Spanish Grain Harvest Seen 'At Least' 33 Pct Lower
With the harvest underway in the south of the country, analysts are forecasting this season's Spanish grain harvest to be "at least" a third lower than last season's bumper 23.2 MMT.
Spanish farmers' union Asaja say that this years grain harvest will only total 15.4 MMT, due to a combination of lower plantings and an acute lack of rainfall during March/April.
Other farm groups say that final production could come in as low as 13.5 MMT, a 42% decrease, as the harvest has not yet begun in the northern Castilla-Leon region that normally accounts for half the country's wheat production, where output is seen as much as 50% lower.
At the end of last year when farmers were making their planting decisions the costs involved in producing a 3.1mt/ha yielding wheat crop were around 600 euros, with 3.1mt of wheat at the time worth only 420 euros.
Many farmers therefore decide to either leave the land fallow or planted lower-maintenance crops like rape, sunflowers, field peas or vetches.
Spanish domestic cereal consumption is just under 30 MMT per annum. Even with a record carryover of an estimated 4.7 MMT of grain from the 2008/09 bumper crop, this leaves the country needing to import around 15 MMT in 2009/10 to cover it's needs.
With Spain the UK's top destination for wheat exports, this is potentially great news for us as they could easily take our entire reduced exportable surplus for 2009/10 in one fell swoop.
CBOT Closing Comments
Soybeans
July soybeans closed at $12.45 ¾, down 21 ¼ cents, November soybeans at $10.77 ½, down 12 ¼ cents. Profit-taking was a feature ahead of the weekend, and despite the drop July beans still finished 20 ¼ cents higher on the week. Next week’s weather is forecast to bring some much-needed warmer temperatures into the Midwest which should aid rapid progress towards the completion of soybean plantings in the US. Monday will see the release of the May NOPA crush report, with the trade expecting 137.2 million bushels of beans to have been crushed during the month.
Corn
July corn closed at $4.26, down 15 cents on the day and 18 cents on the week. Corn planting should now be complete just about everywhere, as farmers switch their attention to getting the remaining beans into the ground. A stronger dollar and weaker crude oil was bearish for corn Friday, and there was also a sense of position closing ahead of the weekend, with funds selling an estimated 9,000 contracts.
Wheat
July CBOT wheat finished at $5.85 ½, down 9 ¼ cents on the day and 37 ½ lower on the week. The early harvest in the south is throwing up some very poor yields with reports of just 10 bushels/acre coming in from Texas. Yields should improve as harvesting progresses further north, but there still remains a distinct possibility that the USDA's lower winter wheat production figure of 1.492 billion bushels will need to be revised lower still. The bearish thing for wheat this week was that despite reducing production US ending stocks for 2009/10 were revised upwards due to lower usage. Global ending stocks were also raised by almost 1 MMT to 183 MMT.
EU Wheat Ends Lower Again
EU wheat futures closed sharply lower again Friday, with Paris November milling wheat ending down EUR3.75 at EUR147.75/tonne, and London November feed wheat closing down GBP2.85 at GBP118.75/tonne.
London wheat lost GBP11.50/tonne, or 8.8% this week and Paris wheat EUR10, or 6.3% as the pound rose significantly against the dollar and US wheat futures fell.
The pound closed the week at $1.6446, having peaked at $1.6620 on Thursday, for a net gain of almost 2.9% on last week's close of $1.5986.
Meanwhile the euro only posted modest gains against the dollar over the course of the week, up from $1.3965 to $1.4018.
Meanwhile US wheat futures fell after the USDA projected 2009/10 US ending stocks at 647 million bushels, considerably higher than the 606 million the trade had been anticipating.
That news comes despite the International Grains Council forecasting that world grain demand in 2009/10 will outstrip production by some 15 MMT.
Egypt Rejecting Meat And Bone Meal
Hot on the heels of the problems with wheat imports, it seems that the Egyptians have now got a problem with meat & bone meal imports, and a fairly sizable problem at that.
