The Lunchtime News
25/10/12 -- Just back from a whirlwind tour of Ireland speaking to a couple of groups of pig farmers over there, and very nice guys they were too. I did my best to support the local economy and malting barley market as you might imagine.
Driving around the Irish countryside one thing that stuck me was the inordinate number of bungalows scattered around the place. What is it with bungalows over there? The guy checking into the hotel in front of me last night was told to go round the corner, past the restaurant and up a small flight of stairs to get to his room. I was half expecting him to say "stairs, what the feck are they?"
The bar area looked like a scene from My Big Fat Gypsy Wedding. The blushing bride appeared to be wearing a kind of black lace shawl underneath her wedding dress, which upon closer (but not too close) inspection turned out to be an almost entirely tattooed upper torso. Lord knows what the lower half resembled. The old joke about the woman having Mike Tyson badly tattooed on one inner thigh and Lennox Lewis on the other, whipping her skirt up to show her husband who promptly said "I don't know who those buggers are but that's definitely Don King in the middle" sprung to mind.
Anyway, back to the grind. The overnight grains are mixed, one to two cents lower on beans and wheat and half a cent or so firmer on corn. London wheat is up again, although Paris is mostly a little lower.
Open interest in Nov 12 London wheat continues to drop I see, now down to well under a thousand lots. Activity in Nov 13 is picking up. We've barely got the 2012 harvest in and we are already fretting about 2013, and with pretty good reason too it would seem. The spread between the two Nov positions in London was almost GBP30/tonne at the start of the month and now it's close to being GBP20/tonne.
In South America strong thunderstorms erupted overnight in Parana, Brazil's top corn state and second leader in soybean production, where conditions have hitherto been very dry, according to Martell Crop Projections. "The 3-day rainfall outlook calls for another 40 to 75 mm (1.6 – 3 inches) as low pressure stalls in Parana and northern Rio Grande do Sul," they add.
In contrast Mato Grosso, Brazil’s top soybean state, has "received disappointing rainfall recently. It appeared as if the rainy monsoon season was finally getting started earlier this month. However, the forecast now calls for lighter rain with scattered coverage. In the Brazil tropics, daily rainfall of 5-6 millimetres is typical, once the monsoon gets underway. The month of October usually brings 100-150 millimetre of rain (4-6 inches). If the drier weather continues, it would delay soybean planting.
"A stark temperature contrast is developing in South America. North of Parana, very hot temperatures are predicted. Mato Grosso highs are expected to reach 35-37 C (over 95 F). In Parana, where thick clouds and strong thunderstorms are occurring, temperatures would be only mid 20s C (upper 70s F)," they conclude.
Across the border "Argentina temperatures were in the 60s F in Buenos Aires province yesterday and well below normal. With wet field conditions and cool temperatures, corn planting is making slow progress.
"Since mid October, 65 mm (2.5 inches) of rainfall has developed in the Argentina grain belt and 45% above average. September was very wet also. In fact, widespread flooding developed last month in the western and central parts of Buenos Aires, confirmed by remote satellite sensing.
"Local sources maintain it is not too late to plant corn in late October-early November. We wonder if that idea applies to Buenos Aires province, where the climate is cooler. If wet conditions persist into November, growers may consider switching to soybeans," they say.
Chicago Closing Comments - Wednesday
24/10/12 -- Soycomplex:
Nov 12 Soybeans closed at USD15.70 1/2, up 17 1/4 cents; Jan 13 Soybeans closed at USD15.72 1/4, up 16 1/2 cents; Dec 12 Soybean Meal closed at USD481.90, up USD5.70; Dec 12 Soybean Oil closed at 51.84, up 52 points. Funds were said to have been net buyers of around 6,000 soybean contracts on the day. The USDA said 105,000 MT of US beans were sold to unknown. Rumour continues to circulate that China has been buying on this recent dip, maybe we will get some confirmation of that in tomorrow's weekly export sales report? Trade estimates for beans are 600-900 TMT versus last week's 525,200 MT. Weekly shipments will also likely reaffirm the recent strong pace of exports slanted heavily in favour of the first half of the 2012/13 season. Celeres said that 47% of the 2012/13 Brazilian bean crop has already been sold. Continued wetness in Argentina may see some intended corn acres shift into beans.
