CBOT Closing Comments
Corn
Grain trading this week is like a yo-yo – up, down, up, down but all the grains have made new annual highs this week with cash remaining firm. Typically, that is not bearish action. Corn export sales were 658,734 MT this morning, and on the low end of trade estimates of 650,000 to 950,000. They were also low compared to last week’s sales of 1,023,400 MT. Bookings do appear to still be on pace with USDA projections for the year. The 8 month high in crude oil boosted commodity markets in general as Fund Managers are looking for investment areas believing the economy is recovering. Funds bought back at least 5000 contracts of the 15,000 thousand they sold on Wednesday. July corn finished at $4.48 ½, up 16 cents.
Soybeans
Soybeans made new weekly and annual highs today along with the Soybean Meal. Soybean Oil made new annual highs this week influenced by Goldman Sachs’ prediction that oil prices will reach $85 a barrel by the end of the year. The USDA currently forecasts the average price of crude oil to be $60.00 for 2009. Soybean net export sales were 36,558 MT considerably lower than the trade estimates of 200,000 to 450,000 MT, however, there are three more months in the marketing year and total commitments are already at 33.736 MT, basically at USDA’s export sales projection for this marketing year. Temperatures are forecasted to remain cooler and wetter than normal through the 19th of June which is favorable to soybeans that are planted and have emerged.
July soybeans closed at $12.30, up 48 cents.
Wheat
Wheat recovered some of yesterdays down move, supported by the uptrend line on all three exchanges and the lower dollar. Weather will be open for harvest in the southern plains over the next several days. Weekly export sales for all Wheat were 265,324 MT on the lower end of the trade estimates of 200,000 to 400,000 MT and compared to last week’s sales of 332,022 MT. May 31st ends the 2008/09 marketing year for all wheat. USDA projections were 1,010 million bushels (27.488 MMT) for 2008/09 export sales. There are a few days to add to the year, actual shipments to date have been only 25.625 MMT. This will be adjusted by shipments for the remaining days of May, and in July Census will adjust it for shipments that customs data measured but was not included in the USDA report. July CBOT wheat settled at $6.35 ¼, up 17 ¾ cents.
EU Wheat Rebounds
EU wheat futures rebounded from the last couple of days losses Thursday with Paris November milling wheat closing up EUR1.50 at EUR158.75/tonne, and London November feed wheat ending up GBP1.75 at GBP130.25/tonne.
Firmer crude oil and strength in the US grains helped wheat stage a come-back from declines earlier in the week.
Yields in eastern Europe are under threat from a combination of lower plantings, drought and reduced inputs.
There is also some suggestion that, faced with a lack of credit, many farmers have planted inferior home-sourced seed in the autumn which will also undoubtedly lead to decreases in output this year.
The large premium for November futures over the nears continues to discourage farmers from spot selling.
It's All Gone Sour For Dairy Farmers Of Britain
Milk co-op Dairy Farmers of Britain, with an estimated 10% of the UK market, is in receivership after months of speculation snd rumour that all was not well.
Exactly what the implications are for it's estimated 1,800-2,000 members so far seems to be unclear.
Who, if anyone, will pick up the milk tomorrow will be a question that many are asking. And what about the milk cheque? I think we probably know the answer to the last one.
Despite various efforts to keep it's head above water, it seems that losing the contract to supply fresh milk to The Co-operative Group, was one body blow too many.
In March the beleagured DFB asked it's members and former members to swap £70 million of their investment for shares worth a fraction of that, making each pound of investment worth one share with a face value of 10p.
Needless to say that didn't go down to well with it's members causing them to resign in their droves.
Argentine Wheat Plantings In A Stunningly Bad Way
If ever you needed some news to proof that tonight's losses on CBOT were overdone then this surely has to be it.
The Buenos Aires Cereals Exchange said in it's weekly crop report Wednesday that Argentine farmers will now only plant 3.2 million hectares of wheat in 2009.
To try and attempt to put that into perspective, get a grip on this:
That is half a million hectares less than they were forecasting just a week ago, and the figure then was the lowest on record.
This number is now almost half the area planted with wheat just two years ago.
The revised acreage now amounts to a 30.4% decrease on what was planted last year.
If you want any worse you can have it:
Soil moisture profiles are so poor that the final planted area could fall further the Exchange say. Well, if it can drop half a million hectares in a week then anything can happen.
Not only that, but the area planted so far amounts to just 420,000 hectares, slightly more than half of what was planted at this time last year, and little more than a third of what was seeded in 2007 at this time.
As well as the severe drought, which has now lasted almost eighteen months, lack of credit and political concerns are also behind the dramatic fall in plantings the Exchange say.
Food for thought: if Argentina only gets the same yield as last year, then they will be looking at a crop of less than 6 MMT in 2009. That's 10 MMT below their output just two years ago, and well below their domestic requirements, turning them from fifth largest exporter in the world to net importer in just two years!
