EU Grains Closing Comments - Wednesday
22/08/12 -- EU grains ended mixed, Nov 12 London wheat was up GBP0.35/tonne to close at GBP206.85/tonne and Nov 12 Paris wheat EUR1.00/tonne lower at EUR266.75/tonne.
Nov 12 London wheat was higher for the seventh successive day on continued reports of serious yield and quality issues with this season's crop as the harvest progresses. There's talk of feed manufacturers having to lower their standards, albeit at a price, as far as minimum bushel weights are concerned this year.
There's also some debate as to where enough wheat of sufficient quality is going to come from to make delivery against futures sales, should that be what shorts were intending to do. There's also the inevitable discussion about grower defaults amongst those with a large percentage of their anticipated 2012 crop already sold should their yields fall well short of expectations.
May 12 London feed wheat is now more expensive than May 12 Paris milling wheat.
The German Farmers' Association (DBV) pegged the grain crop there at 43.8 MMT this year, up almost 5% on last year's harvest, largely thanks to increased barley production. Winter wheat production is seen at 21.0 MMT, with spring wheat output responsible for a further 0.9 MMT to give an all wheat crop of 21.9 MMT. That's 4% down on last year, 600 TMT lower than the USDA currently say and 1.5 MMT below last week's Strategie Grains estimate.
They said that "massive winterkill" reduced the winter wheat acreage by almost 9 percent, leading to a sharp increase in spring barley plantings, up 40 percent this year to 590,000 hectares. That helps bring the German 2012 barley crop in at an estimated 9.8 MMT, some 12% up on last year and 580 TMT more than the USDA currently suggest.
German rapeseed production this year will come in at 4.4 MMT, according to DBV. That marks an increase of 15% on an "extremely difficult" 2011 output, but is fully half a million tonnes less than the USDA forecast. Wet conditions in the autumn of 2011 hindered plantings, keeping the area sown down to around 1.3 million hectares. The quality of this year's crop is "good, sometimes very good" with oil contents of 40 to 46 percent, they add.
StatsCanada estimated the all wheat crop there at 27.0 MMT, exactly in line with the average trade idea, and the USDA, and up almost 7% on last year. Barley production is forecast higher than trade estimates at 9.5 MMT, which is up also 1 MMT more than the USDA predict and almost 22% higher than in 2011. This year's rapeseed crop was estimated 1 MMT below trade forecasts at 15.4 MMT, although still nearly 9% up on year ago levels.
Rain - At Last!
Here's what my old chum Gail Martell of Martell Crop Projections has to say:
"The weather pattern over North America is undergoing change promoting heavy rain potential in the United States heartland. Not only are Midwest farm states expecting heavy rain – Iowa, Nebraska and Minnesota – but also parched winter wheat farms in Kansas, Oklahoma and West Texas.
It is not too late for soybeans to benefit from heavy rain. Pod filling is a 30-35 day process that continues well into September, even after plant leaves begin turning yellow.
Corn is beyond repair where more than 50% of the crop is “denting”, the kernel drying stage. As of August 19, 60% of United States corn was denting. Just a small amount 4% of corn was mature. Corn in the midst of filling kernels would still benefit from a soaking rain.
Kansas topsoil moisture was rated 72% very short, 24% short, 4% adequate and 0% surplus on August 19. This is driest I can ever remember. One good rainfall would not be enough to replenish parched fields, but a solid inch of rain would be a good start.
Kansas wheat seeding is set to begin in late September, finishing up around the middle of October.
Meanwhile, tropical storm Isaac is encroaching on the Caribbean Sea, expected to reach hurricane strength as is moves westward across the warm waters of the Caribbean. This is a ferocious looking storm on the satellite view.
Isaac is on a track that bends northward, making landfall in Florida Monday evening or Tuesday. The storm would then move slowly northward up the Atlantic seaboard.