Corn: Dec 12 Corn closed at USD7.54 1/2, down 1 1/2 cents; Mar 13 Corn closed at USD7.56, unchanged. Funds were said to have been around even on the day. It is interesting to note that Mexico imported 7.82 MMT of corn in 2011/12, with 99% of it coming from the US. Yesterday Mexico bought 270 TMT of non-US corn. Estimates for tomorrow's weekly export sales report are 150-375 TMT versus 166,700 MT last week. Weekly sales need to average 420 TMT/week to meet the current USDA target for 2012/13. This week's ethanol production data shows output at 801,000 barrels/day this past week. A year ago that total was 909,000 barrels/day. As well as US corn exports lagging, cumulative ethanol production data suggests that demand for corn from that sector will also fall short of the current USDA target for 2012/13. MDA CropCast cut their Argentine corn production estimate by 360 TMT to 26.65 MMT from last week due
to continued wetness forcing acreage reductions there.
Wheat: Dec 12 CBOT Wheat closed at USD8.84, up 15 1/4 cents; Dec 12 KCBT Wheat closed at USD9.21 1/4, up 13 1/2 cents; Dec 12 MGEX Wheat closed at USD9.55, up 10 cents. Ukraine formally confirmed their Nov 15 wheat export ban. We know that some sales have been made for delivery beyond this date, including to Egypt. The trade is speculating therefore that Ukraine traders may have to claim force majuere on those sales, leaving the buyers to re-enter the market. Trade estimates for tomorrow's weekly export sales are 250-450 TMT versus 410,000 MT last week. Accumulated US wheat sales are nothing special, but the trade believes that these will pick up significantly in the second half of the season as Black Sea supplies dry up. In the US "dry conditions prevailed across the Plains much of this past week, which maintained considerable moisture shortages across central areas. Colder temperatures across the Plains this week will burn back wheat growth and will slow establishment of the crop," say MDA CropCast.
EU Wheat Gains As Ukraine Confirms Export Ban
Official confirmation of the Ukraine Nov 15th wheat export ban came from the Ag Minister there, boosting prices. Egypt have wheat bought from Ukraine for Nov 11-20th and 21-30th shipment. It is unclear what will happen to these purchases now.
The Ministry also said that the domestic grain harvest is 91% complete producing 40 MMT so far. Yields are averaging 2.97 MT/ha versus 3.44 Mt/ha a year ago, almost 14% down on a year ago.
Corn harvesting is at 73% done, producing 13.78 MMT so far, suggesting a final crop around 19 MMT which is a couple of million below the USDA's latest forecast. The Ministry are calling for a crop of 20 MMT and exports of 12 MMT this season.
News that China imported 524 TMT of wheat in September caught the eye, especially in light of it's recent 295 TMT purchase of Canadian wheat. That may signal that current corn prices could stimulate wheat usage there.
Russia's Ag Ministry said that the country had exported 9.32 MMT of grains so far this marketing year (Jul 01-Oct 17), a fall of 19% year-on-year. Rosstat said that domestic grain stocks held in commercial hands as at Oct 01 were 12.7 MMT down on the same date last year at 35.8 MMT, a drop of over 35%.
Agritel estimate the Australian wheat crop at 21 MMT, down 29% on last year. They also forecast the Argy wheat crop at 11.5 MMT, a fall of 26% on a year ago.
Chicago Closing Comments - Tuesday
23/10/12 -- Soycomplex: November beans closed 6 3/4 cents higher at USD15.53 1/4. Meal was USD5-6 higher and oil down around 20-35 points. The Rosario Exchange said heavy rains in Argentina may continue to delay soybean plantings, although the 6-10 day weather forecast for is drier. Southern Brazil is dry, slowing new crop bean plantings.
Corn: Corn closed around 5-3 cents lower on global economic concerns and harvest pressure. The USDA last night pegged the US corn harvest at a record 87% complete versus just 49% normally. The USDA announced that 270 TMT of corn sold to Mexico that was previously reported as optional origin was being switched to non-US origin, presumably either Brazilian or Argentine. Excessive wetness in the latter remains a problem, whilst parts of Brazil are still too dry.
Wheat: Chicago wheat closed around 2-3 cents weaker. Iraq's wheat crop was estimated 12% down this year at 2.1 MMT due to dryness. They are seen importing a record 5.3 MMT of cereals in the 2012/13 crop year, according to the FAO. US winter wheat planting is in line with schedule, but emergence lags normal as farmers scan the skies for rain. There isn't much of that in the forecast for the Great Plains.
London Wheat Slips From Highs
23/10/12 -- EU wheat ended mixed Tuesday with Nov 12 London wheat down GBP1.50/tonne to GBP204.50/tonne and with Nov 12 Paris wheat down EUR0.50/tonne to EUR262.50/tonne.
In early morning trade the pound had fallen as low as 1.2250 against a broadly firmer single currency, it hasn't been below 1.22 since the first day of May.
There are plenty of concerns around regarding the state of wheat prospects around the world to keep the market underpinned as we head into winter it would seem.