CBOT Closing Comments
Wheat
CBOT July wheat closed down 52 cents at $6.17 1/2 a bushel, as funds cashed in profits selling an estimated 7,000 contracts following steep gains in May. There was no particular huge change to the fundamentals today, crude was weaker as were the global stock markets, but a sell-off got going triggering some sell-stops and next thing we end up 50+ cents lower. The weather outlook for the northern Plains and Canadian wheat belt if very cold with sub-zero temperatures for the rest of the week. News coming out of Argentina re wheat plantings is very bullish, and early yields in the US southern Plains are terrible. Hardly worthy of a 52 cent drop! Estimates for tomorrow’s weekly export sales report are 200,000 to 400,000 MT.
Soybeans
July soybeans closed at $11.82, down 27 cents. Beans got caught up in spillover weakness from wheat, crude oil and equities. Nothing new particularly happened today, but some longs decided to bank a few profits. The old crop picture is still exceptionally tight. Export sales estimates for tomorrow’s report are 200,000-450,000 MT. Even sales of that magnitude, which is low compared to the last ten week average, would leave us well ahead of the USDA projections. And we still have 13 weeks left to go before the end of the marketing year! Allendale estimated old crop ending stocks at 99 million bushels today, 31 million below the USDA's last estimate.
Corn
July corn finished at $4.32 ½, down 17 ¾ cents. Corn was weighed down by wheat, falling crude and a suddenly sharply firmer dollar. As with the other grains there was an element of profit-taking after recent gains and also some sell stops generating computer-driven selling. The weather outlook for the rest of the week isn't too conducive for corn planting with cold and wet being the main theme. Estimates for tomorrow’s export sales are 650,000 to 950,000 MT.
EU Wheat Ends Sharply Lower Wednesday
EU wheat futures closed sharply lower Wednesday in a corrective move from recent steep gains, and weaker outside markets.
London wheat had rallied around GBP15/tonne since mid-April, and it seems that it was time to bank a few profits.
Prices continued to rally late last week and into Monday, despite the pound and euro firming considerably against he dollar, which maybe got the markets a little out of sync.
Crude oil was sharply lower today, which also spilled over into the grains sector, as did falling equities.
Still, if farmers didn't want to sell today, they aren't going to want to sell tomorrow with November Paris milling wheat ending down EUR6.00 at EUR157.00/tonne, and London November feed wheat closing GBP4.25 lower at GBP128.50/tonne.
Sharply weaker US wheat futures late in the day pressured EU wheat to close at or near session lows.
US wheat had a bad day at the office, after moving up around 20% during May a bit of profit-taking was also overdue.
Still, weather problems in Canada, the northern US Plains and Argentina, to name but a few, point to potential crop losses down the road for wheat.
Very Cold Week In Store For Canada
Well below normal temperatures are persisting across the Canadian canola regions from Alberta to Manitoba, according to StormX. On Tuesday morning, frost was widespread in the Canadian Prairies. Environment Canada reported that 10 record lows were set in Alberta at that time. Near Calgary, temperatures dropped to 24ºF, about 20ºF below normal. To the east, in Saskatechewan, Regina hit 28ºF, where lows should be close to 50ºF at this time of year.
Dryness in Alberta and Saskatchewan presents a problem for canola growers, waiting for moisture to plant their crop, whilst conversely in southern Manitoba farmers are still waiting for their fields to dry out.
These same areas are also the main spring wheat growing regions of Canada, so there are potentially harmful implications for wheat too. This cold mass of air over Canada is also seen pushing well into the northern US too, affecting crops in North Dakota, Minnesota, Montana and Wisconsin.
Get the full StormX story here.
eCBOT Close, Early Call
The overnight grains closed lower on profit-taking following recent steep rises, and weaker crude oil. Wheat finished around 10-12 cents lower, with corn off 3-4 cents and beans 7-8 cents easier.
Crude is currently down 68 cents at $67.87/barrel, with talk the much of the recent rally has been contrary to supply and demand fundamentals. The US Energy dept will be out later this afternoon with their take on US inventories for last week.
Crude stocks are expected to decline 1.4 million barrels, although the American Petroleum Institute yesterday pegged the crop at only 828,000 barrels.
Cool and wet is the theme for Missouri, Illinois and Indiana over the next two weeks, according to Allen Motew of QT Weather. In addition, freezing conditions hit W Canada, Montana and North Dakota yesterday and then spread southeastward today, he says. This cold pool of air will remain over Canada during the next 10 days, with temperatures for the remainder of the week averaging -3 to -18 degrees F below normal across the Northern Plains and Western Corn Belt.
That could be a little bullish for wheat and corn, but bearish for new crop beans.
For old crop beans the tightness of the ending stocks is the primary concern. Coming up tomorrow we have the USDA's weekly export sales report, which will be scrutinised to see if old crop bean sales are now finally about to start falling away.
Next week we have the USDA's revised S&D and stocks data, although various trade estimates peg old crop ending stocks around the 100 million bushels or less level, it seems that nobody really expects the USDA themselves to peg it quite that low.
They are frequently slow to follow a shrinking (or increasing) market it seems, and coming out with a number around 100 or lower may be simply "too scary" for them to contemplate.
Wall Street is expected to open lower on ideas that the recent bullishness over economic recovery might have been overdone.
Early calls for this afternoon's CBOT session: July corn called 3 to 5 lower; July soybeans called 8 to 10 lower; July CBOT wheat called 10 to 12 lower.
