Soya Hulls
Resale material offered for the winter ex Liverpool/Avon/Humber at GBP114, try a close bid for a limited volume. Has to be one of the cheapest raw materials around at those levels, and unlike wheatfeed it's available at buyers call. Call/email if you're interested.
US Pledge USD20 Million Aid Package For Ireland
US officials have apparently pledged USD20 million in aid for Ireland following news of the devastation left behind by Hurricane Higgins.
It's the way I tell 'em.
Wheat: Dancing On The Ceiling, Or The Only Way Is Up (Baby)?
You know that there's something amiss when the Daily Mirror starts reporting on the price of wheat. In typically Mirror-esque style they warn of "soaring" food prices saying that "this is really scary stuff".
Did wheat hit an almost impenetrable ceiling of GBP150/tonne, EUR200/tonne and USD7/bushel all at the same time yesterday? Or are we on our way up to GBP200/tonne, EUR300/tonne and USD10/bushel all over again?
This latest spectacular rally certainly isn't demand-led, we all know that. A compounder I saw yesterday told me that their wheat usage was down by around a third at these levels.
The question now is surely is how deep are the pockets in those bankers' suits? Yet again it seems that the vulnerable old wheat market has been latched onto as the easiest way to recoup some of last year's losses and restore Tarquin and Peregrine's six and seven figure bonuses, what, what, what.
Something surely has to be wrong when the open interest on the November Paris future alone is 123,000 lots? That's over six million tonnes, or around half of the entire French exportable surplus.
Yet again it seems that speculative money is holding a hefty chunk of that particular baby. Whilst it is entirely possible that they will be prepared to push things somewhat higher yet, they will not be looking to hold onto November too long. Let's face it they haven't exactly bought it to take delivery have they?
"Where d'you want this six million tonnes of wheat tipping guvnor, at the offices in Canary Wharf or those on the Champs Elysees?"
They'll be looking to pass November baby onto some other poor unsuspecting sod long before it starts wailing too loudly I'd suspect. The big question is will they attempt to roll it into January, or even March, or just put the little ginger November thing up for adoption and skip town with their ill-gotten mazoolah?
That IS a tough one to call.
Morning Snippets
The Russian Ministry have cut their grain crop production estimate to 70-75 MMT, saying that around half of that, 35.5 MMT, has already been harvested. There is now a state of emergency in 27 states. If the drought news wasn't bad enough some news reports are now suggesting that an area of 1.8 million hectares bordering Kazakhstan also has a locust infestation.
The Kazakh Ministry have dropped their grain production forecast from "13.5-14.5 MMT" to 13.5 MMT. Harvested area will fall 1 million ha from last season to 15.6 million ha, they add.
Ukraine's Deputy PM has said that the recently introduced export restriction on wheat should be removed, suggesting that with carryover from last season they could still export 17 MMT of grains this year.
Australia continues to be a "game of two halves" with prospects looking almost ideal in the east but poor in the west. Wheat production in the dry Western Australia state is seen falling to around 6-7 MMT this year from 8.25 MMT in 2009.
CBOT Closing Comments
Soybeans
August soybeans closed at USD10.53 1/4, up 3/4 cent; August soybean meal closed at USD310.90, unchanged; August soybean oil closed at 40.44, up 61 points. Soybean export inspections were below trade expectations at 5.933 million bushels. The USDA confirmed the sale of 116,000 MT of soybeans to China and 130,000 MT to unknown for 2010/11 delivery. Crop condition ratings fell a point from last week in the good to excellent category to 66%.
Corn
September corn closed at USD3.90 1/2, down 2 1/4 cents; December corn closed at USD4.04 1/2, down 2 1/4 cents. Weekly crop progress report showed corn conditions deteriorated from the previous week by a point to 71% in the good to excellent category. The USDA also confirmed the sale of 232,000 MT of U.S. corn to unknown for 2010/11 delivery. Spillover strength from wheat also lent support.
Wheat
Sept CBOT wheat closed at USD6.93 1/4, up 31 3/4 cents; Sept KCBT wheat closed at USD7.00 1/2, up 26 cents; Sept MGEX wheat closed at USD7.13 1/4, up 25 1/2 cents. The trade perception seems to suddenly be focused on sharply lower Russian production. Export inspections were 22.043 million bushels. The crop progress report showed 83% of the winter wheat harvested compared to 88% for the five year average. Spring wheat harvest is at 5% compared to 13% for the five year average
EU Wheat Closing Comments
November London wheat closed GBP6.90 higher at GBP149.40/tonne, with November Paris wheat up EUR12.50 at EUR207.75/tonne.
The first of the month brought with it another wave of fresh buying. Nobody seems to have told the funds that they should have been banking profits last week, and today's price action appears to confirm that the uptrend is still firmly in place.
London wheat closed off the days highs, November reached GBP153/tonne at one point, but considering the strength of the pound today that was still pretty impressive.
Open interest in November Paris wheat is now running at almost 123,000 lots, that is a huge amount.
Egypt bought Russian what again over the weekend, picking up 180,000 MT from Cargill and Bunge. These prices were well below that of French or US wheat.
When prices rise by these sorts of magnitudes in one day everybody sits up and takes notice. We can't really be in "uncharted territory" because we chartered it a few years ago. You can probably recall how badly and painfully that ended.
I sense that we are in for another similar "religious experience". The sixty million dollar question is how high will the funds build this particular house of cards before it all falls down again, in my opinion.
The Overnight Market
Follows through from Friday night's close, adding further gains with front month wheat currently 15 1/4c higher, soybeans up 10-12c and corn up around 4c.
The weak dollar will continue to help US export hopes, with the pound rising to 1.5750, it's highest since mid-February.
I'm out all day today so no more blogging until this evening.
Have a good day.
Are The Shops Still Open?
They are in Russia it seems, drought or no drought. Our old mates Egypt managed to pick up offers of USD238/tonne from Cargill and USD239.50/tonne from Bunge for Russian wheat over the weekend in their latest tender, according to GASC.
Those offers were around USD20 under the cheapest French wheat put up by Nidera on a two ports of loading basis.
Russia clearly hasn't sold out just yet, and what it has left to sell is still comfortably blowing EU (and US) wheat out of the water. The cheapest US wheat was USD262.25/tonne incidentally, and there's a higher freight cost to add on top of that too.
The Cargill offer of USD238/tonne represents a USD27/tonne, or 13%, increase on the cheapest wheat offered in their last tender a fortnight ago. As recently as the end of June they were picking up Russian wheat for only USD165/tonne.
