EU Wheat Close
31/08/11 -- Despite trading lower for almost the entire session EU grains somehow managed to finish mostly higher with Nov London wheat up GBP0.75/tonne to GBP174.75/tonne and Nov Paris wheat EUR0.50/tonne firmer at EUR211.25/tonne.
Depending on what happens overnight that particular anomaly may well correct itself in the morning.
On the month of August as a whole Nov London wheat was up GBP11.00/tonne and Nov Paris wheat gained EUR13.50/tonne.
Offre & Demande Agricole said that UK wheat yields are likely to be down 3.4% compared with last year, with winter barley yields falling 13.5% and rapeseed yields rising 10.5%.
La Salle group peg the EU-27 wheat crop at 137.8 MMT, 4.3 MMT more than the USDA reckon and up 2% on last season with the UK crop coming in at 15.1 MMT.
The Russian Minister of Agriculture now says that grain production there this season will exceed the upper end of trade estimates of 90 MMT.
For once the USDA seem to be significantly underestimating wheat output around the globe this season.
Early Call On Chicago
31/08/11 -- The overnight grains finished lower on profit-taking and a lack of follow through buying. Beans closed with losses of around 4 cents, with corn down 3-5 cents and wheat mostly 2-4 cents easier although front month September showed double digit losses as the gap between it and December widens.
We may be in for some further profit-taking and month end book squaring this afternoon. Crude oil is lower and the US dollar firmer, both of which should weigh on sentiment a little.
A cooler outlook is on the cards for most of the Midwest with some welcome an needed rain in the forecast too. That will come too late to help some crops, but should aid late filling corn and pod-setting beans.
There is talk of early corn harvesting in Illinois throwing up better yields than anticipated.
The parched US Plains should also see some much needed rains which may aid winter wheat planting. That may also encourage some selling ahead of a long three day weekend.
Other than that fresh news is extremely thin on the ground today. Early calls for this afternoon's CBOT session: corn and beans 3-5 cents lower, wheat down 2-4 cents.
News Snippets
31/08/11 -- The Russian railway authority that put a temporary ban on transporting grain into the Black Sea port of Novorossiisk says that it will take a further 5-6 days to clear the backlog.
The Russian Minister of Agriculture now says that grain production there this season will exceed 90 MMT, without giving a specific figure. I told you that the sums didn't add up.
The dollar is firmer after the release of the minutes of the Fed's last meeting reveal that some of the Federal Open Market Committee were in favour of further QE.
The euro is higher on suggestions that the German Cabinet has approved plans to expanding the eurozone's rescue fund's powers and increasing its lending.
Libya has bought two cargoes of French wheat after the garlic-munchers un-froze some Libyan assets and handed them over to their National Transition Council.
Interesting Factlet D'Jour
31/08/11 -- Barley's spectacular fall from grace in the past couple of years means that just about every major producing nation has seen double digit percentage falls in output this year when compared to 2009/10.
Using the USDA's latest figures here's how production this year compares with that of two seasons ago:
In the US -26%, Russia -13%, the EU-27 -17% (incl France -35%, Germany -28% and the UK -25%), Ukraine -28% & Canada -14%. Production in Turkey has remained flat. Only Australia and Argentina have seen growth (+14% and +121%), with the latter coming from a very low reference point of just 1.4 MMT.
Chicago Close
30/08/11 -- Soybeans: Sep 11 Soybeans closed at USD14.48 3/4, up 10 3/4 cents; Nov 12 Soybeans closed at USD13.79 3/4, up 8 3/4 cents; Sep 11 Soybean Meal closed at USD381.10, up USD1.90; Sep 11 Soybean Oil closed at 58.20, up 20 points. The entire market is almost universally bullish, which makes me suspicious. Funds bought 8,000 bean contracts on the day it is estimated, adding to recently established length. What happens if/when they get fed up/spooked by supporting the market at these levels? At the end of the day soybeans at USD14/bu aren't cheap. Don't get me wrong, I readily accept all the bullish arguments that are out there in the marketplace but the notion that there is virtually no downside potential is worrisome.
Corn: Sep 11 Corn closed at USD7.63 1/2, up 7 1/4 cents; Dec 11 Corn closed at USD7.75 1/4, up 5 1/4 cents. Despite trading lower overnight corn quickly turned positive, aided by fund money buying a further 9,000 contracts on the day. One widely quoted weather forecaster appears to be predicting an early frost this year, which grabbed media attention, despite WxRisk.com saying that the guy concerned has issued a frost scare at least four times since 2000 and none of them have so far materialised. Meanwhile, Agrimoney.com report US corn exports falling to an eight-year low this season.
