EU Wheat Follows Chicago Lower
16/12/13 -- EU grains closed mostly easier, as US wheat fell to fresh lows. CBOT wheat closed at levels not seen since June 2012 on Friday, and declined further today.
Jan 14 London wheat ended down GBP1.10/tonne at GBP164.30/tonne, and Jan 14 Paris wheat finished EUR0.50/tonne easier at EUR208.00/tonne, Jan 14 Paris corn closed EUR3.25/tonne lower at EUR172.50/tonne, whilst Feb 14 Paris rapeseed dropped EUR0.75/tonne to EUR366.50/tonne.
Morocco bought 75 TMT of wheat on the domestic, not international, market over the weekend. Algeria booked 150 TMT of durum wheat (thought to be of Canadian origin) for Jan shipment. The lowest bid in Iraq's wheat tender that closed at the weekend was said to be of Australian origin. Otherwise export interest looks pretty scant.
Ukraine said that they'd exported 15.9 MMT of grains in the 2013/14 marketing year so far to Dec 13. That includes 6,33 MMT of wheat, 7.45 MMT if corn and 1.98 MMT of barley, and represents a 22.3% increase on last year.
Coceral finalised their forecasts for the 2013 EU-28 cereal harvest, placing the soft wheat output this year at 135.9 MMT, and increase of almost 8% on last year. The 2013 EU-28 durum wheat crop adds 8.24 MMT to that total, with barley production at 59.7 MMT (versus 54.4 MMT last year) and corn output coming in at 64.8 MMT versus 57.4 MMT in 2012.
The Russian Ag Ministry said that this year's grain harvest was 96.4 MMT in bunker weight, or in excess of 90 MMT in clean weight. That compares to a clean weight harvest of 70.9 MMT a year ago. This year's harvest includes 50 MMT of wheat (in clean weight). They predict a 2014 grain harvest of 95 MMT in clean weight, including 55 MMT of wheat.
Winter grain plantings however are only complete on 14.7 million hectares, 1.1 million less than a year ago. That is now likely to be that until the spring.
The EU Commission's MARS unit said that "The decreasing temperatures of late autumn and early winter initiated the hardening of winter cereals. Our model simulation results indicate some delay in hardening in central and eastern areas of Europe due to the mild thermal conditions of the last two months."
"Hardening is well advanced in southern Germany, the south-western half of the Czech Republic, as well as in northern Europe, most of Belarus, in the Central Okrug of Russia and some areas in northern and eastern Ukraine. Winter crops are partially hardened in a wide region extending from the British Isles and Spain to the Black Sea," they added.
"Below-average temperatures are expected over southern Russia, Turkey and northern Africa, whereas warmer-than usual conditions will prevail in a wide belt extending from the British Isles to the central part of Russia. Frost kill is
unlikely to occur during the forecast period. Most of Europe is expected to remain drier-than-usual, with the exception of the British Isles, southern Scandinavia, Denmark, southern Finland and the north-western part of the Iberian
Peninsula," they noted.
