What Happened To Soybeans On Friday?
What appears to have startled Dumbo this week is the news that a leading US bank were said to have lost USD2 billion, maybe more, on credit default swaps in just six weeks.
The suggestion is that they were selling "paper" soybeans at whatever price they could get on Friday to recoup some of those losses. As ever, when the price drops sharply computer generated stop-losses kick in and the little guys also get sucked into the vortex.
Separately, it is interesting to note that Fortress Investment Group announced Thursday that they were closing their commodities fund, which has lost 12.57% in first four months of year, later this month.
Meanwhile front month May 12 Chicago soybeans are 99 cents lower than where they finished April yet South American production estimates and US ending stocks have been lowered and China/unknown has bought US soybeans virtually every day since then!
Chicago Soybeans Crash
11/05/12 -- Soybeans: May 12 Soybeans closed at USD14.04, down 48 1/4 cents; Nov 12 Soybeans closed at USD13.21 1/4, down 37 3/4 cents; May 12 Soybean Meal closed at USD411.00, down USD12.90; May 12 Soybean Oil closed at 51.90, down 125 points. Extreme volatility continues. On the week overall May 12 beans fell 71 cents and Nov 12 was down 45 1/2 cents. Meal was down USD21.10 and oil shed 140 points. It's been a risk off week despite, for beans, a bullish USDA report yesterday. Crude oil fell to its lowest levels of the year on dollar strength and weak Chinese economic data. Funds were sellers across all of the grains today, shedding an estimated 12,000 soybean contracts on the day. The Commitment of Traders Report shows large funds liquidating around 23,000 of their length in the week through to Tuesday. The USDA announced the sale of 139,500 MT of already tight old crop soybeans to unknown, but even that couldn't stem the tide today.
Corn: May 12 Corn closed at USD6.08, down 17 1/2 cents; Dec 12 Corn closed at USD5.05 1/4, down 2 cents. On the week May 12 corn lost 54 1/4 cents and Dec 12 declined 19 cents. The last time Dec was this low was Feb 2011. Funds were said to have been net sellers of around 10,000 corn contracts on the day, ignoring news of the sale of 300,000 MT of corn to "unknown" - 60,000 MT for 2011/12 delivery and 240,000 MT for 2012/13 delivery. News that the largest bank in America had lost "at least" USD2 billion on derivatives trading that was supposed to be a hedge against economic risk unnerved the market to say the least. Favourable US weather and early plantings weigh on new crop.
Wheat: May 12 CBOT Wheat closed at USD5.92 3/4, down 2 cents; May 12 KCBT Wheat closed at USD6.01, down 8 1/2 cents; May 12 MGEX Wheat closed at USD7.41 1/4, up 11 1/4 cents. On the week overall Chicago wheat was down 11 cents, Kansas down 12 3/4 cents and Minneapolis was 1 1/4 cents higher. New crop Jul 12 Chicago wheat closed below USD6/bu for the first time in the contracts lifespan today. Funds were said to have been net sellers of around 3,000 Chicago contracts on the day. The US winter wheat harvest will soon be going full throttle, with the USDA yesterday estimating that crop at 1.7 billion bushels yesterday, an increase of 13% on last year.
EU Grains Close - Friday
11/05/12 -- EU grains finished mixed with May 12 London wheat finishing down GBP1.25/tonne to GBP172.50/tonne, and new crop Nov 12 falling GBP0.30/tonne to close at GBP148.20/tonne. Aug 12 Paris wheat ended EUR3.75/tonne lower at EUR197.50/tonne, whilst Nov 12 was EUR0.75/tonne firmer at EUR196.25/tonne.
On the week as a whole May 12 London wheat gained GBP0.25/tonne and Nov 12 lost GBP1.30/tonne to close the week at its lowest since February. Nov Paris wheat was EUR0.50/tonne higher on the week.
EU wheat still looks expensive relative to its US counterpart. Benchmark new crop month Jul 12 Chicago wheat closed below USD6/bushel for the first time in the contracts life today, and trading in that began in August 2009.
EU wheat exports will slump to their lowest levels in five years in 2012/13 the USDA said yesterday. At 14.5 MMT they will be down 12% down on this season and 37% lower than last year, they forecast.
The weak euro is helping to support Paris wheat a little, with sterling briefly breaking through the 1.25 level for the first time since Nov 2008 today. Even so EU exports aren't exactly flying out of the door. Brussels issued 176 TMT of soft wheat export licences this week, bringing the marketing year to date total to 11.65 MMT, 32% down on year ago levels.
