Nogger's Blog

Chicago: Off The Highs But Still Posts Strong Weekly Gains

22/06/12 -- Soybeans: Jul 12 Soybeans closed at USD14.42 1/2, up 4 cents; Nov 12 Soybeans closed at USD13.75 1/2, up 4 1/4 cents; Jul 12 Soybean Meal closed at USD422.00, down USD7.00; Jul 12 Soybean Oil closed at 49.74, down 7 points. For the week old crop Jul 12 beans were up 66 1/2 cents, or 5%, whilst new crop Nov 12 added 61 1/2 cents. Jul 12 meal gained USD11.90 and Jul 12 oil added 130 points. The electronic market had beans posting strong gains running into the opening of the daytime open outcry session, but most of those were given up in pre-weekend profit-taking. This is often the case in this kind of weather market, where weekend events and alterations to the latest forecasts can sometimes make things look a whole lot different on a Monday morning than they did on Friday. Funds were said to have had a quiet day and were probably about even on beans and light sellers of meal and oil - hence the lower closes on the latter two products. High prices mean that most of the 2011/12 South American crop is already sold. Indeed, Rabobank say Brazilian farmers have now sold 29% of their 2012/13 soybean crop already - and they don't start planting that until late September at the earliest!

Corn: Jul 12 Corn closed at USD5.91, up 4 1/2 cents; Dec 12 Corn closed at USD5.54, up 4 cents. For the week old crop Jul 12 was up 11 1/2 cents, with Dec 12 adding a much more impressive 48 cents, or 9.5%. As with soybeans, most of the early double digit gains were given up by the close of play - Dec 12 was 17 1/2 cents higher at one stage. Funds were estimated to have been net buyers of around 10,000 corn contracts on the day - a fair volume that you would have thought would have led to a better close than 4 cents higher. Next week has plenty of potential to provide some dramatic trade. Monday's action is likely to be dictated by weekend weather events in the US and the latest forecasts for the week ahead. Monday night we get the latest crop condition ratings from the USDA. Corn and soybeans rated good/excellent will probably see declines of 2-4 percentage points each. Then on Friday we have the USDA's June acreage and quarterly stocks reports. Most traders expect an increase in both corn and soybean planted area from the USDA's March estimates.

Wheat: Jul 12 CBOT Wheat closed at USD6.73 1/4, up 11 1/2 cents; Jul 12 KCBT Wheat closed at USD6.86, up 3 cents; Jul 12 MGEX Wheat closed at USD8.59, up 15 1/4 cents. For the week Jul 12 Chicago wheat was up 63 3/4 cents, or 10.5%, with Kansas wheat gaining 56 cents and Minneapolis adding 71 1/2 cents. So wheat was the star of the week, posting better gains than either corn or soybeans, despite the lack of a really good bullish storyline. Jul 12 Chicago wheat held on to more of it's gains than either of those two managed to do, although Dec 12 finished 6 1/2 cents higher on the day it was more than 10 cents off the intra day highs. Funds were said to have been net buyers of around 4,000 Chicago wheat contracts on the day. Reduced Russian output this year is certainly supportive, bumper crops there last year were responsible for depressing world prices last summer and autumn. Ukraine will also have a much smaller wheat crop this year, but could harvest a record corn crop. Offers of cheap Black Sea corn for new crop positions are already threatening to undermine wheat prices in Europe where wheat production estimates are now rising following plentiful spring rains.

EU Grains Close - Friday

22/06/12 -- EU grains finished higher with Jul 12 London wheat ending up GBP3.25/tonne to GBP183.00/tonne, and new crop Nov 12 ending GBP1.80/tonne higher to close at GBP161.55/tonne. Aug 12 Paris wheat was EUR2.25/tonne higher at EUR214.25/tonne, whilst Nov 12 was EUR2.25/tonne firmer at EUR216.50/tonne.

For the week, Jul 12 London wheat was up GBP8.00/tonne and Nov 12 gained GBP7.55/tonne. Aug 12 Paris wheat rose EUR11.25/tonne and Nov 12 EUR12.75/tonne.

At home, old crop is being supported by ideas that the harvest is likely to be 2-3 weeks behind normal following another week of widespread heavy rain. What we do have left from the 2011 harvest is therefore going to have to last a bit longer than expected.

