Nogger's Blog

Ukraine Latest

09/05/12 -- There are plenty of stories around of it being too hot and dry in Ukraine and of crop damage potential there, so I thought I'd check out what my old mucker and man on the ground over there Mike Lee has to say about it.

Handily enough he's just posted something on his excellent blog here:

"April finishes with rainfall and temperatures above average and above this time last year. May has started very warm with daytime temperatures reaching the mid to high twenties. Occasional showers are continuing to water thirsty crops but not so much as to disrupt spring plantings. In summary: marvelous weather, the question is how long will it last?"

Doesn't exactly sound like a crisis just yet then.

EU Rapemeal Prices

09/05/12 -- Rapemeal prices on the continent are mostly a little higher today, partially recovering from steep declines earlier in the week that mirror soybean losses in Chicago.

Latest guide prices for EU rapemeal today, basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:

Chicago Closing Comments

08/05/12 -- Soybeans: May 12 Soybeans closed at USD14.37 3/4, down 25 3/4 cents; Nov 12 Soybeans closed at USD13.40 1/2, down 13 cents; May 12 Soybean Meal closed at USD416.60, down USD8.60; May 12 Soybean Oil closed at USD52.90, down 31 points. Funds sold 8,000 soybean contracts on the day, taking the market lower despite bullish fundamentals. Outside markets were a bearish influence in follow through selling in the wake of the weekend election results in Europe. The market is also a bit nervous ahead of Thursday's USDA reports. The USDA announced the sale of 225,000 MT of beans to China split 60,000 MT old crop and 165,000 MT new crop. They also reported the sale of 40,000 MT of new crop soyoil to "unknown". That's seven sessions in a row that they've announced the sale of soybeans to China or "unknown" destinations.

Corn: May 12 Corn closed at USD6.66, up 1 cent; Dec 12 Corn closed at USD5.28, up 3 1/4 cents. Corn closed firmer, but well off session highs, with front month May 12 touching 22 cents higer at one point. May goes off the board next Monday. Funds were said to have bought around 4,000 corn contracts on the day. Old crop remains tight with farmer selling minimal as they busy themselves sowing new crop. There's some suggestion that China may have bought old and new crop corn over the weekend, but there is no official confirmation of this yet. The USDA will give us fresh 2012 world production estimates on Thursday as well as report on US ending stocks which, for corn, it has hitherto been reluctant to drop below the 800 million bushel mark.

Wheat: May 12 CBOT Wheat closed at USD6.09, up 2 3/4 cents; May 12 KCBT Wheat closed at USD6.25, up 5 3/4 cents; May 12 MGEX Wheat closed at USD7.31 3/4, down 3 3/4 cents. Funds were said to have bought around 2,000 Chicago contracts on the day. Export activity is fairly light, Jordan bought 50,000 MT of optional origin wheat in a tender overnight. Tunisia bought 75,000 MT of wheat from an unspecified origin. South Korea bought 112,000 MT of optional origin feed wheat, 92,000 MT of US wheat and 36,100 MT of Australian milling wheat. The USDA are expected to report a sharp rebound in US wheat production on Thursday with an average trade estimate of 2.196 billion bushels (59.8 MMT) versus 1.999 billion (54.4 MMT) last year.

EU Wheat Ends Higher But Lacks Direction

08/05/12 -- EU grains finished higher with May 12 London wheat finishing up GBP2.50/tonne to GBP174.50/tonne, and new crop Nov 12 rising a more modest GBP0.45/tonne to close at GBP149.95/tonne. May 12 Paris wheat ended EUR0.25/tonne higher at EUR217.00/tonne, whilst Nov 12 was EUR3.25/tonne firmer at EUR198.00/tonne.

There seems to be little rhyme or reason to the markets at the moment, they are up for a day or two and then down for a day or two - it's been more than a month since May 12 London wheat closed outside the GBP170's.

These remaining old crop months are pretty illiquid though, new crop Nov 12 London wheat however does seem to be in a trend, and it's downwards, having closed at GBP163.50/tonne in late March. Nov 12 Paris wheat peaked at EUR208.25/tonne at the same time.

Fresh news is thin on the ground. Jordan bought 50,000 MT of optional origin wheat in a tender overnight. Tunisia bought 75,000 MT of wheat from an unspecified origin.

America's harvest is growing ever closer though and all the signs point to good, possibly even record, yields in some states. Spring wheat is also going into the ground in a very timely manner.

Meanwhile US corn planting is at its third fastest pace ever, maturity is massively above normal, 32% now as opposed to just 6% last year. This means that the crop is less likely to be at the crucial pollination stage at the height of the summer heat. It should also be less vulnerable to an early frost too.

