EU Grains Close -Wednesday
06/06/12 -- EU grains finished higher with Jul 12 London wheat ending up GBP0.50/tonne to GBP171.50/tonne, and new crop Nov 12 climbing GBP0.25/tonne to close at GBP155.00/tonne. Aug 12 Paris wheat was unchanged at EUR208.00/tonne, whilst Nov 12 was EUR1.00/tonne firmer at EUR206.50/tonne.
It was a day of mixed influences, but none of them particularly dramatic, in a kind of "is the glass half full, or half empty" sort of a day.
The USDA attaché in Russia estimated that grain production there this season would amount to 88 MMT this year down 6% from last year's 94 MMT. Wheat production will come in at 54 MMT, 2 MMT lower than the official number from Washington last month, although higher than some other estimates in the market, they said.
Exports will however be harder hit, with total grain exports of 19 MMT representing a fall of 30% on this season's 27.1 MMT. Wheat shipments declining by 24% to 16 MMT, they estimate.
Many farmers complained that there was practically no spring this year, as cold winter weather suddenly switched to summer heat and dryness, they commented.
"This sudden onset of very hot temperatures resulted in snow quickly melting and evaporating rather than soaking into the soil to improve moisture levels. In addition, this weather has sped up the development of winter wheat, with heading occurring 2 weeks early in many parts.
"In some areas there was no rain from the first week of April through mid to late May and this significantly impacted the growth of winter wheat. Although rains began to fall at the end of May and this will help in filling of grain, the yield potential is expected to already have been significantly damaged by the previous dryness. These May rains, however, are expected to be beneficial for sown spring crops, including corn and sunflowerseeds," they concluded.
At home, the HGCA said that "the total area planted to cereals and oilseed rape by 1 December 2011 in England and Wales is estimated 5% higher than in December 2010 at 2.984M ha. The England and Wales wheat area planted by 1 December 2011 is estimated 3% higher than the previous December at 1.862M ha."
Private US analytical firm Informa Economics raised their US winter wheat crop production forecast to 1.676 billion bushels, up 1.2% from their May forecast. Wheat development has been notably much faster than normal during May, with crop conditions significantly better than the five year average, they observed.
EU Rapemeal Prices
06/06/12 -- Rapemeal prices on the continent are firmer sharply higher following good gains in Chicago soymeal last night and again this morning in follow through electronic trade.
Latest guide prices for EU rapemeal today, basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:
| Jun12 | 264.00 |
+11.00 |
| Jul12 | 260.00 |
+7.00 |
| Aug/Oct12 | 234.00 |
+8.00 |
| Nov12/Jan13 | 229.00 |
+5.00 |
| Feb/Apr13 | 228.00 |
+5.00 |
| May/Jul13 | 217.00 |
+8.00 |
| Aug/Oct13 | 188.00 |
+9.00 |
| Nov13/Jan14 | 195.00 |
+9.00 |
Brazil Will Soon Be Awash With Corn
Conab cut their 2011/12 soybean production estimate by 0.3 MMT to 63.4 MMT, meaning that this will be the first time in over a decade that Brazil will harvest more corn than soybeans this season.
So what are they planning on doing with all that corn? Export it of course. Corn exports this year are pegged at a record 11 MMT, but could easily be higher given that 2011/12 ending stocks are estimated at an" unprecedented" 16 MMT.
With Brazilian FOB prices said to be around USD20-30/tonne cheaper than those on the US Gulf, port listings show that there's 820 TMT of corn lining up to be exported out of Brazilian ports this week. A year ago that total was only 294 TMT.
The Lunchtime Byte
New crop Dec corn has been hovering only just above the USD5/bu mark, a level it has not breached since late 2010. Jul 12 CBOT wheat, which rallied 16.5% in the week ended 18th May has subsequently given up most of those gains to only stand 2.7% above the lifetime contract low as of last night's close. Meanwhile soyoil closed within 9 cents of setting a new 19-month closing low for a front month on Monday.
In the outside markets, front month Jul 12 NYMEX crude which fell nearly 22% between 1st May and 1st June, currently has recovered a little from its lowest levels since last October to currently stand at around USD85.50/barrel.
The USDA's Moscow attaché says that Russia's wheat harvest this year will total 54 MMT, 2 MMT lower than the official number from Washington last month, although higher than some other estimates kicking around. That would represent a 4% drop on last season's output, hardly a crisis in itself. Of note though is the forecast of total grain exports of 19 MMT of which wheat will account for 16 MMT.
Total Russia grain exports in 2011/12 are expected to be 27.1 MMT, so they are seen falling 30% next season, with wheat shipments declining by 24%. Total Russian grain production in 2012 is estimated at 88 MMT down from 94 MMT last year, a 6% reduction.
Brazilian farmers are already 28% sold on next year's soybean crop even though it doesn't get planted for another four months, according to Celeres. This season's crop is 87% sold, 19 points ahead of the five year average, they add. The firm US dollar and weak real make forward prices more attractive than ever, it seems. No wonder then that plantings are seen increasing sharply for the 2012/13 marketing year, with Informa Economics, Oil World and the USDA all recently forecast that Brazil’s 2012/13 soybean harvest will come in around the 78 MMT mark, some 20% up on this season.
