Nogger's Blog

Biofuels And All That

11/08/12 -- I read with interest yesterday a report saying that Commodities house Czarnikow now speculate that following the expiry of the US ethanol blenders' credit at the end of 2011, the adjustment to Europe’s E90 loophole, and the sharp spike in world corn prices we could even see Ensus come back online (albeit at an unspecified date).

My initial reaction was one of my usual scepticism, yeah right, sure, why not close down when wheat is GBP200/tonne, wait for it to fall to GBP140/tonne and do nothing, then wait for it to go all the way back up to GBP200/tonne and re-open again. Hmmmm....

It is with increased interest then this morning then that I read that the Argentine government yesterday decided to hike it's tax on biodiesel exports from 20% to 32%, starting today, in order (it says) to to make domestic fuel prices more affordable.

Now we all know that you can't believe anything a politician says, ditto you know when a woman is lying as her lips move, so we can probably immediately disregard anything that Argy femme fatale and all round babe that President Cristina Fernandez utters as being total codswallop the nanosecond that it leaves her highly glossed pouting lips.

Being around her must be like being in a living, breathing, real life episode of Dallas every day. A dead, much older ex-husband, the make-up, high heels, tight short skirts, exotic lingerie (I assume - if she wears any at all that is), expensive fast cars, diamonds, and massive position of power and money. In fact, I wouldn't be at all surprised to see ex-husband Néstor, who died appropriately enough under mysterious circumstances after reportedly suffering a massive heart attack (what was he up to at the time, we can only wonder) come back to life being played by Antonio Banderas in time for the next series, only for us to be told that everything that has happened between 2010 (when poor old Néstor became an underground turnip inspector) and 2012 has all been a dream.

I appear to have drifted off on a bit of a tangent here, hang on....

Right, so the Argies have upped the tax on biodiesel exports, we know that they aren't arsed about helping the people, getting more tax revenue in is what they are bothered about. Now it is an interesting fact is it not that, according to Oil World, Argentina exported 900,000 MT of biodiesel in the first half of 2012, up from 726,000 MT in FH 2011. Of that 900,000 MT a whopping 93% (840,000 MT) came here to the EU.

You may recall that Spain banned imports of biodiesel from outside the EU back in April in a spat with the Argies following the latter's decision to seize control of energy company YPF from Spain's Repsol. The Spanish are still taking previously contracted Argy biodiesel, and in fact accounted for more than half the 840,000 MT that was imported from Argentina in FH 2012, but that is expected to quickly dry up in the second half of the year.

So, we now have a situation where Argentina's biggest single customer has shut the door and they've now upped the export tax 60%. Meanwhile across the pond we've got ethanol plants closing due to a combination of high corn prices and reduced availability, reduced demand from Europe now that the "splash & dash" loophole has been closed, whilst US demand for gasoline is down resulting in surplus ethanol stocks.

Throw in increased public awareness that the US ethanol mandate is pushing up domestic food prices over there, and a growing lobby to at least partially waive the  Renewable Fuels Standard and things are starting to look interesting for European biofuel supply & demand.

President Obama apparently goes on a three-day bus tour of Iowa, America's largest corn producing state, starting Monday to see for himself how bad things are this year. Friday's tinkerings from the USDA incidentally still leave 42% of the US corn crop going into ethanol production.

Maybe there is a case for Ensus re-opening after all? Of course all this is dependant on the EU persisting with it's own misguided Renewable Energy Directive. That, it would seem is what this market has come to,  political decisions which we have no way of predicting will happen or not, decide price direction from here.