Potential yields and bushel weights look very promising after the crop has enjoyed abundant moisture availability in the past couple of months. It's quality that is now the main concern.

Harvesting a large crop of high moisture wheat that needs to go through the dryer first to only wind up making feed grade is what everybody is worried about now.

Across the Channel French and German wheat has enjoyed plenty of recent moisture too, except they've also had their rainfall events interspersed with more sunshine than we have seen here in the UK.

Toepfer raised their forecast on German wheat production by more than 1.2 MMT today, from 21.49 MMT to 21.71 MMT, citing beneficial spring rains.

FranceAgriMer rate 73% of the wheat crop there as being in good/excellent condition, a year ago it was only 27%. They also reduced their forecast for 2011/12 soft wheat exports by 200,000 MT to 15.7 MMT citing a lack of competitiveness into its traditional homes in North Africa - particularly Egypt.

The main French port of Rouen only handled 60 TMT of grain for export this week, down by more than a third on last week. Of that total 45 TMT was wheat with Cameroon the top destination.

With one week left to go to bring the 2011/12 marketing year to a close Brussels issued 144 TMT of soft wheat export licences this week, bringing the year to date total to 12.4 MMT, 32% lower than the 18.2 MMT that had been granted at this time a year ago.

Early yield results out of Ukraine and Russia are poor, although it is likely that the worst of the crops are being harvested first. Barley yields in the Crimea region of Ukraine are said to only be coming in at around 2 MT/ha compared with the national average of 3.7 MT/ha last year.

Agritel forecast that the barley crop there will struggle to make 8.0 MMT, and will probably only muster 7.7 MMT versus 9.1 MMT a year ago, although that is still 200,000 MT more than the USDA's latest estimate.

EU Rapemeal Prices

22/06/12 -- Rapemeal prices on the continent are mixed today. Widespread wet & dull weather across Europe is seen delaying the harvest and may be starting to harm yield potential.

Guide prices, basis FOB Lower Rhine in euros/metric tonne, with change from previous session:

The Lunchtime Bite

22/06/12 -- The electronic grains are up across the board, with the exception of soyoil. For the week so far, including overnight action, we see old crop Jul 12 corn 16 3/4 cents higher, with new crop Dec 12 up 53 1/2 cents - an increase of more than 10%. Old crop beans are up 58 cents and new crop Nov 12 has added 68 1/2 cents. Jul 12 Chicago wheat is 65 3/4 cents firmer and Dec 12 up 60 1/4 cents.

There's some pretty meaty gains there, it will be interesting to see if the can hang onto them this afternoon. It is Friday after all.

The market seems to be developing "that look" again. Riding for a fall my Mum used to call it. The bulls have an air on invincibility about them once more. "This crop is toast and the only way is up big buddy. The world's gotta eat. If every man, woman and child in China ate just one more chicken nugget each then we'd run out of corn by next Tuesday, etc, etc.." That sort of thing.

Cue the USDA and their June Acreage report a week from today. The stage seems set perfectly for them, and we do know how they like the limelight.

Russia's Deputy Minister of Agriculture says that a revised grain production forecast is in the wings, and it's likely to be "considerably lower" than the 94 MMT estimate that they've been standing by for some time now. I bet it won't be as low as SovEcon's 85 MMT that is already in the market though.

They've exported 26.7 MMT of grain so far in 2011/12, and are likely to finish the season at around 27 MMT, he adds.

In yet more farting about, the CME Group now say that the open outcry pit session will trade until 2pm local time starting on Monday. That means that it and the electronic session will now both finish at the same time, which is 8pm in English money.

How many changes to trading times is that? I've lost count. What an embarrassing shower of money grabbing ne'er do wells they really are. We're only doing what the people want, they say. But then again that's what Pol Pot and Hitler used to say.

Don't get too comfy that you've finally got your head round these new trading times though, because it's all change again on Friday. With the USDA due out with their acreage and quarterly stocks report at 7.30 am local time, or 3.30pm in the good old U of K, the daytime session will kick off ten minutes earlier than normal - not that we really know what "normal" is any more.

Confused? You should be.