If Isaac follows a track up the East coast, it would have little bearing on Midwest crops west of the Mississippi River. However, strong desiccating winds would develop over a large swath of the eastern Midwest and the Mid South. These winds would develop from the hurricane's counterclockwise winds, on the "back side" of the storm centre as it trudges up the Atlantic coast."
Reuters meanwhile are today reporting that Argentina is set to have "its wettest August on record" with Buenos Aires already having had 8.7 inches of rain so far this month. That should be good news for newly planted wheat and could also see corn and soybeans get planted earlier than normal, maximising yield potential.
Argy corn planting usually starts mid-September, with soybean planting kicking off around a month later.
News Snippets
22/08/12 -- The electronic market is consolidating a little from the early week gains, with soybeans down 12-14 cents, corn 5-6 cents lower and wheat down around 8-9 cents.
Day two of the Pro Farmer Crop Tour pegged Nebraska corn yields at 131.8 bu/acre, well below the USDA's projected 147 bpa. Corn yields in Indiana of 113.3 bpa though were above the USDA's estimate of 100 bpa earlier this month. Both of course are well down on last season's 153.7 bpa and 143.1 bpa respectively.
Soybean pod counts were 894.4 in Nebraska and 1,033.2 in Indiana versus 1,286.5 and 1,137.6 respectively last year.
For soybeans at least the cavalry are coming, eventually, although they haven't actually started planting yet. Michael Cordonnier estimates total South American output for 2012/13 could reach 151.0 MMT versus 114.4 MMT in 2011/12, an increase of almost a third.
Corn output could increase a bit more modestly to 100.5 MMT from 95.5 MMT, he estimates.
A good chum of mine down in Norfolk emailed me this morning to say that he'd cut 100 acres of 1st wheat yesterday that only yielded 2.26 MT/acre. "A normal yield for that sort of land is 4 MT/acre+, it looks more like rice that wheat," he adds. Yikes.
As of August 21, the Ukraine grain harvest was 65% complete producing 25.39 MMT with an average yield of 2.58 MT/ha, say the Ministry. Almost a third of the 2013 winter rapeseed crop has already been planted, they add.
Kazakhstan has harvested 3.135 MMT of grains with an average yield of just 0.73 MT/ha of 28% of the planted area, according to their Ministry of Agriculture.
Russia has formally become a fully paid up member of the WTO today.
South Korea have bought 18,700 MT of Canadian milling wheat.
Chicago Market Marches Higher
21/08/12 -- Soycomplex: Sep 12 Soybeans closed at USD17.53 1/2, up 49 3/4 cents; Nov 12 Soybeans ended at USD17.32 1/2, up 49 cents; Sep 12 Soybean Meal closed at USD543.60, up USD11.00; Sep 12 Soybean Oil finished at 55.57, up 168 points. Funds were estimated to have been net buyers of around 15,000 soybean contracts on the day. Nov beans and Dec meal both made fresh contract highs. The USDA raised good/excellent crop conditions by one point last night to 31%, the minimum improvement that the trade was expecting. Day one of the Pro Farmer Crop Tour came up with an Ohio soybean pod count in a 3 foot area of 1,033.72 pods versus the 3-year average of 1,240.85 pods. The South Dakota soybean pod count was 584.9 pods versus the 3-year average of 1,116.9 pods. Customs data shows that China imported 5.87 MMT of soybeans in July, although only 650 TMT of that total came from the US. Brazil was their biggest supplier, providing 3.8 MMT of their total imports. That places Jan-Jul 2012 Chinese soybean imports at 34.92 MMT, up 20.14% from a year ago, of which the US supplied 15 MMT, Brazil 17 MMT and Argentina just 2.4 MMT. Michael Cordonnier estimated 2012 US bean yields at 36.0 bpa, unchanged from his previous estimate and fractionally lower than the USDA's 36.1 bpa forecast.