There's a long way to go to that crop though, and pretty much only the US to keep us all going until then.
The ECB have just announced that they've left interest rates on hold at 1%, contrary to a cut of up to 0.5% called for by some. The euro is down on the news.
There's some talk of the Indian government introducing export subsidies to get rid of it's mountain of surplus wheat stocks that has it's antiquated storage system overflowing with state-owned grain. Doing so will cost them a packet, but they may view it that they are better off cutting their losses now whilst these stocks are still of a merchantable quality and make some space with a huge summer rice crop on the way in October.
Chicago Close - Tuesday
05/06/12 -- Soybeans: Jul 12 Soybeans closed at USD13.49 1/2, up 9 1/2 cents; Nov 12 Soybeans closed at USD12.77, up 8 3/4 cents; Jul 12 Soybean Meal closed at USD400.00, up USD3.90; Jul 12 Soybean Oil closed at 48.50, up 19 points. Funds were said to have bought around 4,000 soybean contracts on the day. "Weather conditions in the Midwest grain belt continue unfavourable for crop development with a dry forecast this week. Though temperatures have moderated somewhat, dry soil conditions prevail. Field moisture has steadily deteriorated with low rainfall in the past month," say Martell Crop Projections. With South America already well sold on it's 2011/12 crop the world is now largely reliant on this year's US soybean crop to see it through until 2013 and can ill afford any weather-related production set-backs.
Corn: Jul 12 Corn closed at USD5.67 1/2, down 1/2 cent; Dec 12 Corn closed at $5.07 3/4, down 16 cents. Dec 12 closed at the low of the day and now stands perilously close to trading under USD5.00/bushel, a level unseen since December 2010. Funds were estimated to have been net sellers of around 7,000 contracts on the day, possibly shorting corn and buying beans. Monday's crop condition report showed corn good/excellent ratings holding steady at 72% whereas the trade seemed to be expecting a reduction to 70%. The 6 to 10 forecast offers the chance of above normal rains for many, although recent such forecasts have generally disappointed. Conab raised their Brazil’s corn crop estimate to 67.8 MMT, thanks to a winter corn crop of 32.9 MMT, up 2.7 MMT from last month. Brazil's corn exports are seen rising on the back of this. FOB prices there offer significant discounts to US corn at the moment.
Wheat: Jul 12 CBOT Wheat closed at USD6.13 1/4, down 14 1/2 cents; Jul 12 KCBT Wheat closed at USD6.38, down 17 cents; Jul 12 MGEX Wheat closed at USD7.28 3/4, down 13 3/4 cents. Funds were said to have sold around 3,000 Chicago wheat contracts on the day. The US winter wheat harvest is well ahead of normal at 20% complete. Recent rains in Russia and Ukraine are hoped to have drawn a line under deteriorating crop prospects there, whilst there's rain in the forecast this week for parched Western Australia. The UK, France, Germany and Poland have also had some beneficial moisture in recent days boosting yield prospects in Europe. Dec 12 CBOT wheat closed at a USD1.50/bu premium to Dec 12 corn, that is going to see those that had been favouring wheat over corn in feed rations switching back to corn.
EU Grains Close - Tuesday
05/06/12 -- Paris grains finished mixed with London closed for a second day for the Queen's Jubilee celebrations. Nov 12 Paris wheat was down EUR1.00/tonne to EUR205.50/tonne, it's lowest close in thirteen sessions.
Decent weekend rains across the UK, France and western half of Germany have extended into the beginning of the week, boosting crop prospects further.
Some rain also fell in parched Western Australia, with more in the forecast for the week ahead. Recent rains may also have drawn a line under deteriorating crop conditions in Russia and Ukraine it is hoped.
Tomorrow all eyes will be on Europe, once again, with some pundits forecasting a drop in interest rates from the ECB. Others are calling for an increase in QE to attempt to boost growth.
At home survey by Lloyds Banking Group shows business confidence slumping from a positive reading of 26 points to a negative one of 21 points.
London wheat will play catch up tomorrow after an extended holiday. Paris wheat has been down on both of the last two days, and Chicago wheat is more than 30c lower based on its close on Friday night through to Tuesday night so a downwards opening seems the most likely.
