EU Wheat Generally A Little Lower, Although Export Pace Remains Robust
The market was generally a little lower, in sympathy with weaker Chicago wheat today, although the old crop availability situation continues to tighten. That said, US weekly export sales of less than 300 TMT of old crop were relatively tepid, and now need to be around 490 TMT for each remaining week to reach the USDA's target for the current marketing year.
Despite US wheat being amongst the most competitively price in the world (currently around USD25/tonne cheaper than EU and Australian wheat) they still don't seem to be picking up as many sales so far in 2013 as many players in the market expected. That is even though Russian wheat is at all time highs (around EUR280/tonne) and Chinese wheat is even more expensive at around EUR300/tonne.
There's talk of US wheat coming into Europe now under the reduced tariff quota system, but there's no official confirmation of it yet. There was in fact a cancellation of 9 TMT of wheat to the UK in amongst today's USDA data. Meanwhile Brussels announced that it had issued 467,079 MT of soft wheat export licenses this past week, bringing the marketing year-to-date total to an impressive 11.3 MMT. Weekly exports only need to be around 200 TMT to hit current export targets, and even that level is forecast to leave ending stocks at the lowest level since before the EU-27 became the EU-27.
Incidentally, most analyst's forecasts for European grain production in 2013/14 are now for the EU-28 with Croatia set to join the bloc in the summer. With an annual wheat crop of less than 1 MMT and consumption of around 600 TMT that won't make too much difference to the overall European supply and demand picture.
MDA CropCast today forecast EU-28 winter wheat production at 132.04 MMT in 2013/14, with OSR output at 18.49 MMT and the barley crop here at 52.9 MMT. All those estimates are unchanged on a week ago.
South Korea bought 55 TMT of non-GM corn from the EU overnight for May shipment, they were also said to have purchased 110 TMT of Indian wheat for May shipment. India keeps picking up sales, although not all buyers are keen on their wheat due to mycotoxin issues. Iraq have issued a tender for 50 TMT of optional origin wheat, although they frequently buy more. Ethiopia are also looking for 35 TMT of optional origin wheat.
The main weather issues grabbing the market's attention continue to be ongoing drought on the US Plains, and how that may impact upon wheat production there in 2013. "Rains returned to southeastern Kansas and northeastern Oklahoma this past week, which helped to improve moisture there slightly. However, precipitation amounts were rather light across the rest of the Plains, allowing significant drought conditions to persist," said MDA CropCast.
A more immediate issue is the daily forecasts coming out of South America, and how that may affect corn and soybean output in Brazil and Argentina. "Rains remain abundant in northern Brazil, which are slowing first crop corn drydown and harvesting. The continued lack of notable rains in Argentina is allowing dryness to persist in western areas, but moisture needs are declining for corn," they add.
EU Rapemeal Prices
31/01/13 -- Rapemeal prices on the continent are generally a little firmer today, mirroring gains in soymeal values in Chicago last night.
Guide prices, basis FOB Lower Rhine in euros/metric tonne, with change from previous session:
| Feb13 | 275.00 |
unch |
| Mar13 | 273.00 |
+2.00 |
| Apr13 | 271.00 |
+1.00 |
| May/Jul13 | 247.00 |
+3.00 |
| Aug/Oct13 | 202.00 |
+1.00 |
| Nov13/Jan14 | 206.00 |
+3.00 |
| Feb/Apr14 | 206.00 |
+1.00 |
| May/Jul14 | 204.00 |
+1.00 |
It's Not April Fool's Day Is It?
Well, a little bird now tells me that in their infinite wisdom the CME Group has now decided to reduce CBOT trading hours (by a hitherto unspecified amount), recognising that they might have overdone it a bit with 21-hours/day trading in an embarrassing display of petulance over the establishment of the (very small) rival InterContinental Exchange futures market. You couldn't make it up could you? Anyone who's ever been shopping for a pair of shoes and a dress with the missus for some upcoming party will be all too familiar with this sort of carry on. I'd send them a sarcastic email but there's no satisfaction in getting involved in a battle of wits with an unarmed opponent is there?
We wait with baited breath for further details.
USDA Reveal Another Week Of Large Soybean Sales
31/01/13
-- The USDA's eagerly awaited weekly export sales report is out, giving us another monster set of soybean sales to China. Total old crop soybean sales were 386 TMT, along with a further 867 TMT of new crop, making a combined 1.25 MMT in total sales for the week through to Jan 24. That comfortable exceeds trade expectations for sales of 6-900 TMT.