Chicago Soybeans Resist Negative Pull Of Wheat And Corn
13/12/13 -- Soycomplex: Beans closed with modest gains, just about managing to shake off tumbling wheat and corn. Ultimately nothing much has changed for beans, we still have very strong nearby demand for US beans supporting the market, but the negative influence of the prospect of record crops to come from South America getting ever closer. Oil World forecast the 2013/14 South American soybean crop at 159.8 MMT, up 10% versus last year and compared to their previous estimate of 158.5 MMT. Brazil will account for 89 MMT of that, along with a further 55.5 MMT from Argentina, they predict. That puts them in the middle of the range of popular trade estimates. The Buenos Aires Grains Exchange said that Argentine bean planting is almost two thirds complete. There's some speculation that the ongoing problems with some US corn shipments to China containing traces of a non-approved variety might lead to increased scrutiny, and therefore shipping delays, for US beans too. Independently of that there's the ever-present gossip that some of the outstanding US soybean sales will ultimately get switched to South America/cancelled. The USDA currently projects 2013/14 US soybean exports at just over 40 MMT, of which 19 MMT has already been shipped and a further 19.7 MMT is on the books waiting to go. Shipments have averaged 2 MMT/week over the last 6 weeks, so in theory all of the outstanding sales could be shipped in the next 10 weeks, or by the end of February, if things hold up at these levels. That's a fairly substantial IF, but one that doesn't make allowances for further sales between now and then, or the almost inevitable switching back to the US once the perennial Brazilian shipping delays start getting out of hand. Nevertheless the outlook for prices is certainly bearish longer-term, especially with US growers expected to mimic their South American compadres and significantly increase soybean plantings in the spring. Rabobank forecast 4th quarter 2014 US soybean prices to average at $10.70/bu, versus tonight's close on Nov 14 of $11.57 3/4. Jan 14 Soybeans closed the day at $13.27 1/2, up 3 3/4 cents; Mar 14 Soybeans closed at $13.13 3/4, up 2 1/4 cents; Dec 13 Soybean Meal closed at $462.90, up $3.50; Dec 13 Soybean Oil closed at 39.47, down 33 points - less than 40 points away from the lowest close for a front month since July 2010.
Corn: The corn market closed sharply lower as the dispute between China and the US over MIR 162 corn shows no sign of letting up. In fact it's getting worse. Yesterday's export sales report showed a further 370,700 MT of US corn heading for China, with seemingly little assurance that it will get through customs clearance when it gets there. Trade talk suggests that China’s strict checking for this unapproved strain of US GMO corn will continue into early next year. One trade commentator told Reuters that he didn't see any approval for MIR 162 happening until after the Chinese New Year festival in February. Some news services are now reporting that the problem has spread to DDGS, with some reports suggesting that traces of MIR 162 have been found in at least one such shipment, leading to fears that they could also start rejecting DDGS cargoes too. CNGOIC said that China's 2013/14 corn crop was a record 217.7 MMT this week, and that domestic consumption was likely to be over 20 MMT less at 197 MMT. Consider too that the reason that China has been buying more wheat than previously for 2013/14 is due to the relatively poor quality of it's 2013 harvest. That low grade surplus wheat is likely to replace some corn in Chinese feed rations. The Buenos Aires Grains Exchange said that corn plantings in Argentina are 55.5% done versus 60% a year ago and 47.7% a week ago. Rabobank forecast that 4th quarter 2014 US corn prices will average $4.10/bushel versus tonight's Dec 14 close of $4.52 1/2. Taiwan Sugar Corp bought 23 TMT of US corn in a tender yesterday. A group of 10 US senators proposed a bill to eliminate the 2014 ethanol mandate yesterday. Whilst most think it unlikely that the bill will get passed, it is nevertheless unsettling for the corn market given the fact that the US has a record large crop to shift, and it's probably only domestic demand from the ethanol industry that's stopped prices falling below $4/bu up until now. Factor in the ongoing problems with China and the only thing that corn has got going for it right now is the anticipated continued unwinding of fund short positions heading into the year end to keep the market from falling further. What will the new year bring? Some think new lows. Dec 13 Corn closed at $4.20 1/2, down 7 3/4 cents; Mar 14 Corn closed at $4.25 1/2, down 8 3/4 cents.
