Brazilian Coop Goes Pop
One of Brazil's largest grain cooperatives has gone into liquidation, according to media reports.
Cooperativa Agropecuaria e Industrial, or Cooagri, which was founded in 1957 was declared insolvent by a court in the Brazilian city of Dourados, according to the local newspaper Valor Economico.
The cooperative had an annual sales revenue of around US$590 million, and almost 1,000 employees.
In February this year the cooperatives members unwisely vetoed a proposal from the board to lease their 18 units in Mato Grosso do Sul to ADM for a period of five years.
No doubt ADM will now attempt to resurrect that deal at a knock-down price. Smart move by the members there!
CBOT Closing Comments
Soybeans
Soybeans finished sharply lower, closing below $9/bushel for the first time since March. November beans finished the day at $8.85, down 33 cents whilst October soymeal closed at $272.00, down $12.70. Informa Economics said that US soybean production this season would total a record 3.383 billion bushels, with an average yield of 44 bushels per acre. The numbers are slightly higher than FCStone's estimates earlier in the week. They are also well above the USDA's September prediction of 3.245 billion bushels with an average yield of 42.3 bushels to the acre. Brazil will produce a record 63.4 MMT of soybeans in 2009/10, according to Abiove. That's 1.4 MMT more than the USDA's September estimate and an 11% increase on last season.
Corn
December corn closed at $3.33 ½, down 7 cents. Spillover weakness from soybeans put corn under pressure. Informa said that US corn production, as with soybeans, will be set an all-time record of 13.127 billion bushels with an average yield of 164.7. Again, as with soybeans, both numbers are slightly higher than FCStone's estimates earlier in the week and well above the USDA's September figures of 12.954 billion bushels with an average yield of 161.9 bushels to the acre.
Wheat
December wheat closed at $4.41 ¼, down 11 ½ cents. Weakness in soybeans weighed on wheat, driving prices to close at or near contract lows. Stats Canada increased their Canadian wheat production estimate by almost 1 MMT from last month to 24.581 MMT. The US spring wheat harvest is just about finished and winter wheat plantings are in line with average with a little over a third of the crop planted.
EU Wheat Closing Comments
EU wheat futures closed mixed with a weak pound helping London close flat to a tad higher, whilst Paris was slightly lower.
November Paris milling wheat closed down EUR0.75 at EUR123.00/tonne. London November feed wheat finished up GBP0.25 at GBP98.50/tonne.
It's the same old stand-off, with end-users expecting lower prices round the corner once farmers have finished sowing winter crops.
Canada became the latest in a long line of countries to confirm that this season's wheat crop might be down on last season, but it is significantly higher than what was expected a month or two back.
All wheat output will total 24.58 MMT this season said Stats Canada, almost 1 MMT higher than their September estimate.
The news comes just a few days after the USDA also raised US production earlier in the week.
Still, it's not all doom and gloom. Rabobank predict that the EU will seize on low grain prices and increased ethanol levels to increase grain usage in biofuel production by 61% to 9 MMT in 2009/10.
Falling corn prices in the US will also see a corresponding increase in corn usage by the ethanol industry this year, they add.
Stats Canada Production Estimates
Stats Canada are out today with revised production estimates, pegging all wheat output this season at 24.58 MMT, 14% down on last season's 28.61 MMT and below trade estimates, although a million tonnes up on last month's projections.
Barley production is also below trade estimates at 9.16 MMT, down 22% on last year's 11.78 MMT. Canola output was towards the low end of trade predictions at 10.27 MMT, 19% down on last year's 12.64 MMT.
Ukraine: Continuing To Milk The Cash Cow, For Now
Dollar-hungry Ukraine continues to export grain like there's no tomorrow, and for them there possibly is no tomorrow. So far this marketing year (July 1-Sept 24) more than 6 MMT has left it's shores, matching last season's record pace. Of that total 3.27 MMT was wheat, 12% more than at the same time a year ago.
The good news is that with a grain harvest 15% lower than last season, and a wheat crop 19% down they surely can't keep on shipping at this rate.
It should come as no surprise that the majority of their exports will come at the front end of the marketing year, these boys are desperate for cash and price is almost secondary.
The Ukraine economy fell 18% in the second quarter of 2009, following a 20% drop in Q1 as industrial production and construction plummeted in the face of the global economic crisis. The only industry that expanded in Q2 was agriculture, up 2% thanks to last season's bumper harvest and subsequent aggressive exports.
The country was granted $11 billion in aid from the IMF last autumn, but there were some tough conditions to meet in order to keep the cash flowing. The next tranche is due this month, and it seems that the authorities will struggle to push through measures required by the IMF to release the money.
A stable hryvnia was one of the IMF's prerequisites, but that has fallen 15 percent against the dollar since the end of June.
The IMF also called upon Ukraine to stabilize the finances of Naftogaz, which is deep in debt due to subsidized gas prices. But with presidential elections fast approaching in January, the government see raising domestic gas prices as political suicide.
