Chicago Market Sets Fresh Highs
03/07/12 -- Soybeans: Jul 12 Soybeans closed at USD15.72 1/4, up 40 cents; Nov 12 Soybeans closed at USD14.74 3/4, up 36 3/4 cents; Jul 12 Soybean Meal closed at USD454.10, up USD11.60; Jul 12 Soybean Oil closed at 52.95, up 77 points. Soybeans have only ever been higher than this once before - July 2008 when crude oil was peaking at USD147/barrel. Hot and dry remains the call for the majority of the US Midwest, with only some scattered showers in forecast. Michael Cordonnier estimated the 2012 US soybean yield at 41.0bpa versus his previous estimate of 42.0bpa and the USDA's 43.9bpa. Private exporters announced the sale of 35,000 MT of old crop soybean oil to China. Enthused by these prices Celeres estimate that Brazilian farmers already have a third of their 2012/13 crop sold even though planting is 2 1/2 months away yet.
Corn: Jul 12 Corn closed at USD7.18 3/4, up 26 1/4 cents; Dec 12 Corn closed at USD6.74 1/2, up 18 3/4 cents. The weather market rumbles on, with corn hitting fresh highs for this latest move, posting the highest close for a front month since last September. Michael Cordonnier estimated the 2012 US corn yield at 150bpa versus his previous estimate of 156bpa and almost 10% below the USDA's 166bpa. Celeres estimated Brazil’s 2011/12 corn crop at a record 69 MMT versus their previous estimate of 66 MMT thanks to a bumper second crop. US markets are closed tomorrow for the Independence Day holiday, there will be no electronic market either. Depending on the latest weather developments and forecasts Thursday could be explosive. Thursday's normal weekly export reports will be delayed until Friday.
Wheat: Jul 12 CBOT Wheat closed at USD7.82 1/4, up 27 3/4 cents; Jul 12 KCBT Wheat closed at USD7.85, up 25 1/2 cents; Jul 12 MGEX Wheat closed at USD8.86, up 14 3/4 cents. Wheat followed corn and beans higher, with the Jul 12 Chicago contract closing at the highest levels for a front month in just over a year. US spring wheat ratings slipped to 71% good to excellent versus 77% a week ago, showing that even it isn't totally immune to US drought. Even so, 71% is still a very respectable amount. India announced that it will sell up to 2 MMT of state-owned reserves following back top back record harvests and bumper stocks. Ukraine’s Prime Minister said they have no plans on limiting grain exports in 2012/13. A senior Russian official made a similar statement last week. That's a bit like a vote of confidence for a Premier League manager weeks before his dismissal.
EU Wheat Posts Contract Highs
03/07/12 -- EU grains closed mostly sharply higher with soon to expire Jul 12 London wheat up GBP8.25/tonne to GBP198.25/tonne and Nov 12 GBP3.50/tonne higher at GBP178.00/tonne. Aug 12 Paris wheat fell EUR0.25/tonne to EUR234.00/tonne but Nov 12 was EUR4.00/tonne higher at EUR236.00/tonne.
Fresh contract highs were posted as the US drought continues and various analysts throw their hats into the ring with predictions on corn yields in the range of 150-155 bushels/acre, around 7-10% lower than where the USDA currently line-up. They will issue revised production estimates next week.
Outside markets were supportive with crude oil up more than USD3.00/barrel on Middle East tensions and a Norwegian strike that has cut back production. Iran’s parliament are said to have drafted up a bill to block the Strait of Hormuz to oil tankers heading to countries that support EU sanctions.
Ukraine’s Ag Ministry said that Ukraine exported 21.8 MMT of grains at the end of the 2011/12 marketing year, up 81% from a year ago. Of that total they exported 13.86 MMT of corn , 5.17 MMT of wheat , and 2.58 MMT of barley.
Russia's IKAR said yesterday that they had exported 27.8 MMT of grains in 2011/12, of which wheat accounted for 21 MMT. Neither country is expected to come anywhere near close to those totals in the season ahead after drought and winter kill look to have curtailed production sharply.