China took 292 TMT of the old crop and 694 TMT of the new crop. Exports were in excess of 1 MMT once again, now for a record eighteen weeks in a row. The whole lot brings total 2012/13 shipments plus outstanding sales to 33.4 MMT, which is over 91% of the USDA's target for the season and we aren't even halfway through the marketing year yet. Yikes!
Old crop soybean sales now only need to average little more than 100 TMT/week to hit that USDA projection.
On top of that, the USDA have just announced the sale of 220 TMT of US soybeans for 2013/14 to you know who under the daily reporting system. They also bought 175 TMT of the same yesterday and 220 TMT on Monday
Corn sales were a relatively insipid 187 TMT of old crop and 66,500 MT of new crop, at the low end of even the modest trade expectations of 2-400 TMT. Shipments plus outstanding sales are 13.5 MMT, 52% of the USDA target for the season.
Old crop corn sales need to be in excess of 400 TMT/week to match the USDA's estimate for 2012/13.
Wheat sales were a bit disappointing at a combined 388 TMT (of which 293,600 MT was old crop) versus expectations of 3-550 TMT. Shipments plus outstanding sales are now 70% of the USDA target, although note that the wheat marketing year starts earlier for wheat than it does for corn or soybeans.
Old crop wheat sales now need to be around 490 TMT to reach the USDA's target for this marketing year.
Chicago Rallies As Funds Step In
30/01/13 -- Soycomplex: Mar 13 Soybeans closed at USD14.78 3/4, up 27 cents; May 13 Soybeans closed at USD14.67 1/2, up 27 3/4 cents; Mar 13 Soybean Meal closed at USD432.70, up USD9.00; Mar 13 Soybean Oil closed at 52.60, up 89 points. Funds were said to have been keen buyers at a net 9-10,000 beans and 3-4,000 each on meal and oil. South American weather has the market's attention, with the continuing theme being too wet in the early harvest areas of northern Brazil and too dry in the south of the country and across into Argentina. Lanworth Inc cut their estimate for Argentine soybean production from 55.2 MMT to 53.1 MMT (vs 54 MMT from the USDA). They did however up their Brazilian estimate to 80.9 MMT versus a previous estimate of 79.4 MMT. El Tejar - the world’s largest grain producer - estimated Brazil’s soybean crop at 80-81 MMT, and Argentina's at 50 MMT. The USDA announced the sale of 175 TMT of US new crop beans to China, underlying continued strong demand from that quarter. Oil World estimated China’s 2012/13 oilseed imports at 65.3 MMT versus 63.1 MMT in 2011/12. Oil World said that Canadian farmers would cut their canola plantings by more than a million hectares to 7.7 million, wooed away by wheat. Trade estimates for tomorrow's weekly export sales report are 600-900 TMT.
Corn: Mar 13 Corn closed at USD7.40 1/4, up 10 3/4 cents; May 13 Corn closed at USD7.41, up 11 cents. Funds were also active corn buyers on the day, taking an estimated net 10,000 contracts. That was despite the fact that the latest weekly ethanol production data showed a decline of 22,000 barrels/day on last week to 770,000bpd - a new lowest weekly total since they starting issuing data in mid-2010. That's the third week in a row that the weekly grind has failed to keep pace with the level required to hit the USDA's projection of 4.5 billion bushels of corn going into the ethanol sector this season. South American weather concerns usurped that news however. Lanworth cut their Argentine corn production estimate to 25.6 MMT from 26.0 MMT previously (and the USDA's 28.0 MMT forecast). For Brazil they went 75.8 MMT versus a previous estimate of 75.5 MMT. El Tejar estimated Argentina’s corn crop at 24-25 MMT. Bloomberg reported that as many as 126 vessels are waiting to load 6.2 MMT of grains in Brazil (versus 72 ships and 2.8 MMT this time last year) as the early soybean harvest clashes with attempts to still export what's left of last year's bumper corn crop. Trade estimates for tomorrow's weekly export sales report are 200-400 TMT.
Wheat: Mar 13 CBOT Wheat closed at USD7.87, up 10 cents; Mar 13 KCBT Wheat closed at USD8.40 3/4, up 10 cents; Mar 13 MGEX Wheat closed at USD8.69, up 8 cents. Funds were said to have been net buyers of around 2,000 Chicago wheat contracts on the day. Lanworth estimated the 2013/14 US wheat crop at 52.8 MMT, unchanged from previous estimate and 14.5% down on last year. They also estimated the 2013/14 Russian wheat crop at 49.9 MMT, up 32% on last year, and Ukraine's output at 23.0 MMT, up 48% on last year. Both figures were unchanged from their previous estimates. Russia’s state weather forecaster said 9.5% of the winter grain crop is in poor condition versus 12% a year ago and 8% on average. Russia’s Ag Minister estimated the 2013/14 grain crop at 95.0 MMT, up 34% versus 70.7 MMT in 2012/13. He also estimated 2013/14 grain exports at 15-20 MMT versus 14.0 MMT in 2012/13. Of the current season's reduced projection of 14.0 MMT around 96% has already been shipped. Trade estimates for tomorrow's weekly export sales report are 300-550,000 MT. Sales of around 435,500 MT are needed to keep pace with the current USDA target. India continues to release wheat onto the international market. South Korea bought 55 TMT of what was probably Indian feed wheat overnight. Other parcels are currently on offer for Mar/Apr shipment.