Soybeans Up, Corn And Wheat Down After USDA Report

10/08/12 -- Soycomplex: Aug 12 Soybeans closed at USD17.09 1/2, up 15 cents; Nov 12 Soybeans closed at USD16.43 3/4, up 12 1/2 cents; Aug 12 Soybean Meal closed at USD544.50, up USD5.80; Aug 12 Soybean Oil closed at 53.60, up 121 points. For the week that puts Aug 12 beans up 53 1/4 cents and Nov 12 beans 15 cents higher. Aug 12 meal rose USD12.90 and Aug 12 oil 156 points. Nov 12 beans finished 29 cents off the early session highs on spillover weakness from corn and wheat. Funds were said to have been net buyers of 6,000 soybean contracts on the day. The USDA cut US soybean yields and production by more than expected. US soybean output this year was pegged at 2.692 billion bushels, down 12% on last month. Yields were cut from 40.4 bpa to 36.1 bpa, 1.1 bpa lower than the average trade estimate. They USDA countered the lower supply by also slashing demand by 363 million bushels, that pegged new crop ending stocks at 115 million bushels, exactly what the trade was expecting. Separately, underlying strong global demand for US soybeans, we had the USDA announcing fresh export sales of 290,000 MT of soybeans to China for 2012/13 shipment, taking their total confirmed purchases for the week to 715,000 MT. China's soybean imports in July were 5.87 MMT, up 4.4% from June, up 10% on July 2011 and the highest monthly total in 25 months. Argentina raised their export tariff on biodiesel to 32% from 20%.

Corn: Sep 12 Corn closed at USD8.00, down 18 1/4 cents; Dec 12 Corn closed at USD8.09 1/4, down 14 1/2 cents. For the week Sep 12 corn was 10 cents lower and Dec 12 corn 1 3/4 cents higher. It was a very choppy session with the highs set in early trade before a "buy the rumour, sell the fact" mentality kicked in. Dec 12 corn closed almost 40 cents off the early highs. Funds were said to have eventually wound up as net sellers of 16,000 corn contracts on the day. US 2012 corn production was cut more than anticipated to 10.779 billion bushels, down 2.2 billion on last month. Yields were pegged at 123.4 bpa versus the expected 126.2 bpa and 146.0 bpa in July, the lowest yield since 1995/96. Demand from the US ethanol sector however was cut 8% from 4.9 billion bushels to 4.5 billion. US exports were also slashed 16% to 33.5 MMT in the face of stiffer competition from Argentina and Brazil, whilst imports were raised 150% from last month and almost 200% from 2011/12. Brazil's corn crop for 2012/13 was raised 3 MMT to a record 70 MMT and Argentina's up by a similar amount to an also record 28 MMT. That helped place world 2012/13 corn ending stocks a little higher than expected at 123.3 MMT, a 14% stocks to use ratio.

Wheat: Sep 12 CBOT Wheat closed at USD8.85 1/4, down 27 3/4 cents; Sep 12 KCBT Wheat closed at USD8.93, down 22 cents; Sep 12 MGEX Wheat closed at USD9.35 1/2, down 23 1/2 cents. For the week Chicago wheat was 6 cents lower, with Kansas wheat unchanged and Minneapolis 11 1/2 cents easier. Funds were estimated as net sellers of 6,000 Chicago wheat contracts on the day. US 2012 wheat production was raised from 2.224 billion bushels to 2.268 billion, contrary to expectations for a small reduction to 2.220 billion. Better than expected early US spring wheat yields were reflected in a spring wheat production well above the trade’s estimate of 484 million bushels at 500 million. Global wheat supplies for 2012/13 were projected 2.1 MMT lower. Russian output was cut by more than expected to 43 MMT from 49 MMT last month. Kazakhstan was seen down 2 MMT to 11.0 MMT whilst Ukraine was raised 2 MMT to 15.0 MMT. Global wheat consumption for 2012/13 was raised 3.2 MMT on the anticipated switch from corn to wheat usage. That sees world 2012/13 ending stocks reduced from 182.4 MMT to 177.2 MMT, around 1.75 MMT lower than anticipated, although still a comfortable stocks to use ratio of 26 percent. After the close Egypt tendered for an unspecified volume of wheat for mid-September shipment, it's first tender since April.

EU Wheat Lower On The Day, Higher On The Week

10/08/12 -- EU grains closed mixed, although wheat was mostly lower, with Nov 12 London wheat falling GBP0.75/tonne to GBP196.00/tonne and Nov 12 Paris wheat down EUR1.50/tonne to EUR264.00/tonne. Aug 12 Paris wheat went off the board today, down EUR1.50/tonne at EUR263.50/tonne.