Wheat: Sep 11 CBOT Wheat closed at USD7.50 1/4, down 7 cents; Sep 11 KCBT Wheat closed at USD8.67 1/2, down 6 1/2 cents; Sep 11 MGEX Wheat closed at USD9.41, down 7 1/4 cents. Private exporters announced the sale of 102,500 MT of HRW wheat to unknown, but apart from that bullish news was limited. Yemen bought Black Sea wheat over the weekend and Western Australia looks set for a wheat crop of around double last season's drought damaged output. Spillover support from corn helped wheat from falling too far however. Oklahoma and Kansas are forecast to get some rain this weekend ahead of winter wheat plantings.
EU Wheat Close
30/08/11 -- EU grains finished mixed with Nov London wheat up GBP2.25/tonne at GBP174.00/tonne and Nov Paris wheat ending EUR3.25/tonne lower at EUR210.75/tonne.
London wheat was playing catch-up following gains in Chicago and Paris yesterday when the domestic market was closed for the Bank Holiday.
The Russian rail authority RZhD said that it had suspended transportation of grain to the major Black Sea port of Novorossiisk as the rail system into the port has become gridlocked. That could give EU wheat a bit of a window of opportunity against Russian wheat still priced USD15-20/tonne cheaper.
Yemen has bought 100,000 MT of Black Sea wheat overnight. So whilst world wheat demand is still good, it isn't EU or US grain that is flavour of the month. US wheat is being supported by the tight corn supply/demand balance and renewed fund appetite for grains.
Concerns about outside influences such as European debt have eased a little in the past couple of weeks, enabling London wheat to close at the highest for a front month tonight since July 5th.
Those worries certainly haven't gone away though. The Eurozone’s Economic Sentiment Indicator fell to 98.3 in August, according to Eurostat, the worst reading since May 2010. The US Conference Board also reported today that consumer confidence there plunged to 44.5 in August - the lowest level since April 2009.
The most likely bearish influence on grain prices for the remainder of 2011 would seem to be the potential for another wholesale exodus of investment money out of the market if (or is it when) EU debt problems get even further out of hand. We've already seen two such flights to safety this year.
The first, which began with the escalation of tensions in north Africa followed by the Japanese earthquake and tsunami, saw London wheat fall GBP40/tonne in a month.
The second, on widespread nervousness surrounding the global economy and the threat of a Greek debt default, saw prices drop GBP37/tonne in two and a half weeks in mid-June.
Early Call On Chicago
30/08/11 -- The overnight grains finished lower on a lack of follow-through buying with beans, corn and wheat all ending around 8-10 cents weaker.
Crude oil is firmer as is the US dollar. Talk that last night's drop in corn ratings was more than the trade anticipated failed to generate further buying interest, which may be a disappointment to the bulls.
Fresh news is pretty thin on the ground so far, although the USDA have just reported the sale of 102,500 MT of HRW wheat to unknown.
Funds have been massive buyers again of late, so once again the market is becoming saturated with length. With month end looming, and a long weekend lying ahead (Monday is Labour Day) today looks like another Turnaround Tuesday at the moment.
The US Conference Board have just reported consumer confidence plunging to 44.5 in August - the lowest level since April 2009. That's below the lowest in a range of economist's estimates of 45-59 average, and sharply below the 59.2 mark recorded in July.
Reports that Russia's eagerness to sell this season's wheat surplus is already causing bottlenecks at the Black Sea port of Novorossiisk are interesting.
Ukraine haven't exactly hit the ground running as far as their exports are concerned, and neither have Kazakhstan who's harvest is only recently underway. Both have plenty of grain to export, but Ukraine needs to iron out it's red tape and export duty system and land-locked Kazakhstan need access to the rest of the world.
Early calls for this afternoon's CBOT session: beans and corn down 8-10c, wheat down 10-15c.
The Morning Vibe
30/08/11 -- Whilst we had a day off yesterday here in the UK the rest of the markets were open with Nov Paris wheat closing EUR3.75/tonne higher at EUR214.00/tonne. Chicago soybeans posted strong gains of 23 1/4 cents last night, with corn modestly higher up 3 3/4 cents and wheat mixed down 5 cents nearby to up 7 cents further forward.
Corn set contract highs as funds piled in for an estimated 7,000 contracts on the day. Are we bouncing on the ceiling here or simply en-route to USD8/bu, or at whatever point price rationing starts?
Corn good/excellent crop conditions fell 3 points to 54% the USDA said after the close, a little more than the trade expected, yet the overnight markets are lower this morning. Soybean good/excellent fell two points to 57%, in line with what was expected.
Winter wheat harvesting has reached 97% done, spring wheat is only 50% cut as opposed to 71% normally and good/excellent spring wheat fell one point to 61%.
Yemen has bought 100,000 MT of Black Sea wheat overnight, let's hope for their sakes that it isn't scheduled to come from the port of Novorossiisk.
In an interesting development over the weekend the Russian rail authority RZhD says that it has suspended transportation of grain to the major Black Sea port of Novorossiisk as the rail system into the port has become clogged and is unable to cope with the volume of traffic heading its way.
In Ukraine the corn harvest began over the weekend, with a crop of around 17 MMT expected. Winter rapeseed planting is already 40% complete.
