Nogger's Blog

Today's "Must Read"

20/10/10 -- US ethanol producers are shaking like an MFI wardrobe in a force nine gale over the prospect that their long-standing 45c/gallon handout from the government, due to expire at the end of the year, might not get renewed.

"I think it would be very irresponsible to take away an incentive overnight," bleats the head of one leading US ethanol producer. I bet he bloody does.

Which is somewhat akin to "Funds not to blame for pushing up grain prices" - Fund manager.

It's not about the money, honest. We're trying to save the planet here for Christ's sake

Muse At Ten

20/10/10 -- The overnight grains are all higher, partially reversing last night's losses in the case of CBOT wheat and corn, and more than making up for them in the case of beans and meal.

The dollar is firmer and the pound is nervous ahead of Georgie Boy's big day.

The pound has just slipped below 1.57 against the dollar after the minutes of the BoE's last MPC meeting came out, showing that Adam Posen voted to increase QE by GBP 50 billion and arch-hawk Andrew Sentance voted for a 25 basis point hike in interest rates.

Other news just out shows that UK public sector borrowing rose to GBP 16.2 billion in September compared to the GBP14.5 billion that was expected.

Crude oil slipped below USD80/barrel last night on the back of China upping it's interest rates, but has manged to claw it's way back above that this morning, currently standing at USD80.36/barrel.

Egypt split it's tender yesterday, buying 120,000 MT of French, 110,000 MT of US and 60,000 MT of Canadian wheat.

The UK exported more than 200,000 MT of wheat in August, add on what went out in July and the 2010/11 marketing year is off to a flyer with 468,000 MT marching out of the door. That's an increase of 75% on this time last year, according to agrimoney.com.

CBOT Close

19/10/10 -- Soybeans

Nov soybeans closed at USD11.80, down 4 cents; Dec soybean meal closed at USD328.20, down USD0.10; Dec soybean oil closed at 47.10, down 56 points. Private exporters announced the sale of 120,000 MT of soybeans to China and 275,000 MT sold to unknown. China surprised the market with an interest rate hike for the first time in three years.

Corn

Dec corn closed at USD5.46, down 11 1/4 cents; May corn closed at USD5.63 1/4, down 12 cents. The US harvest is well advanced with corn harvesting at 68% done vs 39% normally. China has surprised the market by raising interest rates for the first time since 2007, in an attempt to curb rising domestic housing prices and persistent inflation.

Wheat

Dec CBOT wheat closed at USD6.71 1/2, down 18 1/2 cents; Dec KCBT wheat closed at USD7.15 1/2, down 16 1/2 cents; Dec MGEX wheat closed at USD7.29 1/2, down 15 1/4 cents. The USDA reported that private forecasters had sold 110,000 MT of HRS wheat to unknown for 2010/11 delivery and a change in destinations from unknown to Egypt for 110,000 MT of HRW wheat. Egypt also bought 290,000 MT of US, French and Canadian wheat for last half Dec shipment.

EU Wheat Close

19/10/10 -- It was another mixed day with Nov London wheat ending down GBP0.90/tonne at GBP160.10/tonne and Nov Paris wheat down EUR2.75/tonne at EUR211.0/tonne.

On Paris wheat the Nov/Mar inverse has now narrowed to just EUR1.00/tonne. Open interest in Nov continues to erode.

China raised their interest rates today, undermining potential US grain exports.

The dollar was firmer and the pound weaker on the back of that.

Egypt bought French wheat in a tender today, but also took US and Canadian wheat, and Iraq booked a 200,000 MT combo of US, Canadian and Ukraine wheat, indicating that no one origin has the upper hand at current levels.

Ukraine's grain harvest is 96% done, producing 38.5 MMT compared to a final figure of 46 MMT last year.

Early Call On CBOT

19/10/10 -- The overnight grains closed lower with nearby beans down around 14c, wheat 7-8c lower and corn around 5c easier.

The dollar rose and crude oil fell after China surprised the market with an interest rate hike for the first time in three years.

The inference being put on that by the market is that of a rising yuan, possibly spilling over into general currency appreciation in neighbouring Asia, and the effect on demand for commodities in general.

Tim Geithner meanwhile came out with what now looks like a well-timed statement last night that the US would not allow the dollar to devalue to gain a competitive export edge. Is there some collusion going on here?

The US harvest is well advanced with the USDA last night reporting 83% of US soybeans harvested vs 62% on average, and corn harvesting at 68% done vs 39% normally.

Egypt are tendering for wheat today, and US origin may stand a fair chance of getting the nod.

The Chinese announcement is clearly the big news of the day, with the market expected to open lower across the board, but being particularly bearish for soybeans.

Early calls for this afternoon's CBOT session are: beans down 12-15c; wheat down 6-8c; corn down 3-5c.

China Raises Interest Rates In Surprise Move

19/10/10 -- China has surprised the market by raising interest rates for the first time since 2007, in an attempt to curb rising domestic housing prices and persistent inflation.

The move could also be seen as the latest twist in the ongoing dispute between China and the US over the value of the yuan, ahead of this weekend's G20 meeting in South Korea.

The talk seems to be that maybe the US and China have reached and accord on exchange rates, and that the Chinese may now be more willing to accept the yuan moving higher. That may curb demand for imported commodities, and as well all know China regularly account for 75% or more of all US soybean weekly export sales these days.

With Chinese demand for commodities almost single-handedly keeping the global market going at the moment, one or two raging bulls might fancy cashing in a few chips this afternoon.

EU Rapeseed Meal Prices

The Morning Vibe

19/10/10 -- The market has a treading water feel to it so far this morning, the overnight grains are a little firmer, but only modestly so.

The dollar is also firmer after US treasury secretary Tim Geithner says that he isn't a fan of using a weak currency to boost exports.

Ukraine's grain harvest is 96% done, producing 38.5 MMT compared to a final figure of 46 MMT last year.

Egypt are back in the market tendering for wheat today, with the results expected mid-afternoon.

China only sold 22% of the corn it put up for public auction this week.

India's top wheat producing state of Uttar Pradesh will increase output by more than 12% in the coming season to nearly 31 MMT, according to the state's agriculture director. Beneficial rains and an increased utilisation of higher yielding varieties will be behind the boost in output, he says.

George Osborne is in the limelight tomorrow and his every word will be scrutinised, along with the publication of this month's MPC minutes. Before that we've got Merv the Swerve speaking to UK business leaders today. I'm getting the word "volatility". I'd expect the pound to end the week lower than it started it.

The UK feed market has a "toppy" feel to it. Whether that is because the big price increases of the past few months are starting to hit demand, or if it is simply a case of "demand will pick up once winter arrives" remains to be seen.

Another school of thought is that many farmers doubled up their orders last month and will find themselves back to the trough in November.

Personally I'd tend to favour the former theory, not that I see prices completely falling out of bed mind. The way things look at the moment it could be a difficult winter, with tight supply equally matched by thin on the ground demand.

The domestic rape crushers seem to have suddenly found some more rapemeal to sell that they didn't know they had. Ditto the flour millers and their wretched wheatfeed. Both those markets seem to have turned on a sixpence.

Tarquin and Ptarmigan can push bits of paper around all day, it doesn't actually create one extra mouth to feed does it?