Wheat: Wheat fell particularly sharply on front month Dec 13 in both Kansas and Minneapolis, although note that the Dec 13 position went off the board on all three exchanges today. Even so, wheat was down around 3-6 cents on most other months too. Dec 13 Chicago wheat meanwhile went off the board at the lowest levels for a front month since just before the big price spike of the summer of 2012 when it became apparent that all was not well with the crop in Russia. Talk that India plans to move around 2 MMT of wheat onto the world market in the next two months ahead of their 2014 harvest adds to the bearish tone at the moment, despite buoyant EU sales. US wheat also faces stiff competition on the world export market from Europe, where we have a distinct price advantage into North Africa and the Middle East, due to freight considerations. There is also the threat on their own doorstep of this year's monster Canadian crop. Canadian wheat exports Aug 1-Dec 5 were up 26.5% on the same period in 2012, according to customs data. With a record 37.5 MMT crop to market, according to both Stats Canada and the USDA, they are likely to remain aggressive sellers right the way through until harvest 2014. We've already seen a significant shift away from US wheat and into Canadian origin from Japan lately. Australia's wheat crop also seems to be getting larger, and they and Canada are expected to slug it out in an Iraq wheat tender that closes over the weekend. The Buenos Aires Grains Exchange said that the Argentine wheat harvest is almost 40% complete, and stood by their forecast for a crop of 10.35 MMT this year. There's talk that Brazil bought one cargo of US HRW wheat this week, but that offers little bullish input. The cold snap that has gripped the US recently is seen giving way to much milder conditions in the week ahead "Temperatures in the High Plains are warming up. Moderating temperatures are predicted the next several days as a warm ridge of the high pressure builds into the southwestern United States. Well above normal temperatures are predicted the next several day on the High Plains. Wheat areas in Kansas would warm up into the mid and upper 50s by Monday, the moderate temperatures expected to persist most of next week. Growth in winter wheat is not expected, as the warm-up would not last long enough to coax wheat out of dormancy," said Martell Crop Projections. Dec 13 CBOT Wheat closed at $6.18 1/4, down 4 1/4 cents; Dec 13 KCBT Wheat closed at $6.57, down 12 1/4 cents; Dec 13 MGEX Wheat closed at $6.42 1/4, down 10 cents.
EU Grains Up On The Day, But Mostly Down For The Week
13/12/13 -- EU grains closed mostly higher on continued very strong export demand. Brussels issued 780 TMT of soft wheat export licences this past week, another big weekly number and in fact the second highest of the season so far, which take the total volume issued in 2013/14 to 12.55 MMT, up almost 46% on a year ago. The USDA currently has the EU-28 down to export 10.6% more wheat than in 2012/13.
The session ended with Jan 14 London wheat up GBP1.85/tonne at GBP165.40/tonne, Jan 14 Paris wheat was EUR2.75/tonne firmer at EUR208.50/tonne, Jan 14 Paris corn was down EUR0.25/tonne at EUR175.75/tonne and Feb 14 Paris rapeseed rose EUR1.25/tonne to EUR367.25/tonne.
For the week that puts London wheat up GBP0.70/tonne, Paris wheat was down EUR1.50/tonne, Paris corn fell EUR5.00/tonne and Paris rapeseed shed EUR7.25/tonne. So London wheat managed to punch above it's weight a bit this week relative to the other grains (Chicago wheat was 19 cents lower on the week too).
Trade data shows that the UK imported 221 TMT of wheat in October, similar to the volume imported a year previously, and although that does represent a decline on September's imports it's still quite a big number given that Defra were predicting imports to drop off sharply after the first quarter. Corn imports meanwhile are also ahead of last season's pace and totalled 129 TMT in October.
The Ukraine Ministry said that the country will export 3.5 MMT of grains this month, down from the record 4.7 MMT shipped out in November. Jan/Feb exports will decline further, to around 3 MMT each, they said. The vast majority of that is now likely to be corn.
Ukraine farmers will plant around 8.7 million hectares of spring grains in 2014 (versus a little over 7.7 million ha of winter grains), an increase of 600,000 ha versus 2013, said the Ministry. Around 98% of winter plantings have emerged and approximately 92% are said to be in good/satisfactory condition. The 2014 corn area is expected to expand from around 4.8 million hectares this year to 5.2 million ha.
Russian winter crop conditions are said to be "better than last year" despite delayed plantings. Unseasonably warm weather in October and November has helped crops get established before the onset of winter.
The Buenos Aires Grains Exchange said that the wheat harvest there was around 40% complete, and stood by their estimate for final production of 10.35 MMT, despite output of only 2.9 MMT so far. I guess that we must assume that the more productive land is yet to see a combine?
CBH Group estimated the Western Australian grain crop at 14.5 MMT, up from their previous estimate of 13.2-13.8 MMT, due to better than expected yields.
Indian wheat plantings have been completed on 25.4 million hectares, up 11.5% from a year ago, according to the Ministry.