So the country remains stuck in political limbo, hemorrhaging money, with the IMF potentially about to pull the plug. You can see why farming enterprises are currently so eager to get some dollars, but all this comes at a cost.
Agrimoney.com recently reported that Ukrainian farming giant Landkom International are actively seeking a "substantial merger". They also reported that "Landkom's cash balance narrowed to $542,000 at the end of June from $34.5m a year before" after a "disappointing" first half of 2009.
If Landkom are struggling, what are the implications for smaller farming enterprises? Drought, the lack of financial resources and the current low prices for grains look set to see grain production next year lower again.
As recently as 2006/07 Ukraine imposed export restrictions after adverse weather conditions hit crop production hard. The 2009/10 season might be Ukraine's swansong before it "does an Argentina" and departs the international wheat export stage as rapidly as it stormed it.
CBOT Closing Comments
Soybeans
November beans closed at 9.18, down 9 cents. Export sales were strong at 1,384,800 MT, but record production is also round the corner. FCStone said today that US soybean output will be a record 3.329 billion, with a yield of 43.4 bu/acre. Output from Brazil and Argentina will also likely be record in 2010.
Corn
December corn closed at $3.40 ½, down 3 ½ cents. Weekly export sales were good at 1,223,400 MT, but a huge US crop is waiting in the wings with seemingly little threat from frost for the time being.
Wheat
December wheat finished at $4.52 ¾, down 4 ¾ cents. Export sales today were 538,152 MT or 19,773,696 bushels and shipments were 23,196,298 bushels, a marketing year high. Morocco are said to be tendering for 400,000 MT of wheat. Russia looks the favourite seller to me.
EU Wheat Ends Higher
EU wheat futures closed higher Thursday with November Paris milling wheat closing up EUR2.00 at EUR124.50/tonne, and London November feed wheat trading up GBP0.75 at GBP98.25/tonne.
London wheat was aided by a weaker sterling, following news that the manufacturing purchasing managers' index (PMI) fell to 49.5 last month from 49.7 in August.
The trade remains in a general state of flux as both buyers and sellers seem content to stand aside. EU growers are now faced with the conundrum of what to plant for next season. It seems that whilst western Europe may be content to give unprofitable wheat one more chance, in eastern Europe farmers may not have that luxury.
Tight credit and unseasonably warm and dry weather may be forcing a few hands it would seem. Having said that I wouldn't go getting carried away with the idea that wheat prospects will be looking a whole lot brighter in 2010.
If the wheat market is going to move significantly to the upside then I think we need to see a serious production problem somewhere like India over the next few months.
eCBOT Close, Early Call
The overnight session closed a little easier with beans and corn down around a cent or two and wheat off 5-6 cents.
There was a hint of frost in places overnight, but it certainly doesn't seem to be a killer. Another potential drop into the low 30's is seen Sunday, but the main timeframe for a serious sub-freeze looks to be October 9-10.
Export sales were very strong again for beans and corn and respectable for wheat. Actual exports themselves were also strong for corn and wheat. China was once again far and away the biggest buyer of soybeans, booking more than 800,000 MT, with the possibility that they in fact took more than a million if some of the 'unknown destinations' turn out to be Chinese.
It's a national holiday in China now through all of next week, so things should quieten down a little on that front.
FC Stone have increased their production estimates for US corn and soybeans.
Russia have admitted that their official estimate of grain production at 85 MMT was too low and increased it to 90 MMT, which is probably also too low. More serious private estimates from the likes of SovEcon are probably nearer reality at around 95 MMT.
India's summer soybean crop is seen 10% down due to drought. They will shortly begin sowing winter wheat and rapeseed, after summer rains were the lowest in almost forty years. Pakistan will also start sowing winter wheat this month, and conditions there are less than ideal too. With output from the two combined in excess of 100 MMT that situation warrants keeping an eye on.
Morocco are said to be tendering for 400,000 MT of wheat. Russia looks the favourite seller to me.
Chicago wheat got a shot in the arm from month-end short covering last night (who predicted that eh - me!), but is seen giving up much of those gains today.
Not a lot of fundamental change really. For soybeans it's tight old-crop stocks and strong demand from China versus large production round the corner. Throw in potentially record production to come from South America in the new year.
They started planting beans in Brazil's Mato Grosso a fortnight ago, and widespread rains there look like getting the crop off to a good start. Some of these early fast-growing varieties will get harvested in January to take advantage of front-end premiums.
Argy farmers will also plant a record amount of soybeans for harvesting in spring.
So China need to keep their buying boots on, it will however come as a major shock to the US system when they inevitably switch their buying attention to South America in the new year. Where will this record US production go then?
Early calls for this afternoon's CBOT session: corn called 1 to 2 lower; soybeans called steady to 2 lower; wheat called 4 to 6 lower.