Chicago Close - Monday
04/06/12 -- Soybeans: Jul 12 Soybeans closed at USD13.40, down 4 1/4 cents; Nov 12 Soybeans closed at USD12.68 1/4, up 10 1/4 cents; Jul 12 Soybean Meal closed at USD396.10, up USD1.60; Jul 12 Soybean Oil closed at 48.31, down 28 points. Jul 12 soybean oil closed within 9 cents of setting a new 19-month closing low for a front month. Cruse oil was lower again for much of the day, but managed to claw its way into positive territory by the end of the session on light consolidation following a near 22% drop in a month. The USDA announced the sale of 165,000 MT of new crop soybeans to China, which was supportive. So too were ideas that despite the early planting, this season's crop hasn't got off to a great start with large parts of the Midwest too warm and dry in May. The USDA released their first soybean crop ratings of the new season. The trade was expecting around 70% good/excellent, but got only 65% in the top two categories. Planting is 94% complete versus 75% normally and emergence is 79% compared with 50% normally. The weather outlook is cooler, but lacking in precipitation. "The temperature forecast this week is favourable, not calling for extreme heat. On the other hand, dry air and low humidity is expected to dominate the grain belt with high pressure in control. This would enhance evaporation, without enough rainfall to compensate. The 5-day rainfall outlook shows a big hole over the Midwest Corn Belt where less than .25 inch of rainfall is anticipated," say Martell Crop Projections.
Corn: Jul 12 Corn closed at USD5.68, up 16 1/2 cents; Dec 12 Corn closed at USD5.23 3/4, up 13 3/4 cents. Funds were said to have bought around 12,000 corn contracts on the day after weekend rains turned out to be lighter than anticipated. The 30-day rainfall totals for May show much of the Corn Belt having less than 50% of normal precipitation last month. Following sub-par field moisture in May the weather forecast going forward doesn't contain much in the way of precipitation either. Talk persists that China has bought up to 6 cargoes of US corn as prices dipped to 17-month lows last week, but there is no confirmation of this from the USDA as yet. Ukraine announced it's intention to sell 3 MMT of it's new crop corn to China in 2012/13 if it can get over a few quarantine hurdles, although that will be easier said than done. After the close the USDA said that 72% of the US 2012 corn crop is rated good/excellent, unchanged from last week. Emergence is 97% versus 83% normally.
Wheat: Jul 12 CBOT Wheat closed at USD6.27 3/4, up 15 1/2 cents; Jul 12 KCBT Wheat closed at USD6.55, up 18 cents; Jul 12 MGEX Wheat closed at USD7.42 1/2, up 3 cents. Short-covering was a feature. Wheat regained around half of Friday's losses, although talk circulates of Asian buyers potentially switching out of wheat and back into corn at current price differentials. Funds were said to have been net buyers of around 4,000 Chicago wheat contracts on the day after weekend rains in Russia and China were below expectations. Weekly export inspections of 21.6 million bushels were bang in line with trade expectations. The USDA peg the winter wheat harvest at 20% complete, more than double last week's pace and well ahead of just 3% normally. Harvesting is 73% done in Oklahoma compared to just 13% on average for this time. Winter wheat crop ratings fell from 54% good/excellent to 52%. Spring wheat good/excellent fell one point to 78%.
EU Grains Close - Monday
04/06/12 -- Paris grains finished mostly lower with the London market closed for a two day public holiday. Inactive Aug 12 Paris wheat was unchanged once again at EUR208.00/tonne, whilst Nov 12 was EUR2.25/tonne lower at EUR206.50/tonne. Corn was one wuro firmer to one euro lower, whilst rapeseed ended with losses of EUR5-6.00/tonne.
European markets were playing catch-up with a sharply lower US wheat close on Friday night, although the overnight electronic market did manage to reverse some of those losses today.
European concerns are never far away, with fabled billionaire investor George Soros warning that EU leaders only have a three-month window left to save the euro. The German economy will soon start to weaken under the burden of trying to keep the eurozone intact, he says, making it more difficult for Angela Merkel to sell the idea of increased financial responsibility to the German electorate and tax-payers.
Crude oil was under pressure again for most of the day, extending recent losses on fears over the health of the global economy.
Weekend rains in the US were lighter and less widespread than had been hoped, allowing grains there to rebound somewhat from last week's losses.
The Ukrainian Grain Association say that grain carryover stocks at the end of the 2011/12 marketing year could be as high as 12 MMT after the government there were slow to remove export restrictions earlier in the season. That should compensate for winter wheat losses and allow them to participate in a full export programme in 2012/13, led by corn.
Kazakhstan will have healthy grain carryover stocks of 5 MMT, according to the Minister of Agriculture, and that's only if they can manage to export 4.5 MMT in the last two months of the marketing year, which sounds rather ambitious in the current climate.
Kazakh spring grain plantings are 96% done, he added. Russian spring sowings are at around a similar stage of completion, whist Ukraine's are said to have already exceeded expectations.
Winter crop conditions in the latter are said to be 68% good/satisfactory, with winter wheat rated 71.4% good/satisfactory.
Rusagrotrans say that an optimistic assessment of the 2012 grain harvest potential in Russia places the total crop at around 93.4 MMT - only marginally down on last year. A "moderate" estimate would be 89.6 MMT and a pessimistic one 82 MMT. The middle ground figure would allow them to export 19 MMT of grains in 2012/13, they say.
Ukraine meanwhile says it is hoping to export 3 MMT of corn to China in the coming season, which would be a knock to US export hopes if they can allay the Chinese authorities fears on quality issues.