The USDA will report on US and world production prospects for 2012 for the first time on Thursday. We've got used to being thrown a surprise or two in recent reports, few would bet against them doing the same again this time round.

Early Call On Chicago

08/05/12 -- The overnight grains are mostly higher with beans up 1-3 cents, corn up as much as 8 3/4 cents nearby and 2-3 cents higher on new crop and wheat up 5-7 cents. Crude oil is almost a dollar lower, extending it's recent losing streak.

Having reported soybean sales to unknown/China every day last week, and again yesterday, the USDA are back again today announcing the sale of 225,000 MT of beans to China split 60,000 MT old crop and 165,000 MT new crop. They are also reporting the sale of 40,000 MT of new crop soyoil to "unknown".

How much longer the market can absorb these daily sales remains to be seen. It will also be interesting to see what these orders do to the USDA's old crop balance sheet projections on Thursday.

Despite seeming to have the most upside potential, it doesn't feel like soybeans are going to put in any significant gains ahead of this report though, given the heavy fund length that exists already.

There's some suggestion that China may have also bought old and new crop corn over the weekend, but there is no official confirmation of this yet.

US corn, soybean and spring wheat plantings are well advanced. So too is winter wheat maturity. That will tempt many to harvest early and double crop with corn, or more particularly soybeans. Informa last week suggested that soybean double cropped acreage will climb by 26% on last year.

Whilst the EU rapeseed crop is forecast to drop sharply to around 17.5 MMT by Rabobank, Canadian and Australian production is seen rising by 14-15%, possibly more in the case of the latter.

With a large US winter wheat harvest almost upon us, upside potential for that looks limited. Old crop corn is undeniably tight, but a probable record crop lies ahead to put new crop under pressure somewhere down the line unless we get a weather scare. Soybeans offer most upside potential given the large reductions in South American production and constant Chinese interest.

Looking further ahead into 2013 Informa last week forecast Brazilian soybean production at a monster 80.5 MMT, with Argentina chipping in with a record 60 MMT of their own as South American producers attempt to cash in on these big prices. In Brazil some of that will be down to new land coming into production, in Argentina it may be partially due to a switch away from wheat.

Early calls for this afternoon's CBOT session: corn 6-8 cents higher old crop and 2-4 cents firmer new crop; soybeans up 1-3 cents and wheat up 4-6 cents.

Chicago Close - Monday

07/05/12 -- Soybeans: May 12 Soybeans closed at USD14.63 1/2, down 11 1/2 cents; Nov 12 Soybeans closed at USD13.53 1/2, down 13 1/4 cents; May 12 Soybean Meal closed at USD425.20, down USD6.90; May 12 Soybean Oil closed at 53.21, down 9 points. Having annouced sales of mostly new crop soybeans to China/unknown every day last week, the USDA began the week reporting 110,000 MT of old crop soybeans to unknown today. Even so, beans gave in to a broad-based sell-off in commodities following the weekend election results in Europe. The Buenos Aires Grains Exchange cut their Argentine soybean production estimate to 41 MMT, more than 8 MMT down on last year. The USDA, who currently have Argentine production pegged at 45 MMT, will issue revised supply & demand estimates on Thursday. Funds, who were said to have been net sellers of 6,000 soybean contracts on the day, may continue to liquidate their length ahead of that report. The USDA reported soybean planting at 24% complete after the close, compared to 11% normally.

Corn: May 12 Corn closed at USD6.65, up 2 3/4 cents; Dec 12 Corn closed at USD5.24 3/4, up 1/2 cent. Corn just about shrugged off outside market influences. The USDA announced 240,000 MT of optional origin new crop corn sold to Mexico and a further 116,000 MT to South Korea. Funds were said to have been net sellers of around 2,000 contracts on the day. After the close the USDA announced that US spring corn planting progress was 71% complete, versus trade expectations for 62-67% done, and well ahead of the five year average of 47%. This is surprising given that widespread Midwest rains last week were thought to have stalled sowings somewhat. Emergence for the early planted crop is running at 32% compared with 13% normally. Ideas are that La Nina has given way to what may prove to be an El Nino weather pattern, which would typically bring cool and wet conditions for the Midwest this summer, could bring record yields when coupled with these early plantings and thus a longer growing season.

Wheat: May 12 CBOT Wheat closed at USD6.06 1/4, up 2 1/2 cents; May 12 KCBT Wheat closed at USD6.19 1/4, up 5 1/2 cents; May 12 MGEX Wheat closed at USD7.35 1/2, down 4 1/2 cents. StatsCanada announced Mar 31 wheat stocks of 14.5 MMT, slightly below expectations and 1.3 MMT less than last year. The USDA will release their first 2012/13 production estimates on Thursday. US wheat output is expected to be around 10% higher with an average trade estimate of 2.196 billion bushels (59.8 MMT) versus 1.999 billion (54.4 MMT) last year. After the close the USDA pegged spring wheat planting well advanced at 84% done versus 49% normally, emergence is also well ahead of the five year average of 17% at 47%. Winter wheat rated good/excellent fell slightly from 64% to 63%, but that is well ahead of this time last year when only 33% of the crop was rated in the top two categories. In Washington 90% of the crop is now rated good/excellent. Hot and dry conditions in parts of Ukraine and Russia are being flagged up as potential problem areas for wheat.