Corn: Sep 12 Corn closed at USD8.31 1/4, up 16 cents; Dec 12 Corn finished at USD8.38 3/4, up 15 cents. Funds were estimated to have bought 10,000 corn contracts on the day. Day one of the Pro Farmer Crop Tour found yield potential in Ohio 29% down on last year versus the USDA's current estimate of a 20% reduction. South Dakota corn yields were found 47% lower this year versus the USDA's 26% cut estimate. Crop conditions were left unchanged by the USDA last night, with 51% of the crop rated poor/very poor. This season continues to draw comparisons with 1988, when US corn production shrank 38% from similar hot and dry weather. "A very significant amount of corn was never harvested for grain that year, and was instead cut for silage due to poor quality. The 1988 US corn yield was around 25% below average. The USDA pegged corn production at 10.8 billion bushels in the August report, only 15% below average. Growers boosted plantings by 7% this season, buffering corn losses to a degree, yet we must wonder about further losses from a shrinking crop area. Corn not fit as a feed grain would be cut for silage. Thus, corn losses this year may be worse than currently anticipated," said Martell Crop Projections.
Wheat: Sep 12 CBOT Wheat closed at USD9.00 1/2, up 21 cents; Sep 12 KCBT Wheat finished at USD9.08 1/4, up 17 1/4 cents; Sep 12 MGEX Wheat ended at USD9.44 3/4, up 13 3/4 cents. Fund buying was estimated at 4,000 Chicago wheat contracts on the day. Iran bought 400 TMT of milling wheat for September shipment, thought to be mostly of EU and Black Sea origin. Stats Canada's crop production and yield estimates are out tomorrow with the trade forecasting all wheat output at 27.0 MMT from within a range of estimates of 25.9-28.2 MMT, their July estimate of 26.8 MMT and 2011 production of 25.261 MMT. All wheat yields are estimated at 42.3 bpa from within a range of estimates of 40.5-44.0 bpa, their July estimate of 42.8 bpa and 2011 yields of 44.0 bpa. Customs data shows that China imported 251,474 MT of wheat in July, more than double that of a year ago. That takes their 2012 calendar year to date imports to 2.44 MMT, which is also up sharply from a year ago. The USDA last night reported winter wheat harvesting just about complete at 97% done, with the spring wheat harvest well advanced at 79% complete versus just 40% normally. Spring wheat condition reports have now finished for the season. Trade talk/market chatter continues that Russia may have to limit grain exports before too long. They've shipped 3.4 MMT in the first six weeks of the 2012/13 marketing year, against trade estimates for the full season of only 10-12 MMT.
London Wheat Higher For Sixth Straight Session
This was the sixth higher close in a row for London wheat as UK farmers understandably remain reluctant sellers until the crop is in the barn and they know what they are dealing with.
Big question marks remain over both quality and quantity this year. There is also a large open interest in excess of 1 MMT in front month November, some are already wondering how much of this season's crop will even reach futures quality criteria, let alone make milling standard.
FC Stone revised their estimate for UK 2012 wheat production to 14.0 MMT, down 1.0 M from their previous estimate and 8.5% lower than last year despite a small increase in planted area.
Russian grain stocks as at Aug 1st were 27.7 MMT say the Ministry there, some 14% lower than year ago levels. Aug 1-15 grain exports were 1.3 MMT, putting them in line to ship 2.5-3.0 MMT this month to add to the 2.1 MMT exported in July.
Russia’s grain harvest is now 54% complete with average yields at 1.98 MT/ha, down 27.5% from a year ago.
The USDA last night estimated the US spring wheat crop at 79% harvested vs. 65% a week ago and vs. 40% for the 5-year average. Winter wheat harvesting is wrapping up at 97% complete.
Day one of a high profile crop tour in America estimated corn yields in Ohio this year at 110.5 bushels/acre versus 156.3 bpa last year, the current USDA estimate of 126.0 bpa and the 3-year average of 160.5 bpa.
South Dakota corn yields were forecast at 74.3 bpa, the lowest in 19 years, compared to 141.1 bpa last year, the existing USDA estimate of 98 bpa and the 3-year average of 143.9 bpa.
