Chicago Closing Comments
Soybeans
August soybeans closed at USD10.15 1/4, up 3 1/2 cents; November soybeans closed at USD9.78 1/2, up 5 1/2 cents; August soybean meal closed at USD303.30, up USD1.80; August soybean oil closed at 38.26, down 14 points. Solid demand and uncertainties regarding the size of the US soybean crop kept a floor under the market. Argentina’s Ag Ministry trimmed their 2009/10 soybean production to 52.7 MMT, down from their previous number of 54 MMT. Weekly export sales for tomorrow range between 550 and 950 TMT.
Corn
September corn closed at USD3.79 3/4, up 5 3/4 cents; Dec corn closed at USD3.93 1/2, up 6 cents. Traders noted that the market had little or no support from crude oil or the US dollar. Trade estimates for tomorrow's weekly export sales report range from 850 to 1,000 TMT. The trade is still concerned about crop losses in the FSU and Europe. One report suggested that the prospective passing of the increase of the so-called E15 ethanol blend will see Wall Street money "pouring into" the Midwest.
Wheat
September CBOT wheat closed at USD5.88 1/4, up 11 1/4 cents; September KCBT wheat closed at USD6.01 1/2, up 12 cents; September MGEX wheat closed at USD6.13 1/2, up 11 3/4 cents. The weekly USDA export sales report will be out in the morning. Trade estimates for that range from 350 to 450 TMT. Hot and dry conditions in Russia and Kazakhstan continue to stress spring planted crops there. The US missed out on Egypt's tender yesterday, but ideas are that they will have to cast their net further afield before too long.
EU Grains Close
Nov London wheat ended GBP4.05 higher at GBP129.50/tonne, and Nov Paris wheat gained EUR7 to close at EUR175/tonne. Paris corn and rapeseed also posted significant gains.
Fund money continues to push the market higher. There is no doubting the crop losses in Russia and Kazakhstan, the question is does the latest price action justify, or over justify it?
I've just deleted the next three paragraphs for fear of sounding bitter and twisted, so I will attempt to tone things down a little.
Nobody can predict the heights to which the current inflow of money will push this market to. It is tempting to say that this is "unintelligent money" but it isn't really. The objective seems to be to corner a relatively illiquid market and make some money. To that end EU wheat looks like a fair target.
I recall making a speech for a certain company around October last year, you know who you are. In that, I likened the 2007/08 market to the Everton/Liverpool FA Cup Final of 1986. At the time the media was full of images and reports along the lines of "I've waited all my life for this, it will never happen again, etc."
They were ultimately incorrect, as the "once in a lifetime Cup Final" subsequently happened again a few years later in 1989. A bit like waiting for the bus really, if you get my drift.
If we can learn anything from history, it is that it does indeed repeat itself. If current prices hold, I don't think that you have to be Poirot to figure out that global wheat plantings will be up big time this autumn. Just like they were in 2008.
What is that going to do to prices? It's a no-brainer. You can send the cheques to the usual place!
I Might Have Mentioned This Before But....
Celebrity Masterchef, do you watch it? I do, although I am already a bit of a celebrity already of course, courtesy of you my lovely readers, and I can slice up a spring onion with the best of them.
Anyway have you noticed something different about the celebrity version and the Joe Public variety? I have.
"Tonight Gregg, we're looking for something that little bit different, someone who can go the extra mile. They've got a full beef fillet, caviare, saffron, monkfish, lobster tails, wagyu beef and truffles, to cook us one dish in just four hours."
Whereas the non-celebs get "a pigs tongue, a pork pie, a banana, a slice of Asda econo bread and a tin of mushy peas, ten minutes do your best."
These lads are clearly unfamiliar with the concept of quitting whilst you're ahead.
How Much Is That Piggie In The Pokey?
Those slippery snakes the Indian government have so much wheat that they are looking relax a ban on exports and get shot of some, according to media reports.
Yet at the same time Indian flour millers are importing wheat from Kazakhstan and Australia.
So what's going on here then?