EU Wheat Mixed In Sideways Trade
A sideways trading pattern continues it would seem until we get a clearer picture of how northern hemisphere crops will emerge from winter dormancy.
Defra came out with some revised supply & demand numbers but there were no great changes to their previous estimates. "Wheat imports are supporting record UK consumption levels with little evidence that strong prices are dampening demand. UK imports to end-November were at the highest since 1993/94," they noted.
"Poor weather has resulted in strong demand for compound feed which is pushing higher the total demand for cereals in animal feed. Additional compound feed demand is mainly being met by increased barley and imported maize consumption, as these have been the most competitively priced grains," they added.
They upped their forecast for UK wheat imports this season, as expected, but by less than many in the market would have guessed - only 144 TMT to 2.19 MMT. They did comment however that "imported usage has continued to increase but has yet to find a steady level and consequently imports are challenging to forecast."
Wheat for Human & Industrial (H&I) consumption was forecast at 7.927Mt, 16% higher than 2011/12 but similar to previous estimates. H&I usage of home-grown wheat was reduced by 101 TMT cue to increase utilisation of imported wheat and also some degree of substitution with corn.
The total amount left over for export and carryover stocks was estimated at 2.3 MMT, which was 100 TMT more than projected in November although still a historically tight number.
In international news Syria bought 100 TMT of what is expected to be Black Sea soft milling wheat, possibly Kazakh origin, in their tender. South Korea bought 55 TMT of optional origin feed wheat, said to be most likely of South American or Indian origin. India seems the most likely, they put up a further 60 TMT of state-owned surplus wheat stocks for sale by tender today.
The market remains focused on South American weather as far as supplies for soybeans and corn are concerned, and also a little less concentrated on US winter wheat development on the Great Plains.
As far as the latter is concerned "Heavy rains were noted across southeastern Kansas, northeastern Oklahoma (and parts of the Midwest) yesterday and overnight...However, amounts were too limited to notably improve moisture in the central and western Plains.... Dryness will remain extensive in the Plains next week as showers continue to be very limited," say MDA CropCast.
EU Rapemeal Prices
30/01/13 -- Rapemeal prices on the continent are a little higher in old crop monthss following decent gains last night and again this morning in Chicago soymeal. Reports of vessels already backing up in Brazil waiting to load soybeans and corn look like keeping nearby premiums in the market for some time.
Latest guide prices for EU rapemeal today, basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:
| Feb13 | 275.00 |
+2.00 |
| Mar/Apr13 | 270.00 |
+3.00 |
| May/Jul13 | 244.00 |
+2.00 |
| Aug/Oct13 | 201.00 |
-1.00 |
| Nov13/Jan14 | 203.00 |
-1.00 |
| Feb/Apr14 | 205.00 |
+1.00 |
| May/Jul14 | 203.00 |
+1.00 |
The Morning Muse
30/01/13 -- Is it just me or is the market slowly coming around to the way of thinking that China needs more soybeans than you can shake a shitty stick at, and will pay up whether the price is USD14/bu or USD20/bu?
The Chinese also suddenly seem to have cottoned on to the notion that a record large Brazilian soybean crop is not much good if it's stuck on a truck in a 100km queue to get into Paranagua where a boat to take it to China is 124th in the line waiting to load.
In fact the only useful purpose that the record large Brazilian crop will have done is to temporarily drive the price down in North America so that the Chinese can buy some soybeans that they can physically get their hands on.
What are they going to do when they've had every last soybean for sale from the US 2012 crop and boats to load in South America are facing the currently estimated (and conservative in my view) 45 day shipping delays come March time?
It's been in the news this week that Chinese traders expect to import more than 15 MMT, or 36% more soybeans in the second quarter of this year than in Q1. That number actually seems low compared to Oil World who have Q2 & Q3 imports at a combined 35.9 MMT - which is almost 1.4 MMT/week. That's a lot of kit when your only reliable supplier has gone fishing for six months.