The Morning Papers And The Emperor's New Clothes
13/12/13 -- One of the first things to grab my attention this morning is the news than a group of US senators have got together to introduce a bill to eliminate the US ethanol mandate completely. See here.
Whether it will actually get passed is another matter entirely of course, but it does highlight the fickle times (and markets) within which we operate. One stroke of the pen in Washington or Brussels and the rule book goes out of the window and we all start again from scratch....
"I remember the good old days when wheat was 200 pounds a tonne, don't laugh, it all used to go up the road to this bloody great big factory where they turned it into some shit or other and then they were back on the blower the next day wanting to buy more. Seriously. They passed a law, a fucking law, ordering that everyone had to buy this shit whether they wanted it or not! They didn't even know they were buying it half the time! Imagine that. That was the year when me and yer Nan bought our first Caribbean island. It worked well for a few years, and it would have carried on working if it wasn't for those pesky senators...."
It is particularly interesting to then hear about this: Biofuel suspected in probe into diesel breakdowns happening here in the UK.
Surely this whole biofuel thing can't be simply one enormous Ponzi scheme where the big boys help themselves get richer whilst pretending to be saving the planet? A scheme which the politicians fell for hook, line and sinker?
What happens of the lawmakers realise that biofuels aren't all they're cracked up to be and pull the plug on the whole little lot? A scary thought eh?
But that's not going to happen is it? The big boys are too, well, BIG. And too well connected, and with pockets that go all the way down to the ground.
Chicago Market Tumbles
12/12/13 -- Soycomplex: Beans crashed lower, despite another week of string export sales, on what looks like continued long liquidation heading into the year end. Producer selling with futures prices over $13/bu is said to be brisk with the first new crop Brazilian soybeans expected to be harvested around New Year's Day. Weekly export sales of 1.1 MMT topped trade expectations for sales of 750-950 MMT. As ever, China (558,100 MT) was the biggest buyer. Total commitments for the season are now at 96% of the USDA forecast. The USDA also reported sales of 413,900 MT for 2014/15 delivery, with that particular campaign already off to an excellent start. Actual shipments this week topped 1.7 MMT, with over 1 MMT of that heading for China. The IGC forecast the world 2014/15 soybean crop at 288 MMT, up 2.1% on this season, with consumption coming in at 285 MMT. Looking ahead they projected global soybean output to rise to 312 MMT by 2018/19, with consumption at similar levels. They see 2018/19 world soybean ending rising from 29 MMT this season to 39 MMT five years from now. They expect Brazil's soybean area to grow from the present 29 million hectares to over 32 million by 2018/19, with Argentine plantings up more marginally - from 20.7 million ha to 21.1 million. By 2018/19 they suggest that Brazil's crop could swell to 99.5 MMT, with Argentine production exceeding 60 MMT and US output to 95 MMT. Chinese soybean production is seen declining slightly, from 12.5 MMT this year to 11.8 MMT by 2018/19. Chinese soybean imports will hit 83.5 MMT by then, from their current forecast of 68 MMT in 2013/14, they say. Oil World said that Australia's canola crop is yielding better than expected, and might exceed 3.6 MMT versus ABARES 3.4 MMT and the Australian Oilseeds Federation's 3.2 MMT. Harvesting is 75-85% complete, they added. MDA CropCast raised their forecast for Brazil's 2013/14 soybean crop by 620 TMT from last week to 88.16 MMT. Funds were estimated to have been net sellers of around 8,000 soybean contracts on the day. Dec 13 meal and oil go off the board tomorrow. Jan 14 Soybeans closed at $13.23 3/4, down 20 1/4 cents; Mar 14 Soybeans closed at $13.11 1/2, down 17 cents; Dec 13 Soybean Meal closed at $459.40, down $5.20; Dec 13 Soybean Oil closed at 39.80, down 40 points.