That should leave EU wheat well-placed to recapture some lost ground to important export homes in North Africa after a pretty disappointing 2011/12 season.
Talk that the ECB will lower interest rates on Thursday may see further euro depreciation, aiding export prospects further.
French crops are looking well, with FranceAgriMer last week pegging wheat good/excellent ratings at 73% compared to just 27% at the same time a year ago. Corn is rated 73% good/excellent from 64% this time in 2011.
Yield prospects in the UK are also looking highly promising, all we need now is some sunshine to ripen up the barley and dry things up and the combines can get rolling. Unfortunately there isn't much of a prolonged dry spell in the forecast.
The Morning Rant
03/07/12 -- London and Paris wheat have hit fresh contract highs this morning, following the lead of US grains. The IGC yesterday cut their US corn crop estimate to 350 MMT - strangely the exact amount that I calculated yesterday using the USDA's newest harvested area forecast along with Informa's revised yield estimate. As mentioned yesterday 350 MMT would still be an 11% increase on last year's production and an all time record.
It may be considered slightly strange then that the market is through the roof against a backdrop of what is currently still set to be a record US corn crop by some considerable distance.
Of course, given the current weather forecast, there is an distinct possibility that US corn yields will come in lower than Informa's 154.9bpa. However, using the USDA's forecast harvested area of 88.9 million acres we'd need to see final yields at 147bpa before US corn production isn't a record this year.
"But China may need to import 8 MMT of corn this year," many would point out. So what? If so (and DDGS imports may curtail some of this demand), at least half of that could easily come from South America. And what is 8 MMT of corn in the overall scheme of things? Less than 1% of the world's output, that's what.
Meanwhile the Chinese are currently importing almost that volume of soybeans per month - nearly 7 MMT in June, according to the Ag Ministry. If the market warrants getting excited about anything it's soybeans not corn - at least this side of South America's 2012/13 crop.
Talking of which, output there could be a monster in the spring of 2013. Big prices do after all encourage big plantings. Safras e Mercado yesterday estimated Brazil's 2012/13 soybean crop at 79.4 MMT, some 21% up on this year. Corn production will come in at 71.95 MMT next year, an increase of 7% on this season's record crop.
Similar large increases in output are also expected from Argentina, assuming of course that weather condition return to normal. That's a fairly big "if" some would say. It's also a fairly big "if" that weather conditions in South America won't be normal however. Indeed, it could be that weather conditions are better than normal, there's just as equal a chance.
The Australia Bureau of Meteorology today said that climate indications point towards a shift towards an El Nino climate event in the coming months. Typically that means abundant rainfall for South America, Argentina in particular.
Chicago Market Presses On Higher
02/07/12 -- Soycomplex: Jul 12 Soybeans closed at USD15.32 1/4, up 19 1/2 cents; Nov 12 Soybeans closed at USD14.38, up 10 1/4 cents; Jul 12 Soybean Meal closed at USD442.50, up USD6.50; Jul 12 Soybean Oil closed at 52.18, down 3 points. Funds were said to have been net buyers of 6,000 soybean and 2,000 soymeal contracts on the day whilst selling 4,000 oil. There were rains over the weekend in Iowa, northern Illinois, Indiana and Ohio - generally 3/4 inch but up to 1 1/4 inches in places - but a large portion of the corn belt south of those areas missed out entirely. With daytime temperatures in the 90's and low 100's evaporation will have also been high. The weather forecast for the week ahead offers more of the same, scattered rains and hit temperatures. The USDA announced the sale of 1.19 MMT of new crop soybeans to unknown, presumably China, and clearly not put off by prices over USD15/bu. The USDA pegged the crop at 45% good/excellent, a drop of eight percentage points from last week and double the cut that was expected.