Globex Grains Latest
20/08/12 -- Soycomplex: Sep 12 Soybeans trade at USD16.84 1/2, up 13 1/2 cents; Nov 12 Soybeans are at USD16.59, up 13 1/4 cents; Sep 12 Soybean Meal is at USD524.40, up USD1.70; Sep 12 Soybean Oil closed at 53.47, up 36 points. The market will be looking to tonight's USDA crop progress report released after the close to see if there are any signs that recent rains have improved US yield potential, or merely halted their decline. There seems to have been little rain around for the western corn belt over the weekend, with shower activity mainly confined to the south and east. China's CNGOIC see second half 2012 soybean imports falling to 25.5 MMT from just over 29.0 MMT in the first half of the year. After peaking at a more than two year high last month, August imports will decline to 4.5 MMT, some 23% down on July, and Sep/Oct soybean imports may fall further to a combined 7 MMT, they say. Domestic stocks are plentiful and crusher demand slow due to a squeeze on margins, they add.
Corn: Sep 12 Corn trades at USD8.06 3/4, up 8 1/4 cents; Dec 12 Corn is at USD8.15, up 7 3/4 cents. There's virtually no rain at all in the forecast for the Corn Belt for the next 2-3 days. That will enable further harvest progress, but do little for later maturing corn. Tonight's crop progress report will be of interest. Last week the USDA left good/excellent crop conditions unchanged at 23% with poor/very poor raised one point to 51%. Bunge have said that they may soon start exporting larger volumes of corn from Brazil into the US. They have only been exporting small amounts of corn so far. Brazil harvested a record corn crop of 72.78 MMT this year thanks to bumper "sarafina" or second crop. The Buenos Aires Cereals Exchange say that Argentina has sold 79% of their 2011/12 corn crop and 6% of their yet to be planted 2012/13 corn crop. They estimate Argentina’s 2012/13 corn area at 3.1 million hectares, down 20% from 2011/12.
Wheat: Sep 12 CBOT Wheat trades at USD8.75, up 1/2 cent; Dec 12 CBOT Wheat stands at USD8.95 1/4, up 3/4 of a cent. Russia’s Ag Ministry say that the grain crop this year will total 75-80 MMT, but other private estimates are now much lower with SovEcon coming in at 71.0-72.5 MMT and IKAR at 73 MMT. SovEcon now estimate the wheat crop there at only 39.0-41.0 MMT, a level that sparked the 2010 export embargo. Argentina Ag Ministry estimate the 2012/13 wheat area at 3.7 million hectares versus a previous estimate of 3.82 million and 4.63 million in 2011/12. Planting should be just about done, and recent good rains will help get the reduced crop off to a good start at least. The Buenos Aires Cereals Exchange say growers there had sold 100% of their 2011/12 wheat crop and 18% of their 2012/13 wheat crop. Tonight's USDA report should be of more importance for corn and soybean than for wheat. Last week the USDA reported the US winter wheat harvest at 88% complete, with spring wheat harvesting at 47% done. Good/excellent spring wheat conditions were 63%.
EU Grains Higher - Led By London Wheat
This is another new life of contract high for Nov 12 London wheat after weekend harvest activity continues to throw up highly variable, but generally disappointing results. Wheat yields half of normal, down to 2 MT/acre, were reported in Norfolk over the weekend, with quality similarly poor.
London wheat continues to lead the way higher on ideas that output this season may ultimately finish well below last year's 15.3 MMT, despite an increase in plantings, whist domestic demand will be boosted by the re-opening of Ensus and Vivergo also coming on stream before the end of the year.
Since the end of July front month Nov 12 London wheat is up 5%, with it's Paris counterpart only 2% higher and Sep 12 Chicago wheat around 1% lower.
It will be interesting to keep an eye on UK exports now that we are into the new 2012/13 marketing year. Shipments in June, the last month of 2011/12, were a six year low of just 55 TMT. With serious doubts over the quality of this year's crop reflected in large milling wheat premiums, UK wheat is simply not competitive to traditional export homes like Spain.