Corn: The corn market closed around 3-5 cents weaker, reversing yesterday's gains. Weekly export sales of 695,400 MT were in line with trade expectations of 600-750 TMT. Total commitments for the 2013/14 marketing year are currently at 72% of the USDA's target for the season versus 52% normally at this time. The USDA also reported sales of 109,400 MT for 2014/15 for Mexico. Shipments of 977,400 MT included 370,700 MT heading for China despite the ongoing problems with some consignments being rejected if they are found to contain traces of the non-approved MIR 162 strain. There's now talk of China also rejecting DDGS shipments from the US on the same grounds. The market was further unsettled by newswire reports that 10 US senators had raised a bill to eliminate the US ethanol mandate completely. They say that the mandate pushes up food prices, damages the environment, costs the US taxpayer billions of dollars and makes fuel prices more expensive. Like they've only just realised that? The USDA announced the sale of 120 TMT of US corn to unknown for 2013/14 shipment under the daily reporting system, but that caused hardly a ripple. FranceAgriMer cut their French corn production forecast from 15.16 MMT to 14.9 MMT (versus 15.34 MMT last year), they also trimmed exports from 5.86 MMT to 5.49 MMT (versus 6.76 MMT in 2012/13) and raised ending stocks from 2.95 MMT to 3.11 MMT (2.47 MMT last year). The IGC said that world corn production in 2014/15 will only fall surprisingly modestly, down 0.4% to 944 MMT. They see world consumption at 940 MMT next season, with production rising to 1016 MMT by 2018/19 and consumption at 1020 MMT. Brazil's corn crop will grow from 72 MMT this season to 83.8 MMT by 2018/19, whilst output in Europe is seen relatively flat over the next 5 years, at 66 MMT in 2018/19 versus 65 MMT this season. China's corn crop will swell from 210 MMT this year to 234.4 MMT five years from now, they estimate. Interestingly they don't see further dramatic growth in corn production in Russia or the Ukraine across the next five years. Both countries have tripled their output in only a few years, but if the IGC are correct then Russia's crop won't be any higher in 2018 than it is now, and Ukraine's will only be modestly higher at 30.7 MMT. Dec 13 Corn closed at $4.28 1/4, down 3 cents; Mar 14 Corn closed at $4.34 1/4, down 5 cents.
Wheat: The wheat market stumbled generally 6-8 cents lower, although front month Kansas wheat crashed over 27 cents. Dec 13 contracts expire tomorrow on all three exchanges. Weekly export sales of 372,200 MT were hardly thrilling, although trade expectations were also modest at 300-500 TMT. India reportedly picked up best bids of between $282-287 in a couple of tenders for various volumes of wheat out of both the east and west coast of the country. These prices are above the government's newly suggested floor of $260 and so presumably will get booked. The IGC forecast the world wheat crop up 0.4% to 699 MMT next year (2014/15), with consumption almost matching production at 697 MMT, an increase of 1%. Production, consumption and ending stocks are all well matched in their early projections for the next five years. Global output will grown to 737 MMT by 2018/19, with use at 738 MMT and ending stocks steady across the period at between 182-184 MMT. They see increased wheat plantings between now and 2018 in most of the major producers, with Europe's area rising from 25.7 million hectares to 26.5 million, and America's up from 18.5 million ha to 20.3 million. Production will climb in Argentina (up from 10.5 MMT in 2013 to 14.1 MMT in 2018), Russia (50.5 MMT to 56.8 MMT), Ukraine (22 MMT to 22.5 MMT), America (57.5 MMT to 65 MMT), whilst holding steady in Europe and declining from the current record high in Canada to around 30 MMT. Chinese wheat production will continue to see modest growth, up from an anticipated 118 MMT this year to almost 124 MMT in five years time. FranceAgriMer said that winter wheat plantings there are down 1.2% to 4.92 million hectares, whilst those for barley are down 0.4% to 1.13 million ha. They trimmed their forecast for the 2013 soft wheat crop in France from 36.96 MMT to 36.84 MMT (up 3.4% versus 35.62 MMT last year), with exports seen rising from the previous forecast of 18.975 MMT to 19.645 MMT thus ending stocks were cut from 2.9 MMT to 2.4 MMT. Brussels confirmed late in the day that they'd issued a further 780 TMT of soft wheat export licences this past week as demand for European wheat remains strong. That takes the cumulative total for the season so far to 12.55 MMT versus 8.6 MMT this time 12 months ago. Dec 13 CBOT Wheat closed at $6.22 1/2, down 7 3/4 cents; Dec 13 KCBT Wheat closed at $6.69 1/4, down 27 1/4 cents; Dec 13 MGEX Wheat closed at $6.52 1/4, down 6 1/4 cents.