For the week Nov 12 London wheat still gained GBP4.00/tonne and Nov 12 Paris wheat added EUR3.00/tonne. For Nov 12 London wheat this was the highest close in the contract's history on the weekly chart.

Wheat traded either side in early trade on the day but edged down in the afternoon following the release of the USDA's eagerly awaited August supply & demand report after which Chicago wheat moved lower.

Not that the report was particularly bearish, it seemed to be more a case of buy the rumour and sell the fact. US corn and soybean yields & production were both cut more than anticipated. US wheat production was raised 1.2 MMT to 61.73 MMT however, an increase of 13.5% on last year.

World wheat production though was trimmed 2.5 MMT, with Russia taking the largest (but not unexpected) hit, down 6 MMT to 43 MMT - towards the lower end of trade estimates. Output from Russia, Ukraine and Kazakhstan is now seen at 69 MMT versus 101 MMT last year.

Russia's wheat exports in 2012/13 are forecast to shrink 63% to just 8 MMT, with Kazakhstan's down by a third to 7 MMT, although Ukraine's are seen increasing 13% to 6 MMT thanks to better production than feared and healthy carry-in stocks.

World wheat ending stocks were forecast 5.3 MMT lower to just over 177 MMT, the lowest since 2008/09, although that still represents a comfortable stock to use ratio of 26 percent.

In amongst all the data was a small downwards revision for European wheat production to 132.9 MMT, a 3% reduction on last year. The French crop is seen up 8% to 39 MMT, with Germany's broadly unchanged at 22.5 MMT and the UK's up a tad on last year at 15.5 MMT (although that's 100,000 MT down on last month).

Trade gossip suggests that the UK number may be optimistic. Very early wheat harvest results are disappointing so far with yields of 7.4 MT/ha being reported compared to the five year average of 7.8 MT/ha. With a planted area of 2 million hectares that would suggest a crop of 14.8 MMT, although other trade estimates are lower than that.

The USDA also cut the world corn crop to 849 MMT, 6% down on last month, thanks largely to US output being slashed 17% to 273.8 MMT - a six year low. Europe's corn crop was also cut 4 MMT to 61.5 MMT, whilst Ukraine's was trimmed 3 MMT to 21 MMT.

The USDA raised European rapeseed production by half a million tonnes to 18.5 MMT, with France producing 5.36 MMT (unchanged on last year), Germany 4.9 MMT (up 27%) and the UK 2.64 MMT (down 4%).

The USDA are estimating the average UK wheat yield at 7.7 MT/ha (which may prove to be too high this year), with barley yields coming in at 5.6 MT/ha (maybe too low) and rapeseed yields averaging 3.6 MT/ha (the HGCA say 3.4-3.6 MT/ha).

USDA Report Nitty Gritty

10/08/12 -- Here's a few of the salient points from this afternoon's USDA report:

Wheat:

US 2012 wheat production raised from 2.224 billion bushels to 2.268 billion, contrary to expectations for a small reduction to 2.220 billion. Global wheat supplies for 2012/13 projected 2.1 MMT lower. Russian output cut by more than expected to 43 MMT from 49 MMT last month. Kazakhstan down 2 MMT to 11.0 MMT and Ukraine raised 2 MMT to 15.0 MMT. Indian production increased 2.9 MMT. Global wheat consumption for 2012/13 raised 3.2 MMT on switch from corn to wheat. That sees world 2012/13 ending stocks reduced from 182.4 MMT to 177.2 MMT, around 1.75 MMT lower than anticipated. Europe's wheat crop trimmed slightly to 132.9 MMT, Canada's increased from 26.6 MMT to 27.0 MMT, Australia's unchanged at 26.0 MMT.