Corn: Jul 12 Corn closed at USD6.92 1/2, up 20 cents; Dec 12 Corn closed at USD6.55 3/4, up 21 cents. Funds were said to have been strong buyers again, booking an estimated 17,000 contracts on the day. The USDA announced the sale of 110,500 MT of US new crop corn to Mexico. Cropcast reduced its estimate for US corn yields to 150.6 bu/acre - some 9% below the current USDA prediction. The IGC raised its world corn production estimate by 4 MMT from last month to a record 917 MMT, estimating the US crop at 350 MMT, which is almost 26 MMT below the USDA's forecast. Despite the reduction in the US corn production prospects have improved sufficiently elsewhere around the globe, in places like China and India, to more than compensate for this, they said. The USDA also cut corn good/excellent ratings by eight percentage points to 48%. Ukraine's state weather forecaster estimated the 2012 corn crop at 22 MMT versus 22.7 MMT in 2011.
Wheat: Jul 12 CBOT Wheat closed at USD7.54 1/2, up 15 1/2 cents; Jul 12 KCBT Wheat closed at USD7.59 1/2, up 21 cents; Jul 12 MGEX Wheat closed at USD8.71 1/4, up 7 1/4 cents. The IGC estimated the 2012/13 global wheat crop at 665 MMT versus their previous estimate of 671 MMT and the USDA's 672 MMT. Russian production was cut 6 MMT to 49 MMT, some 4 MMT lower than the USDA although in line with other local estimates. Local analysis group IKAR said that Russia finished up exporting 27.8 MMT of grain in 2011/12. Many private estimates now suggest that that figure could halve in 2012/13. The USDA cut spring wheat crop ratings from 77% good/excellent to 71%, still a pretty high percentage. They said that 73% of the spring wheat crop is heading, the five year average is only 35%, so maturity is well advanced. The winter wheat harvest is now pegged at 69% done versus 59% last week and 43% for the 5 year average.
EU Wheat Posts Contract Highs
02/07/12 -- EU grains finished higher with Jul 12 London wheat up GBP2.00/tonne lower to GBP190.00/tonne, and new crop Nov 12 GBP3.50/tonne higher to close at GBP174.50/tonne. Aug 12 Paris wheat rose EUR5.25/tonne to EUR234.25/tonne, whilst Nov 12 was also EUR5.25/tonne firmer at EUR232.00/tonne.
Both London and Paris new crop Nov 12 wheat took out the previous contract highs, encouraged by US corn surging to 9 1/2 month highs on continued Midwest drought, dragging US wheat with it.
Despite rising wheat prices Jordan issued a tender overnight to buy 100,000 MT of wheat following business done with Tunisia and the Middle East last week.
The IGC cut their June 2012/13 world wheat production forecast by 6 MMT from last month to 665 MMT. That represents a 30 MMT, or 4.3% drop, on last year's record output.
Russian wheat production was cut 6 MMT to 49 MMT, with Ukraine's down 1 MMT to 13 MMT. Even so, this only brings the Russian number into line with other estimates from the likes of local analysts IKAR and SovEcon. The Ukraine forecast is the same as the USDA said last month.
The IGC raised their world corn production estimate 4 MMT to a record 917 MMT, despite US weather woes. The US crop was pegged at 350 MMT, which despite all the media doom and gloom still represents an increase of 36 MMT on last season, or over 11%.
Closer to home, Coceral put some flesh on the bones of their European production estimates leaked Friday. EU-27 all wheat production is seen almost 1.5 MMT lower than their March estimate at 133.14 MMT, 3% down on last year.
Whilst output in the UK (15.73 MMT), France (37.25 MMT) and Germany (22.72 MMT) were all increased from their earlier forecasts that was counteracted by reductions in particular for Spain, Poland, Hungary and Romania.
EU-27 barley production was also cut by 1.5 MMT from March to 52.57 MMT (1.7% higher than last year), whilst corn output was raised 3.6 MMT to 65.73 MMT (1.5% up on last year). The UK barley crop was pegged at 5.62 MMT.
The EU-27 rapeseed crop was cut 850 TMT to 18.28 MMT (4% down on 2011), with the UK crop estimated at 2.67 MMT, France's at 5.22 MMT and Germany's at 4.87 MMT.