April rains have replenished soil moisture deficits in the UK, France and western Germany. FranceAgriMer rate 65% of the French wheat crop in good/excellent condition. The French body also raised their estimates for wheat and corn 2011/12 carryover yesterday due to lower exports than anticipated.
Commodities in general were under pressure today following the announcement that America's largest bank, JPMorgan Chase, has suffered losses of "at least" USD2 billion due to a risky hedging strategy. That may lead to calls for tighter regulation on speculative activity in the grains market.
Drought Cancelled
Phew. The kids have been desperate for me to get the paddling pool out as well, so they'll be made up when they get home from school later. I might even have a celebratory bath all on my own later. It's been a bugger sharing it with MrsN#3 lately I can tell you, she keeps pinching me loofah.
Still, at least we can both fit in the bath together if we so chose. Which for some inexplicable reason puts me in mind of MrsN#1 with a shudder. On a holiday in the Lake District with her one time she decided to go for a swim in Windermere only to discover that she could hardly fit, Bowness went under twelve foot of water and the RSPCA thought that they'd found the Loch Ness monster's much bigger brother.
Yes, brother. Three Japanese tourists kept trying to harpoon her.
EU Rapemeal Prices
11/05/12 -- Rapemeal prices on the continent are mostly a little higher today on the back of sharp rises in Chicago soymeal last night.
Latest guide prices for EU rapemeal today, basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:
| May12 | 248.00 |
unch |
| Jun/Jul12 | 248.00 |
unch |
| Aug/Oct12 | 211.00 |
+2.00 |
| Nov12/Jan13 | 210.00 |
+1.00 |
| Feb/Apr13 | 210.00 |
+1.00 |
| May/Jul13 | 203.00 |
+5.00 |
| Aug/Oct13 | 178.00 |
+4.00 |
| Nov13/Jan14 | 185.00 |
+3.00 |
The Morning Vibe
11/05/12 -- Today has all the hallmarks of a thank God it's Friday let's all piss off early to the pub sort of a day. And it's lashing it down. Again.
The overnight grains are lower, with soybeans giving up around half of last night's gains. For corn we have the July contract sub-USD6/bu, having shed more than 20 cents this week to reside at its lowest levels in 14 months.
July CBOT wheat is now also under USD6/bu - a lifetime contract low. Things aren't looking too pretty for that with a large US new crop looming.
Nov 12 London wheat is GBP0.45/tonne easier to GBP148.05/tonne, it's lowest level since February, and to round off a week of market jitters we have news today of JPMorgan Chase revealing trading losses of "at least" USD2 billion and possibly USD3 billion. But what's the odd billion between friends eh? Billion shmillion, that's what I say.
Soybeans are finding it difficult to swim against the tide today, despite bullish fundamentals. China's Jan/Apr soybean imports are reported to be up 22.3% on the same period in 2011.
They will import 61 MMT of soybeans in 2012/13 the USDA said yesterday, 5 MMT more than they will buy this year and around a quarter of all the soybeans in the world.
Are they open yet?
Chicago Closing Comments
10/05/12 -- Soybeans: May 12 Soybeans closed at USD14.52 1/4, up 24 1/2 cents; Nov 12 Soybeans closed at USD13.59, up 25 1/2 cents; May 12 Soybean Meal closed at USD423.90, up USD9.00; May 12 Soybean Oil closed at 53.15, up 69 points. Beans led the way sharply higher on the back of a bullish USDA report that reduced old crop ending stocks by more than anticipated and pegged new crop inventories well below market expectations. The 2011/12 soybean carryout was cut from 250 to 210 million bushels and 2012/13 ending stocks were estimated at a very tight 145 million bushels. Insatiable China's 2011/12 soybean imports are seen rising 3.7 MMT to 56 MMT, and by a further 4 MMT to 61 MMT in 2012/13. Weekly export sales were also bullish at 466,500 MT for old crop and a hefty 1,360,500 MT for new crop giving a combined total of 1,827,000 MT versus expectations of 1.2-1.4 MMT. It should be noted that China accounted for more than 1 MMT of the combined total. Funds were said to have bought around 7,000 soybean contracts on the day.