It appears that meat & bone meal shipped into Egypt must be certified "pork-free", Egypt is after all a mainly Muslim country and therefore not very pig friendly. You will recall the recent enforced mass-cull of every pig they could get their hands on held by the Christian minority following the outbreak of swine flu.
Well, large quantities of MBM shipped from South America to Egypt have all recently been impounded having tested positive for traces of pork. The Egyptians have, crucially, recently changed the way that they test for pork, but it would seem that they kind of forgot to tell anyone. MBM shipped from Argentina was certified pork-free when it left and pork-positive when it arrived.
The new method of testing, using DNA PCR analysis, is so hot it has found traces of pork in just about every consignment entering the country, causing a major headache for the South American exporters and the Egyptian buyers.
The Egyptian government are saying that this material cannot enter the food chain under any circumstances, no matter how minute the traces of "pork". Far Eastern buyers are now queuing up to take delivery of this material at knock-down prices, as shipments sit at the docks racking up huge demurrage charges.
In addition, as this material has never been customs cleared in Egypt, there is now a problem with documentation to "re-export" MBM to the Far East without the proper paperwork.
Meanwhile, the knock-on effect is that Egyptian buyers are suddenly faced with taking MBM out of the rations and replacing it with prairie meal, or something similar, with nearby prices reacting accordingly.
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eCBOT Close, Early Call
The eCBOT grains traded either side in the overnight session, but ultimately ended up in negative territory with July soybeans down 1 3/4 cents, corn 3 cents lower and wheat 10 1/4 cents easier.
In a reversal of yesterday, crude and metals were lower and the dollar higher, all dragging the grains down as the morning session wore on.
Crude oil dipped on ideas that the recent rally has been overdone, speculatively driven and without too much focus on demand. July crude currently stands $1.49 lower at $71.19/barrel.
For soybeans it's still all about old-crop tightness. The US will not run out of beans everybody keeps re-assuring us, prices will ration demand, China have more than enough and will go away etc.
The USDA projected ending stocks at 110 million bushels earlier this week. That might be the lowest for 32 years, and the tightest stocks to usage ever, but it's still a surplus isn't it?
Well, that's true, but where were the physical ending stocks last year when the September contract closed more than four limits up on the last day of trade? They were more than double then what they are projected to be this year, but physically where the hell actually where they? Nowhere to be seen, floating around in the USDA ethereal, that's where they were.
The South Korean Feed Association bought 165,000 MT of US corn overnight. Nonghyup Feed Inc., also of South Korea, bought 275,000 MT of mixed US/optional origin corn.
South Korea also bought 55,000 MT of optional origin wheat and Algeria took 150,000 MT of the same.
The CWB peg the western Canadian grain crop 18-20% lower in 2009/10, saying that conditions have worsened considerably in the past two weeks.
Early calls on this afternoon's CBOT session: Corn Down 2-4c, Wheat Down 8-10c, Soybeans Down 3-5c.
Ensus Plant Soon Up and Running, Implications For Wheat?
The Ensus bioethanol plant at Wilton on Teesside, the largest of its kind in Europe, is expected to be up and running before the end of the year. With an anticipated wheat requirement of 1.1 MMT, that is going to make a sizable dent in next season's exportable surplus.
After winter wheat was planted late and in largely unfavourably wet conditions, many crops looked in pretty poor shape after a much drier than normal Feb/Mar/Apr. A return to more normal British conditions of rain, interspersed with the odd few days of temperatures in the 70's and even low 80's in May, have the crop looking in much better shape now.
Even so, it seems highly unlikely that we will get the same bumper yields as last season, with the UK crop at the moment seeming likely to come in at somewhere between 14.2-14.6 MMT in 2009.
With the extra demand from Ensus, assuming of course that they do indeed buy British, this would make the UK's exportable surplus for the 2009/10 season maybe only a million tonnes or so, much more manageable than the 3 MMT+ we had in 2008/09.
Random Thought Of The Day
If I was a Brazilian or Argentine stevedore or dock workers leader right now, I couldn't think of a better time to call a strike over pay & conditions than July/August.
US soybean stocks are the lowest in 29 years and stock/usage is at an all time low, and the harvest is running late.
That would make things interesting wouldn't it?