EU Grains Mostly Lower, Are We Breaking Out To The Downside?
12/12/13 -- EU grains closed mostly lower with Jan 14 London wheat ending down GBP1.00/tonne at GBP163.55/tonne and Jan 14 Paris milling wheat settling EUR0.75/tonne easier to close at EUR205.75/tonne. Feb 14 Paris rapeseed fell EUR3.00/tonne to EUR366.00/tonne, whilst Jan 14 Paris corn dropped EUR1.00/tonne to EUR176.00/tonne.
The market, which has been stuck in a relatively sideways move for some time, appears to be showing signs of breaking out to the downside. Whether that is purely a function of year-end selling, which will correct itself in the new year, remains to be seen.
The strong, record even, pace of EU wheat exports is a steadying influence. The USDA raised their forecast for those to an all-time high 25 MMT on Tuesday, up 1 MMT on last month and versus 22.62 MMT in 2012/13. Wheat usage in feed was dropped 1 MMT to 51.5 MMT to account for this.
FranceAgriMer said that soft wheat production there came in at 36.84 MMT this year, down slightly from the previously forecast 36.96 MMT, but up on output of 35.62 MMT last year. Exports (including flour) were raised from last month's 18.975 MMT to 19.645 MMT, cutting ending stocks from 2.9 MMT to 2.4 MMT.
ADAS said that the UK wheat crop could amount to around 14.5-15.1 MMT in 2014, if we ignore the 5-year average yield (which has after all included 2 very difficult years) and go with the 10-year average of 7.8 MT/ha instead. Production in 2013 was 12.1 MMT you may recall, so this would represent an increase of around 20-25%.
"Early indications are that the winter crops have all established well and are in good condition going into winter, however early drilling and lush growth does make the crops more susceptible to lodging and disease so, good management in the spring will be required," they said.
The IGC released a mountain of data concerning crop production for next year and beyond. These numbers are obviously intended to be very much guidelines only, as they can't possibly predict any potential weather-related crop disasters - or any bumper production years come to that.
Overall they see the 2014/15 world wheat crop up only marginally (+0.4%) next year at 699 MMT (based on their assessment of 2013/14, not the USDA's), with corn production falling by a similar percentage to 944 MMT. The global barley crop is forecast down 2.1% at 140 MMT, and the OSR harvest little changed at 68.2 MMT at this early stage.
They see world wheat consumption almost matching production next year at 697 MMT, with corn usage at 940 MMT and that of OSR at 67.7 MMT, so overall there's no big build in ending stocks anticipated.
Going forward, that is generally also the case. World wheat carryout is forecast holding relatively steady between 182-184 MMT from 2013/14 as far forward as 2018//19. Corn ending stocks are also seen flat-lining at around 151-152 MMT over the next five years, with those of OSR also steady at between 6-7 MMT.
The world's 8 major wheat producing nations are seen increasing their cropped area from 116.7 million hectares to 122.1 million by 2018/19, with Europe's up from 25.7 million ha to 26.5 million. Production amongst these countries is forecast to rise from 357.4 MMT in 2013/14 to 375.5 MMT in 2018/19. Europe's output is forecast almost the same in 5 years time as it is now (142.8 MMT). Russia's crop is seen rising from 50.5 MMT to 56.8 MMT, with Ukraine's up from 22 MMT to 24.5 MMT and America's increasing from 57.5 MMT to 65 MMT.
The IGC interestingly don't forecast the rapid expansion in corn plantings in Ukraine and Russia that their respective Ministries foresee. The Russian Ministry said only this week that they anticipate corn production there growing to 25 MMT by 2020, the IGC have output in 2018 at only 9.4 MMT. Ukraine's crop meanwhile is only pencilled in at 30.7 MMT in five years time, barely more than this year's expected output.