Corn: May 12 Corn closed at USD6.25 1/2, down 15 3/4 cents, Dec 12 Corn closed at USD5.07 1/4, down 9 1/2 cents. Funds were said to have sold 23,000 corn contracts on the day after the USDA surprised the market by raising old crop ending stocks rather than reducing them by 50 million bushels to 851 million bushels, around 90 million more than the trade was expecting. They also gave us the largest US corn crop in history this year - over 375 MMT. They said that 2012/13 ending stocks will more than double to 1.881 billion bushels and pegged the world corn crop at almost 946 MMT, far higher than the IGC's recent 900 MMT. Brazil's crop was seen increasing 5 MMT from last month to 67 MMT. Weekly corn export sales were 224,200 MT old crop and 249,200 MT new crop, well under the combined 1.1-1.3 MMT that the trade was expecting.
Wheat: May 12 CBOT Wheat closed at USD5.94 3/4, up 3 1/2 cents; May 12 KCBT Wheat closed at USD6.09 1/2, up 1 1/2 cents; May 12 MGEX Wheat closed at USD7.30, down 1 1/4 cents. There were both bullish and bearish numbers for wheat in today's USDA report. Kansas was forecast to produce a 387 million bushel winter wheat crop this year, 40% up on last year. The US all wheat crop was estimated at 2.245 billion bushels, more than expected and 12.3% up on last year. They also pegged global wheat production at 677.6 MMT in the year ahead, some 17 MMT down on last year, a fall of 2.5 percent. Global wheat consumption is seen falling around 8 MMT next season, due to the outlook for a bumper world corn crop which absorbs some of this lower production. Even so, at 686.5 MMT the world will consume 11 MMT more wheat than it produces in 2012/13, meaning that world ending stocks for wheat are seen declining by 9 MMT to 188 MMT.
EU Grains Close
10/05/12 -- EU grains finished mixed but mostly lower with May 12 London wheat ending up GBP0.25/tonne to GBP173.75/tonne, new crop Nov 12 was down GBP0.40/tonne to GBP148.50/tone. Expiring May 12 Paris wheat crashed EUR12.75/tonne to EUR215.75/tonne, whilst new crop Nov 12 was down EUR1.75/tonne to EUR195.50/tonne.
The last remaining old crop Paris contract staged another dramatically thin performance, reversing all of yesterday's equally off the wall EUR11.50/tonne gains and then some.
Today was all about the USDA who gave us their first 2012/13 world crop production estimates, along with both old crop and new crop ending stocks projections both in the US and around the world.
Essentially the reports were bullish soybeans (and thus rapeseed), bearish corn and somewhere in the middle for wheat.
For soybeans they cut 2011/12 US ending stocks by more than expected to 5.7 MMT and projected 2012/13 carryout even tighter at 3.9 MMT. US ending stocks have only been lower than this four times in the last forty years, and when the latter number is taken on a stocks to usage basis this is the tightest availability since the mid-1960's. Meanwhile insatiable China's 2011/12 soybean imports are seen rising 3.7 MMT to 56 MMT, and by a further 4 MMT to 61 MMT in 2012/13.
The USDA pegged the EU-27 rapeseed crop down almost 6% to 18 MMT this year. World and EU-27 rapeseed ending stocks are forecast at nine year lows in 2012/13. World stocks will slump 32% to 2.86 MMT – less than half of where they were two years ago. Europe’s stocks meanwhile will more than halve from where they are expected to be at the end of this season to just 675,000 MT.
They estimated that the UK will produce a marginally lower 2.7 MMT rapeseed crop this year, with French production also seen down a tad to 5.25 MMT. German output will recover 15% from last season's drought damaged crop to 4.45 MMT.
The world corn numbers were undeniably bearish, with US 2011/12 ending stocks increased to 21.6 MMT and those for 2012/13 seen more than doubling to 47.8 MMT. US production this year was pegged at a record in excess of 375 MMT, with world output also pegged at a record of almost 946 MMT - well above the ICG's current estimate 900 MMT.
For wheat they gave us a world crop of 677.6 MMT, which was very much in the ballpark of other estimates from the IGC (676 MMT) and the FAO (675 MMT). World ending stocks are seen declining by 9 MMT to 188 MMT in the coming season.
The EU-27 wheat crop will come in at 132 MMT this year, they said. That's a 4% drop on last year. In amongst that there was little change on last year for the three main protagonists, with a UK crop of 15.6 MMT, a French crop of 36.5 MMT and a German crop of 22.5 MMT.
Separately FranceAgriMer raised their estimates for wheat and corn 2011/12 ending stocks there due to domestic prices being too high to meet earlier export forecasts.