EU Wheat Closing Comments

07/05/12 -- EU grains finished mostly lower although London wheat was closed for a belated May Day holiday. May 12 Paris wheat ended down EUR3.25/tonne at EUR216.75/tonne, new crop Nov 12 was down EUR1.00/tonne to EUR194.75/tonne.

For new crop Nov 12 Paris wheat this was the lowest close in two months as the coming season's harvest hopes rise on improving prospects in Western Europe and the US.

Much of the SE of England, and most of France and Spain have had between two and six times their normal rainfall totals in the past 14 days, according to Martell Crop Projections.

US production hopes have also improved significantly since winter wheat went into dormancy, with abundant rains in recent months boosting hopes that the top producing state of Kansas will have a record yield this year.

Weekend election results in France and Greece knocked the euro to its lowest levels against the pound since November 2008. New French PM Francois Hollande is likely to less willing to climb into bed with German Chancellor Angela Merkel than the ousted Nicolas Sarkozy.

That potentially threatens the uneasy accord that has been struck within the fiscally mired Eurozone of late. Meanwhile Greece faces political and financial turmoil after the pro-austerity parties took a thrashing at the polls.

The market is already suggesting that a new coalition Greek government is unlikely to have enough support from the pro-austerity sector to push through the necessary spending cuts needed to qualify for the next tranche of EU bailout funding.

With each week that passes the new 2012/13 marketing year gets closer. The USDA will issue their first production estimates for the coming season on Thursday this week. US analytical firm Informa Economics on Friday forecast word corn production in 2012/13 at a record 932 MMT, which is 67 MMT (or 7.6%) up on last year. That's well above the IGC's April estimate of 900 MMT.

Interesting Chart Of The Day

06/05/12 -- Whilst updating a plethora of charts over the weekend for various discerning clients I got myself thinking about fertiliser, Urea specifically, as I have some historical price data on that going back a few years.

I found myself wondering how much correlation there is between the price of wheat and the price of urea. I mean I can't be the only one who's wondered in an idle moment if basically it isn't really just priced at what the producers think that the market will stand.

Let me say right here that I what I know about the fertiliser market fundamentals is four fifths of bugger all. What I have noticed though is that the price seems to follow the price of wheat on a delayed reaction basis.

The price of oil, demand from China, the Indians haven't bought yet, you'd better get your order in now or it will all be gone we've only got a couple of lorry loads left are all great selling points aren't they?

So anyway, as I was updating my FOB Black Sea urea chart I noticed that prices are now matching last summer's highs - the highest that they've been since I started keeping tabs on them at the start of 2010. On that basis alone it would seem unlikely to me that this is indeed a great time to buy.

You can click the chart to enlarge it. What I've noted for you is that over the past eighteen months or so we've had three significant lows on London wheat:

A: Mar 2011-  in the aftermath of the Japanese earthquake, tsunami and nuclear scare.

B: Jun 2011 - financial melt-down on fears of a Greek debt default.

C: Dec 2011 - the bottom of the recent market when London wheat fell to GBP140/tonne.

All three of these events were matched by a subsequent dip in Urea prices between one and two months later. Coincidence? Maybe.

During this period the highs for London wheat were set:

1: Apr 2011 - the all time high close for London wheat, helped by erm, let's call it "technical market conditions" shall we?

2: Aug 2011 - just before we all realised that despite the drought we were actually going to end up with a decent crop after all.

3?: Apr 2012 - are the old crop highs now in? We don't know, but we can say that prices were higher in April than they had been at any time since last June so let's call it a high for now.

It seems that the Apr 2011 wheat high was met by a subsequent Urea high set in June of last year. The Aug wheat high was followed by a Urea price rally that peaked in late September. Once London wheat peaked last summer it was, like my marriage to MrsN#1, downhill all the way to the mid-December lows. Urea mirrored that decline, starting a month or so later and finishing the first week of February around six weeks after wheat had bottomed.

So the first two of these three of these events were matched by a subsequent peak in Urea prices between one and two months later. Double coincidence? Double maybe.

Supposing wheat has peaked, or that it will do so this month, the odds seem to be stacked in favour of a Urea high being just around the corner. But what do I know? Four fifths of bugger all. It's an interesting theory though, and one I will be monitoring over the next few months.