India's attempt to offload 400,000 next door to Bangladesh has hit a small technical hitch or is "caught in negotiations" as one media report describes it.
The Indians want to recoup their own ludicrously high domestic support price by asking their Bangladeshi chums to stump up USD370/tonne for their wheat. Bangladesh are understandably reticent to support the Indian economy by coughing up a highly inflated price compared to what is on the table elsewhere.
The Indians are quick to extol the virtues of their own wheat, in much the same way that they would try to sell you an "Armani" silk suit or a 24 carat "Rolex" no doubt.
What's so good about Indian wheat? Well there's no need to add any water to turn it into bread is there, they thoughtfully left it out in the fields for a couple of years already for you just to soak up all of nature's goodness.
Aral Sea Is Disappearing
This might help explain the current Kazakh drought:
Russia To Sell Off Intervention Stocks Domestically
Twenty three Russian districts have now declared state of emergencies due to what media reports are calling the "worst drought in 130 years".
Agriculture Minister Yelena Skrynnik has said that the government will sell "at least" 3 MMT of the state-owned intervention grain stockpile to "struggling meat and dairy producers in the drought-affected areas."
Yet still they continue to sell their soul to the devil, or in this case GASC. I'm sensing a possible long hard winter of discontent in Russia this year as and when the public find out that the family silver has been exported to Egypt.
Meanwhile, some "enterprising" Moscow taxi drivers are now apparently charging their fares extra for using the air conditioning, according to some reports. More than 1,200 Russians are said to have died so far this month, mostly by drowning whist attempting to take refuge as temperatures reached near-historic record levels of 36.5C.
Only In Britain
Would you find flood warnings and a hosepipe ban in place at the same time in the same location. I can only assume that St Swithin must have come from Cumbria? Lucky there isn't much wheat grown up there, we've had our fair share in North Yorkshire from around 6pm last night, with one or two heavy downpours. Growers in the South East seem to have escaped relatively unscathed up until now from what I can tell, although spotty showers are forecast today through until Friday.
Farming Online's online survey pegs the average barley yield at 6.4 MT/ha so far this season, with oilseed rape averaging 3.39 MT/ha up until now.
Morning Snippets
The Kazakh Ministry have cut their 2010/11 grain crop estimate by a million tonnes to 13.5-14.5 MMT. They haven't put a specific figure on wheat yet, although last season wheat accounted for 80% of all grain production. That would imply a wheat crop of only 10.8-11.6 MMT this year, and the wheat planted area this season is slightly down on last year too.
Egypt's GASC bought 60,000 MT of Russian wheat from Cargill at USD211/tonne and a similar quantity of Russian wheat from Louis Dreyfus at USD212.45/tonne yesterday. Those prices are the best part of USD50/tonne higher than they were four weeks ago. French wheat was USD3-4/tonne dearer, and is also at a freight disadvantage. To me that indicates that at these prices Russia will find the wheat to export, for now, and will probably still remain aggressive exporters up until Christmas. If you are hoping for significantly higher prices than what's on the table now you may have to wait until then.
This year's Russian grain harvest is currently running at 21 MMT as of yesterday, according to the Ag Ministry. Yields this season are currently averaging 2.8 MT/ha, they say. That's "only" 10% down on last year, although there is trade talk that this figure will decline as the harvest progresses.
In Ukraine, they've harvested 11.6 MMT of grain so far, with yields averaging 2.4 MT/ha, according to the Ministry. They've already harvested a million tonnes of rapeseed off 70% of the planted area, they say. That implies a rape crop of around 1.4 MMT this year, down 22% on last season. Forty percent of the wheat area has been cut, producing 6.6 MMT say the Ministry, that would imply a final wheat crop of only 16.5 MMT - a whopping 21% down on last year, and considerably lower than anyone forecasting. Our Ukraine correspondent, Mike Lee, says that the recent hot weather "may have improved the quality of wheat, with our first samples achieving Grade II."
The Australian Bureau of Meteorology say that La Nina is continuing to develop in the Pacific basin. That should be good news for wheat in NSW, Victoria and Queensland in the second half of the year. It could however be bad news for South America.