Feed wheat ex store Saxony for September collection was reportedly offered at EUR235.00/tonne on Friday - the equivalent of around GBP185.00/tonne. The premium for A quality 13% protein, 275 hagberg milling wheat over there is currently around EUR15.00/tonne as opposed to in excess of GBP30.00/tonne here in the UK.
SovEcon have cut their estimate for Russian wheat production again, to 39-41 MMT, from 40.5-42.5 MMT last week, as the harvest progresses into the Urals and Siberia with yields similarly disappointing to those further south and west.
That represents a 27-30% decrease on last season's output of 56.2 MMT, with an inevitable impact on exports also likely. Even so Russia's Ag Ministry have ruled out an export ban saying that other methods will be employed to contain rising domestic food prices.
The Ministry are still forecasting a total grain crop of 75-80 MMT. SovEcon now say that will be more like 71.0-72.5 MMT (from an earlier estimate of 70-74 MMT), whilst other local analytical group IKAR are predicting 73 MMT (down from 74.5 MMT previously). Production in 2011 was 94 MMT.
The Kazakhstan Ministry are reporting grain yields there down 37% from last season, although less than one million of the estimated 15 million hectares planted has been harvested so far. Carryover stocks from 2011/12 should still enable them to export 12 MMT of grains in 2012/13 despite production this year more than halving to around 13 MMT, they add.
The European debt crisis rumbles quietly on in the background, with signs of Germany getting to the end of their tether. German finance minister, Wolfgang Schäuble, said over the weekend that "we can help the Greeks, but we cannot responsibly throw money into a bottomless pit," according to a report in the FT.
Schäuble apparently went on to rule out a new aid plan for Greece, saying that "there are limits".
Early Morning News
20/08/12 -- Fresh news from over the weekend is fairly limited so far this morning.
China's CNGOIC think-tank says that they see LH 2012 soybean imports falling to 25.5 MMT from 29.05 MMT in FH 2012. August imports will likely total 4.5 MMT, some 23% down on July, and Sep/Oct soybean imports may fall further to a combined 7 MMT on declining profit margins, they say.
If they are correct then that has them importing some 54.55 MMT in the 2012 calendar year versus the USDA's 2011/12 estimate of 57.5 MMT and 2012/13's predicted 59.5 MMT. Last week's government auction of just over 400 TMT of soybeans was fully subscribed you may recall. The government are supposed to be repeating this offering on a fortnightly basis.
Chinese port stocks of soybeans are currently reputed to be around 6.5 MMT.
Despite now only expecting a grain harvest of around 13 MMT, Kazakhstan may still export 12 MMT in 2012/13 thanks to the very large carryover stocks of 9 MMT left from the record 2011 harvest, according to the Ag Ministry.
Landlocked Kazakhstan struggled to find access to export homes to the west, particularly during the first half of 2011/12, with Russia and Ukraine busy shipping their own grain out of the Black Sea. That's left plenty of wheat left over to carry into 2012/13 it would seem.
The Ukraine Ministry say that the wheat harvest there is just about finished at 16.3 MMT in bunker weight, which implies a clean weight figure of somewhere around 14-15 MMT. Good crop husbandry isn't the strong suit of your average Ukraine cereal grower.
Latest estimates have Ukraine exporting 20.3 MMT of grains in 2012/13, including 4.5-5.0 MMT of wheat, 3 MMT of barley and around 12 MMT of corn.
Russia join the WTO later this week (either Weds or Thurs depending on which report you read). Trade talk currently suggests that the introduction of punitive export tariffs may be the most likely avenue for them to follow to curb grain shipments, rather than an outright ban.
A report on Reuters quotes the Russian Minister of Agriculture as saying that "pinpoint interventions" may be used to contain domestic food price increases. These actions may include the release of government-held intervention stocks onto the market, he appears to be hinting, but these are only thought to stand at around 5 MMT.
That won't be enough to stem the outflowing tide currently running at a rate of 2.5-3.0 MMT/month.