At home in Europe the wet, dank and grey summer has given way to a wet, dank and grey autumn with similar winter around the corner it appears. Planting conditions in the UK, western Germany and France are far from ideal which is supporting new crop months.
Australia's wheat production estimate of 23 MMT from the USDA is 3 MMT too high, according to the Australia New Zealand Bank.
US winter wheat sowings are in line with normal at 81% done, but what has been sown desperately needs rain, and there's precious little in the forecast.
"Showers are developing today in southwest Oklahoma. Later this week on Thursday-Friday another weather disturbance is expected to produce welcome rain and wet snow on the High Plains wheat growing area in Colorado and Nebraska. Kansas - the leading US wheat state - is not expecting meaningful precipitation this week. Soil profiles are still dry from severe drought last summer in the Great Plains. Very heavy rain would be required to replenish the deep soil layer," say Martell Crop Projections.
Ukraine's early season exports are tearing along, up 73% year-on-year, at 7.65 MMT, of which 3.82 MMT is wheat, according to the Ministry there. The say that wheat exports will be finished by around 15-20 November.
French wheat exports are expected to pick up sharply in the second half of the season as Black Sea supplies run dry. FranceAgriMer predict French wheat stocks may decline to only 1.8 MMT by mid -2013, the lowest carryover since record keeping began in the late 1990s, add Martell Crop Projections.
Chicago Closing Comments - Monday
22/10/12 -- Soycomplex: Nov 12 Soybeans closed at USD15.46 1/2, up 12 1/4 cents; Jan 13 Soybeans closed at USD15.49 1/4, up 12 3/4 cents; Dec 12 Soybean Meal closed at USD471.00, up USD7.20; Dec 12 Soybean Oil closed at 51.66, up 8 points. Fund buying in beans was said to be around 3,000 contracts on the day. Most of Argentina remains too wet, and parts of Brazil are too dry. Talk of Chinese buying under the counter at these levels persist. Current US prices are very attractive compared to domestic Chinese levels. Meanwhile the South American crop is at least four months away, with soybean planting in Brazil only around 16% complete, according to Safras e Mercado. US soybean harvesting is 80% complete, versus 71% last week and 69% on average, the USDA said after the close. Weekly export inspections remain robust at 61.42 million bushels, suggesting another bold week of shipments. Last week's exports were almost 1.5 MMT - the highest weekly total in twenty months and the third week in a row of shipments in excess of 1 MMT.
Corn: Dec 12 Corn closed at USD7.61 1/4, down 1/4 cent; Mar 13 Corn closed at USD7.59 1/4, down 1/4 cent. Unlike soybeans, corn exports continue to lag, with today's inspections only a fraction of those for beans at just 9.6 million bushels. That is only around a third of last year's total for this week and falls well short of the required 24 million needed to hit the USDA's projections for the full season. "Parana, Brazil's leading corn state, is very dry as the spring planting season begins. An 8-inch (200 millimetre) moisture deficit has accrued from a 3-month drought. Rainfall was very disappointing again last week with traces- .20 inch (0-5 mm). Average weekly rainfall is 1.6 inches in October," say Martell Crop Projections. Persistent hot temperatures in October have added to moisture stress frequently topping 90 F. After the close the USDA reported corn harvesting at a record 87% complete. The five year average is only 49% done at this time.
Wheat: Dec 12 CBOT Wheat closed at USD8.78 1/4, up 5 3/4 cents; Dec 12 KCBT Wheat closed at USD9.15 1/2, up 7 1/2 cents; Dec 12 MGEX Wheat closed at USD9.47 1/2, up 5 cents. Iraq is tendering for wheat, with the results due later in the week. Few expect US wheat to get a look in as it still looks too expensive compared to other origins. In the US "wheat conditions have grown dry in the main US bread wheat states in October. Some areas in Oklahoma and southern Kansas have received less than 15% of normal rainfall. Gusty winds last week whipped up dry fields producing a dust veil from southwest Nebraska through Kansas into Oklahoma. Kansas topsoil moisture was reported at 72% short-very short and 28% adequate in the mid- October USDA weekly crop letter from USDA," say Martell Crop Projections. After the close the USDA pegged US winter wheat plantings in line with normal at 81% complete. These areas now desperately need rain. Weekly export inspections of 16.4 million bushels were an improvement from last week's paltry 7.0 million, but still below year ago levels.
New Crop London Wheat Sets Lifetime Contract High
Catching the eye was Nov 13 London wheat closing up GBP3.75/tonne at GBP182.50/tonne, setting a fresh closing high for the contract's lifetime, as the trade already starts to get anxious about prospects for next year's crop.
There are concerns that the recent excessively wet conditions might cause some problems in France too, where northern and western areas have received 5-8 inches of rain over the past thirty days - two to three times the normal volume for this time of year.