Corn:

US 2012 corn production cut more than anticipated to 10.779 billion bushels, down 2.2 billion on last month. Yields pegged at 123.4 bpa versus the expected 126.2 bpa and 146.0 bpa in July, the lowest since 1995/96. Demand from the US ethanol sector cut from 4.9 billion bushels to 4.5 billion. US Imports for 2012/13 raised by 45 million bushels to 75 million: "reflecting strong domestic corn prices and competitively priced foreign supplies." US 2011/12 old crop ending stocks raised more than expected to 1.021 billion bushels, that helps 2012/13 carryout come in in line with expectations at 650 million bushels, although that's still 533 million down on last month. World 2012/13 ending stocks 123.3 MMT, slightly higher than expected thanks to Brazil's corn crop for next season being raised 3 MMT to a record 70 MMT and Argentina's up by a similar amount to 28 MMT. China's corn crop this year raised from 195 MMT to a record 200 MMT. Ukraine's crop cut 3 MMT to 21 MMT and Europe's down 4 MMT to 61.5 MMT.

Soybeans:

US 2012 soybean production estimated lower than expected at 2.692 billion bushels, down 12% on last month. Yields cut from 40.4 bpa to 36.1 bpa, 1.1 bpa lower than the average trade estimate. US 2011/12 old crop ending stocks cut by more than expected to 145 million bushels. New crop US ending stocks cut in line with trade estimates to a very tight 115 million bushels. World 2012/13 ending stocks a bit lower than forecast at 53.4 MMT. Brazil's 2012/13 crop potential raised 3 MMT from last month to a record 81 MMT. Argentina's next crop left unchanged at 55 MMT. These represent production increases of 24% and 34% respectively but are a long way off being written in tablets of stone and will need some pretty ideal growing conditions to come to fruition.

The USDA Numbers

10/08/12 -- The USDA's August WASDE numbers are out, here's some of them:

USDA 2012 US Yield Estimates (bushels/acre):

USDA 2012 US Production Estimates (billion bushels):


USDA 2011/12 US Ending Stocks Estimates (billion bushels):


USDA 2012/13 US Ending Stocks Estimates (billion bushels):


USDA 2012/13 World Ending Stocks Estimates (MMT):


South American 2012/13 Crop Production (MMT):

Ukraine Latest

10/08/12 -- According to the Ukrainian Ministry of Agriculture harvesting of grains and rapeseed there is just about complete, producing 15.64 MMT of winter wheat with an average yield of 2.9 MT/ha., and 647,000 MT of spring wheat (off 96% of the planted area) with an average yield of 2.91 MT/ha. Interesting to note spring wheat yields marginally higher than those of winter wheat.

In addition, 5.73 MMT of barley has been harvested with an average yield of 2.22 MT/ha along with 1.18 MMT of rapeseed off 97% of the planted area with an average yield of to 2.23 MT/ha.

These will be bunker weight totals I would suggest, giving a probable total wheat harvest of around 15.0-15.5 MMT in clean weight, 6.5-7.0 MMT down on last season, although 2-2.5 MMT higher than a recent Reuters survey suggested.

Russia Latest

10/08/12 -- The Russian Ministry of Agriculture report grain harvesting at 38.1% complete, producing a crop of 37.1 MMT so far.

The average yield was to date is said to be 2.17 MT/ha compared to 3.00 MT/ha last year, a reduction of 28%.

Of that total 25 MMT of wheat has been harvested so far with an average yield of 2.32 MT/ha versus 3.28 MT/ha last year at this time, which is 29% down on a year ago.

Russia planted about 2 million hectares (4.9 million acres) less wheat this year than in 2010, when yields averaged 1.91 MT/ha, according to SovEcon.

If we were to use a harvested area of 2 million hectares less than in 2010, and a final yield figure of 2.32 MT/ha, then we'd end up with a total wheat harvest of 45.8 MMT. However, it's the normally more productive south of the country where the harvest is well advanced, yields normally drop significantly as harvesting progresses into the Urals and Siberia.

Either way, Russian wheat output this year looks set to end up well below the USDA's 49 MMT July estimate.

Scary footnote: final wheat yields in 2011 came in at 2.26 MT/ha - which is over a tonne/ha, or 31%, lower than the 3.28 MT/ha average yield seen at the end of the first week of August.