Chicago Market Regains Tuesday's Losses
11/12/13 -- Soycomplex: Beans reversed yesterday's losses, closing around 4-6 cents firmer on the day, on continued strong demand. The trade is expecting another robust week of export sales from the USDA tomorrow, with bean sales forecast to come in around 750-950 TMT, and with meal sales of 100-200 TMT. The USDA's office in Brazil estimated the soybean crop there at 88.5 MMT, half a million more than the USDA themselves said yesterday, noting generally ideal weather conditions. They peg Brazil's 2013/14 soybean exports at 45 MMT, which is 1 MMT more than the USDA said yesterday, but 0.9 MMT below Conab's estimate. Celeres pegged Brazil's 2013/14 soybean crop at 87.2 MMT, which is now one of the lowest estimates on the table, with others at 90 MMT, or even a little more. There's a little concern surrounding talk that China may be having a re-think on stockpiling agricultural commodities, according to Deutsche Bank. The theory is that this would allow domestic prices to fall closer to world levels (soybeans on China's Dalian Exchange have been trading at the equivalent of around $20/bu lately). What the government need to concentrate on of course is how not to de-incentivise Chinese farmers from producing crops at all if they perceive prices as being too low. Direct farm subsidies is the way, say Deutsche Bank. Don't expect any sudden announcement on this front overnight, but it's something to be mindful of going forward. The funds are long beans, and may be looking to trim that length heading into the year-end. Whether they will fancy re-establishing fresh longs in January with a potentially monster South American crop then imminent is debatable. The threat of a large output from Brazil and Argentina is often enough to see the market put in lows early in the new year. The USDA's Outlook Forum on Feb 20-21 is expected to indicate farmers' intention to "go large" with spring US soybean plantings too, potentially providing a bit more downside. Jan 14 Soybeans closed at $13.44, up 5 3/4 cents; Mar 14 Soybeans closed at $13.28 1/2, up 6 1/2 cents; Dec 13 Soybean Meal closed at $464.60, up $0.50; Dec 13 Soybean Oil closed at 40.20, up 29 points.
Corn: The corn market regained yesterday's losses, and then some, closing around 3-4 cents higher. The US Energy Dept reported the weekly ethanol grind leaping from 913,000 barrels/day last week to 944,000 bpd - the biggest week since January 2012 - as margins in the sector remain robust. The USDA's revised projections for corn demand from the ethanol sector means that production needs to average around 911,000 bpd to hit that target. Also supportive was the USDA reporting the sale of 120 TMT of US corn to "unknown" for 2013/14 delivery. Brazil exported 3.91 MMT of corn in November, according to customs data. That's similar to the volume exported in Nov 2012, and only marginally less than the 3.95 MMT shipped in October. Ukraine's corn harvest is 98% complete at 29.572 MMT. The USDA raised their Ukraine crop estimate from 29 MMT to 30 MMT yesterday - easily a record production and one which they are keen to export into Europe and Asia. Chinese think tank CNGOIC estimated the corn crop there at a record 217.7 MMT, up 6% on last year and versus their previous forecast of 215 MMT. Chinese government support prices for corn are said to be around the equivalent of around $9/bushel. Large US corn shipments to China are still being held up due to some containing traces of the non-approved MIR 162 strain. Chinese Authorities in the eastern province of Zhejiang are said to have rejected a 59 TMT cargo of US corn today. With demurrage rates what they are, US shippers will have to think seriously about loading vessels for China at the moment until this problem is resolved. Trade estimates for tomorrow's weekly export sales for corn are in the region of 600-750 TMT. Dec 13 Corn closed at $4.31 1/4, up 3 3/4 cents; Mar 14 Corn closed at $4.39 1/4, up 3 1/4 cents.