French winter wheat plantings are only 20% done according to FranceAgriMer, a year ago they were past the halfway point at this time.
Vivergo appear to be gearing up for their scheduled opening around the turn of the year, as they are apparently offering their distillers grain by-product into the market for Feb/Apr 2013, I hear.
Ensus recently said that they would be prepared to take UK wheat down to 60kg/hl bushel weight following this year's crop disaster (subject to seeing how well such wheat actually performs). Vivergo will no doubt also be pondering their stance on this issue.
The EU Commission's MARS unit made minor tweaks to last month's yield estimates today, with small rises for corn, barley and OSR and a small decrease for wheat. They put 2012 EU-27 corn yields at 6.07 MT/ha, 20.6% down on last year and 12.6% below the 5-year average. Wheat yields were said to have averaged 5.25 MT/ha, 2.5% down on last year and 1.2% below average. Barley yields were pegged little changed from a year ago or the 5-year average at 4.34 MT/ha, whilst OSR yields were estimated 6% up on last season at 3.03 MT/ha.
UK wheat yields still look way to high versus other trade estimates at 7.35 MT/ha. Barley yields here were forecast at 5.72 MT/ha and OSR yields at 3.48 MT/ha, a little above Defra, but not startlingly so.
The trade seems a little less certain today that Ukraine has introduced a Nov 15 wheat export ban than it was on Friday. What is reported is that they have already exported 7.1 MMT of grains, of which 3.6 MMT is wheat, and that they have a further 1.8 MMT of wheat contracted to ship. That takes them well over the agreed 5 MMT voluntary ceiling anyway, so suffice to say that they are out of the wheat export market until new crop.
Russia say that their grain harvest is just about over, producing 39.5 MMT of wheat at an average yield of 1.86 MT/ha, 21% down on last year.
Chicago Closing Comments - Friday
19/10/12 -- Soycomplex: Nov 12 Soybeans closed at USD15.34 1/4, down 11 1/4 cents; Jan 13 Soybeans closed at USD15.36 1/2, down 9 3/4 cents; Dec 12 Soybean Meal closed at USD463.80, up USD0.50; Dec 12 Soybean Oil closed at 51.58, down 72 cents. For the week Nov 12 beans gained 11 3/4 cents, meal was down USD1.40 and oil added 91 points. Informa Economics estimated that US growers would plant 80 million acres of soybeans for the 2013 harvest, a 2.8 million increase on this year. A return to trendline yields of 43.8 bu/acre would see US soybean production leap more than 20% to a record 3.453 billion bushels. If true, and there are a lot of if's here, then that would follow up from potential record output from all the main South American producers: Brazil, Argentina, Paraguay, Bolivia and Uruguay next spring. That's a lot of soybeans for China and the rest of the world to pick and chose from. Unfortunately, in the mean time we've only got America's 2.86 million bushel crop this year to scrap over, and 71% of that is sold already.
Corn: Dec 12 Corn closed at USD7.61 1/2, up 3/4 cent; Mar 13 Corn closed at USD7.59 1/2, up 1/4 cent. Dec corn was up 8 3/4 cents on the week. Informa placed US corn plantings in 2013 almost a million higher than this year's 75 year record at 97.5 million acres. Clearly, with corn and soybean prices where they are both US and South American farmers will find the acres from somewhere. The USDA attaché in Brasilia estimated corn production in Brazil for 2012/13 at a record 74 MMT, a 4 MMT increase on the USDA themselves and 1.8% up on this year's crop. South Korea bought 63,000 MT of optional origin corn. Excessive rains in Argentina are delaying corn planting, which is currently running around 11 percentage points behind year ago levels. Corn got a boost from a firmer wheat market on the back of reports that Ukraine will ban wheat exports from the middle of next month.
Wheat: Dec 12 CBOT Wheat closed at USD8.72 1/2, up 4 cents; Dec 12 KCBT Wheat closed at USD9.08, up 3 1/4 cents; Dec 12 MGEX Wheat closed at USD9.42 1/2, down 1 1/2 cents. Chicago wheat was up 15 3/4 cents on the week. Wheat gave up most of it's early gains by the close of play. Early firmness being tied to reports of a Ukraine wheat export ban. All the popular news services carried the story, although as the day wore on there seemed to be some conflict of opinion as to exactly what had been said. It is largely immaterial as it has been known for some time that the Ukraine government want to cap wheat exports at 5 MMT, and that 3.35 MMT of that has already been shipped. Adding support was a USDA announcement of 230 TMT of US wheat sold to "unknown" for 2012/13 delivery. Informa said that US all wheat plantings for the 2013 harvest will be 56.8 million acres, an increase of just over a million on this year.