Chicago Sharply Higher Heading Into USDA Report

09/08/12 -- Soycomplex: Aug 12 Soybeans closed at USD16.94 1/2, up 64 1/2 cents; Nov 12 Soybeans closed at USD16.31 1/4, up 50 cents; Aug 12 Soybean Meal closed at USD538.70, up USD16.80; Aug 12 Soybean Oil closed at USD52.39, up 81 points. If there was to be any pre-USDA report book-squaring there was absolutely no sign of it, with fund buying an estimated 12,000 soybean contracts on the day. The trade is clearly expecting a bullish report for beans, with US production seen falling from 3.05 billion bushels last month to less than 2.8 billion this time round. The USDA's renowned skill for creative accounting will be tested to the full when it comes to projected ending stocks for 2012/13 as there is little scope for reducing soybean demand giving China's continued appetite for US beans. Right on cue they were back again today to book 165,000 MT of new crop. Rumours circulate that they may have bought up to 1 MMT of US beans in the past week as prices fell to around USD16/bu from over USD17.50/bu less than three weeks ago. Goldman Sachs apparently said in a note that they expect CBOT soybeans to hit USD20/bu in the next three months. Trade estimates for tomorrow's 2012/13 US ending stocks range from 95-140million bushels, averaging out at 115 million versus 130 million last month. MOFCOM estimated China’s July bean imports at 5.29 MMT, but said that imports in August will fall to 4.37 MMT. Weekly export sales of a combined 300,400 MT were in line with trade expectations.

Corn: Sep 12 Corn closed at USD8.18 1/4, up 7 1/2 cents; Dec 12 Corn closed at USD8.23 3/4, up 7 1/4 cents. Funds were said to have been net buyers of around 10,000 corn contracts on the day. A Dow Jones survey sees the USDA placing US corn production at 10.97 billion bushels in tomorrow's report, fully 2 billion, or 15%, down on last month. Some pundits are forecasting production below 10 billion. Weekly export sales were at the low end of trade estimates at a combined 1.103 MMT, considering that the trade already knew about a substantial sale to Mexico for 2012/13. The USDA appear to have a bit more leeway when it comes to not letting 2012/13 corn ending stocks fall too low in that they could lower exports, domestic feed demand and usage from the ethanol sector. They may well also increase 2011/12 ending stocks, thereby increasing the amount of carryin into 2012/13. Conab estimated Brazil’s 2011/12 corn crop at a record 72.78 MMT versus a previous estimate of 69.48 MMT and up 26.8% from 2010/11. The East Kansas Agri Energy ethanol plant said that it will halt production on Oct 1st. The firm cited the prolonged US drought conditions as having a negative impact on availability of corn along with rising feedstock prices, they also said that the demand for gasoline is down resulting in surplus ethanol stocks.

Wheat: Sep 12 CBOT Wheat closed at USD9.13, up 13 3/4 cents; Sep 12 KCBT Wheat closed at USD9.15, up 11 1/4 cents; Sep 12 MGEX Wheat closed at USD9.59, up 13 3/4 cents. Funds were said to have been net buyers of around 5,000 Chicago wheat contracts heading into tomorrow's USDA report. That is only expected to show a very minor adjustment to US wheat production, with all wheat output seen down fractionally from 2.224 billion bushels last month to 2.220 billion this time round. It's the world production numbers that will be of more interest, with Russian output pegged at 49 MMT last month and trade estimates now centred around 45.5 MMT. Ukraine and Kazakhstan could also see cuts to their production in line with other trade estimates. For 2012/13 world wheat ending stocks the average trade estimate is 178.949 MMT from within a range of estimates of 172.5-184.0 MMT. The July USDA estimate was 182.44 MMT. Japan bought 106,530 MT of mostly US wheat for Sept/Nov shipment in its usual weekly tender. Weekly export sales of 665,300 MT were at the top end of trade estimates of 400-675 TMT. Ukraine exported 840 TMT of grain in July versus 1.47 MMT of grain in June, according to ProAgro. Shipments in the first week of August have slowed further to 110 TMT, they add.