Wheat: The wheat market posted nominal gains, but fell well short of recovering all of yesterday's losses. The spectre of a record large 711 MMT world wheat crop hangs over the market, particularly with wheat prices at such a big premium to corn. Egypt saw the recent price fall as an opportunity to tender for wheat, picking up three cargoes of Romania and two of French origin for Jan shipment. Tomorrow's weekly export sales report for wheat will be interesting (with the trade expecting sales of around 300-500 TMT). Brazil has gone a bit quiet lately, and Conab yesterday forecast their crop significantly higher than the USDA's 4.75 MMT at 5.36 MMT, which is also up sharply on where they were a month ago (4.81 MMT). There's also some talk that Argentina's crop might not be as low as the Ministry suggest, and that their low ball estimate is politically motivated. The USDA yesterday surprised the market by leaving their forecast for the Argentine wheat crop unchanged at 11 MMT. Demand from Brazil has been one of the main factors supporting US wheat lately. So too has been fresh interest from China, and they also seem to have gone quiet - certainly as far as buying US wheat is concerned - as they are said to now be more interested in Australian wheat. We also this week have had the news that Japan is buying Canadian wheat in preference to US origin. All these things conspired to see the USDA raise their forecast for US wheat ending stocks in yesterday's report, whereas the trade had been expecting a drop of 20 million bushels. Dec 13 CBOT Wheat closed at $6.30 1/4, up 3/4 cent; Dec 13 KCBT Wheat closed at $6.96 1/2, up 2 cents; Dec 13 MGEX Wheat closed at $6.58 1/2, down 1/4 cent.
EU Wheat Rebounds From Tuesday Losses
11/12/13 -- EU grains closed generally a little higher, rebounding from yesterday's slump following a bearish USDA report. Egypt bought EU wheat in a tender, also supporting the market.
Jan 14 London wheat ended up GBP1.75/tonne at GBP164.55/tonne, and Jan 14 Paris wheat finished EUR0.75/tonne firmer at EUR206.50/tonne, Jan 14 Paris corn closed unchanged at EUR1.0077/tonne, whilst Feb 14 Paris rapeseed rose EUR3.75/tonne to EUR369.00/tonne.
The euro rose to a 3-week high against the pound and a 6-week high versus the US dollar, capping potential wheat gains across the Channel today.
Nevertheless, Egypt bought 300 TMT of wheat in a tender for Jan 10-20 shipment, of which 180 TMT is to come from Romania, with a further 120 TMT being French origin. The market can't work out if it's good news that they bought all EU origin, or if it's bad news that Romania is still in there pitching after last week's "purchase" was aborted.
Either way, EU wheat exports remain at a brisk pace.
The French Farm Ministry forecast soft wheat exports in 2013/14 at 18.95 MMT, up from their previous estimate of 18.26 MMT and versus 17.2 MMT in 2012/13. They said that 11.8 MMT of this total will go outside of the EU-28 versus 11.2 MMT previously.
Russia bought 19,575 MT of grain for it's intervention fund today, bringing the total bought so far this season to 485,460 MT of mostly wheat (71,820 MT is barley). They look set to fall well short of their intention to rebuild their intervention stocks by 203 MMT this year.
Ukraine has now harvested 99% of its 2013 grain harvest, producing what is easily a record 63.2 MMT to date. Average yields are 4.02 MT/ha, up 27% on last year's 3.17 MT/ha. Corn accounts for 29.57 MMT of that total, off 98% of plan.
Now that we have the USDA report out of the way the market looks like consolidating into year end. Where we go in the early part of 2014 will be interesting.
Some suggest that the current spell of book-squaring and profit-taking on corn will be over by then, and that fund money may be looking to establish/build on existing short positions. That could pressure wheat down further if that's the case.
India will be harvesting new crop wheat by the end of March, and southern US states won't be too far behind that, so there is certainly some downside potential in the first half of 2014 - especially of winter wheat in Europe and the FSU emerges from dormancy in decent condition.
Current pricing structure would appear to indicate that US spring wheat plantings could steal a few acres off corn too.
Demand from Brazil (and maybe China too) could help fashion price direction early in 2014. The latest vibe seems to be that Brazil's wheat crop may be higher than anticipated (and so too might be Argentina's - normally Brazil's largest supplier).