Even closer to home than that, the MetOffice said today that June was the wettest since records began in 1910. It was also the second dullest June on record with just 119.2 hours of sunshine, along with being the coolest June since 1991.
EU Rapemeal Prices
02/07/12 -- Rapemeal prices on the continent are steady, mirroring further soymeal increases in Chicago on Friday night and again this morning.
Latest guide prices for EU rapemeal today, basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:
| Jul12 | 276.00 |
+4.00 |
| Aug12 | 264.00 |
+1.00 |
| Sep/Oct12 | 260.00 |
+3.00 |
| Nov12/Jan13 | 252.00 |
+2.00 |
| Feb/Apr13 | 250.00 |
+4.00 |
| May/Jul13 | 227.00 |
+2.00 |
| Aug/Oct13 | 198.00 |
+5.00 |
| Nov13/Jan14 | 203.00 |
+3.00 |
The European Titanic Has Already Hit The Iceberg
02/07/12 -- My thanks to David Baker for flagging this one up. A nice rant from UKIP leader, and MEP for the South East Counties, Nigel Farage following the recently announced Spanish bank bailout deal that the EU leaders put some more flesh on the bones of (and subsequently reassured the market with) on Friday:
The Morning Paper
02/07/12 -- The electronic grains have started July where they left off June, in positive territory.
What a turnaround month June was. Jul 12 CBOT corn finished May at a 17-month low of USD5.55 after falling 13.5% on the month. For June it reversed those losses and then some, rising 21% to close the month at USD6.72 1/2.
For the record Jul 12 CBOT Soybeans gained 13% in the month of June whilst Jul 12 CBOT wheat added almost 15%.
Jul 12 London wheat posted a slightly more modest near 10% gain, with Nov 12 adding a similar amount and Nov 12 Paris wheat rising 7%.
So, where do we go from here? The trade is currently almost universally bullish, tensions have eased considerably regarding the main thing that has been hanging over it like the Sword of Damocles - the European debt crisis - following last week's summit and subsequent announcement of an apparent easing in bailout criteria.
We are back to trading the US weather, and keeping an eye on yields out of the Black Sea where a Reuters survey last week pegged wheat output from Russia, Ukraine and Kazakhstan 22% lower this year at 78.9 MMT.
Following Friday's USDA report, besides the weather, the trade will now be focused on next Wednesday's WASDE report and wondering what the USDA is going to say about US yield prospects.
On Friday the usually bullish Informa Economics estimated the 2012 US corn yield at 154.9bpa, down 5% from their previous estimate of 163.4bpa. Using Friday's USDA estimated harvested (not planted) area of 88.9 million acres that gives us a US crop of 13.77 billion bushels in 2012, or just under 350 MMT which is almost 26 MMT under the current USDA estimate.
As shocking as that may sound, that still represents an increase of 36 MMT on last season, or over 11%. The USDA will doubtless be currently working on tweaks to domestic demand (possibly lowering consumption from the ethanol sector?) and maybe reduced corn US exports due to increased competition from South America and the Black Sea in order not to cut US 2012/13 ending stocks too much. Having just got the chance to increase them to more comfortable levels, they will not want to go cutting them too sharply at this early stage in the season, that's my guess.
For soybeans, the USDA are now predicting a harvested area of 75.3 million acres. Using Informa's new yield estimate of 42.7bpa, that would give us a US crop of 3.215 billion bushels in 2012. That's 87.5 MMT in English money, which is actually slightly higher than the USDA's current estimate of 87.2 MMT amazing as it may seem.
Maybe there's some potential then for a bearish surprise in soybeans next week's report?
Before we get there though, short-term direction may be governed by this afternoon's revised weather forecasts and this evening's crop ratings. Neither of those are likely to be bearish. Last week the USDA cut corn good/excellent by six percentage points to 57% - a larger drop than the trade was anticipating. They also cut soybeans good/excellent by three percentage points to 53%.
I think that tonight we may see a further 3-4 points taken off corn and maybe 2-3 off soybeans.
