the Great Plains and Upper Midwest, says Gail.
Last week's strong export sales for corn and soybeans lay add a bit of support too, although weather conditions in Argentina seem to be generally hugely better than they were twelve months ago. A record soybean crop in 2010 there looks highly likely.
EU Rapemeal Prices
Guide prices basis FOB Lower Rhine in euros/tonne:
Jan 154,00
Feb 147,00
Feb/Apr 142,00
May/1st h Jly 125,00
Aug/Oct 10 121,00
Nov/Jan 11 128,00
Nov/Apr 11 129,00
A Quick Christmas Summary
There is no trade today, Monday, on the London market - although Paris and the overnight eCBOT markets are open and trading will recommence on CBOT tonight.
Thursday's CBOT closes saw January soybeans close 1 3/4 cents lower at USD9.99 1/2, just below the key USD10/bushel level. May corn closed 3 1/2 cents higher at USD4.18 3/4 and CBOT wheat ended 4 1/2 cents lower at USD5.24 1/2.
For wheat the big story last week was another set of poor weekly export sales, which at 221,000 MMT was a marketing-year low. For corn however export sales were large at 1.59 MMT, well above trade expectations of 650,000-850,000 MT. As of last Sunday 5% of the US crop still remains unharvested.
Soybean weekly export sales were also impressive at 1,369,100 MT. China took 806,800 MT of that, including 173,500 MT of next season's crop. The US Census Bureau pegs the November crush at 168.61 million bushels, a rather large 17% increase on November 2008.
EU futures were subdued all last week, and look set to do nothing spectacular this week either. The pound is back below USD1.60 which may support London wheat a bit, as too may the imminent opening of the Ensus bioethanol facility on Teesside.
Algeria bought 300,000 MT of wheat of unspecified origin last week, the trade seems to be assuming that it was probably French.
Once we get past what will probably be a low volume quiet week, what happens in 2010 may initially depend on whether fund money returns to the agri-commodities arena.
In Brazil they are itching to get started with the soybean harvest in some areas, but persistent and heavy rains in Mato Grosso are thwarting early attempts. Heavy rains have also returned to Argentina, hugely improving soil moisture profiles in almost all of the major soybean growing areas on year ago levels.
Early season drought, followed by a sharp plunge in temperatures - coupled with a lack of snow cover - may have caused some damage to winter wheat in parts of eastern Europe, although snow has recently arrived to alleviate the risk of further problems. Either way, we won't know the extent of any potential damage until the spring.
The overnight eCBOT market is firmer across the board on ideas that another major snowstorm for the US Midwest across the holiday period will have caused further problems for corn.
Crude oil prices above USD78/barrel are also supportive. US stocks fell by almost 5 million barrels last week, the US Energy Dept said. The recent severe wintry weather and a pick-up in holiday season demand may have added further to offtake.