Nogger's Daily Sheet

22/06/12 -- The longest day is behind us, and what a long, boring and wet one it was. From here on in it's all downhill to winter, if you pass GO do not collect GBP200.

There's the small matter of a harvest to get over at some point in between now and Christmas - if it stops raining before then that is. What wouldn't our Septic mates across the pond give for a thorough soaking like this, eh?

Well, they can't have it, this is British rain, for British people.

Old crop Jul 12 London wheat is up GBP2.25/tonne this morning I see, it's highest levels in more than a year. I can only assume that that is weather related, as it's starting to look like whatever old crop is still around is going to have to last a bit longer than was thought.

Nov 12 is down GBP0.75/tonne, widening the gap between old and new crop to a cavernous GBP23.00/tonne, up from GBP16.00/tonne four weeks ago.

What's happening elsewhere? Rabobank have said that Australia will harvest 24.5 MMT of wheat in 2012/13 after recent rains proved "very helpful" - that's 0.4 MMT higher than ABARES recent estimate, although still well down on 2011/12's record bin-busting 29.5 MMT.

The Philippines says that it will buy more feed wheat and less corn in 2012/13 due to price considerations.

In a similar vein, Reuters report that in Japan corn inclusion rates in livestock feed have fallen to a two decade low, whilst wheat's percentage of the ration has increased to at least a twenty year high.

Crude oil prices have rebounded a little this morning after taking a right old pasting throughout the week. Indeed it's been a bad couple of months for oil, with WTI crude down 25% in the past eight weeks.

That doesn't do much for ethanol margins in the States. With high corn prices, slack demand for ethanol, crude prices tumbling, US oil stocks at record levels (see this interesting chart) and the tax blenders credit having disappeared the odds are stacked against the ethanol industry.

Well they've been saying for long enough that they should be able to stand on their own two feet and not rely on government subsidies for ever, so let's see how they get on.

Pacific Ethanol Inc apparently lost USD7.5 million in the first quarter of 2012 compared to making a USD2.6 million profit in Q1 of 2011.

Whilst we are throwing interesting charts about, this one may also interest you. London wheat versus WTI crude oil.

Note how the two are fairly closely matched for the first half of the chart, but that any correlation has gone totally out of the window latterly.

Throwing up multi-million pound bioethanol refineries in such volatile times is not for the faint-hearted.

Chicago Closing Comments - Thursday

21/06/12 -- Soybeans: Jul 12 Soybeans closed at USD14.38 1/2, down 8 cents; Nov 12 Soybeans closed at USD13.71 1/4, down 24 1/4 cents; Jul 12 Soybean Meal closed at USD429.00, up USD1.60; Jul 12 Soybean Oil closed at 49.81, down 100 points. Funds sold an estimated 7,000 soybean contracts on the day in a return to "risk off" trade firmer the dollar and saw WTI crude close below USD80/barrel for the first time since early October 2011. Weekly export sales for soybeans were less than expected at 608 TMT vs the 700-950 TMT anticipated. Cropcast became the latest analyst to lower its US yield estimates, cutting soybeans' potential from 44.1bpa to 42.4bpa, which is 1.5bpa lower than the current USDA forecast. Another analysis group, ProExporter, forecast 43.3bpa. The Argentine government estimate their soybean crop at 40.3 MMT versus a previous estimate of 41.5 MMT.

Corn: Jul 12 Corn closed at USD5.86 1/2, down 25 1/4 cents; Dec 12 Corn closed at USD5.50, down 16 1/2 cents. Fickle funds were said to have dumped 17,000 contracts on the day, having been heavy buyers at the beginning of the week. That would still place them up around 25,000 on the week as a whole though. Corn weekly export sales of 382 TMT were below the 450-650 TMT anticipated. The firming dollar and tumbling crude were both bearish influences, as too was poor Chinese economic data. Cropcast cut its US corn yield estimate to 158.6bpa, from 163.7bpa previously and the USDA's 166bpa. ProExporter estimate 157.2bpa. Midday weather forecasts added a bit of rain for the Midwest next week, with temperatures seen moderating. "Maximum temperatures in the 90s F previously this week are being replaced by low 80s F. Night temperatures would chill down into the upper 50s – low 60s F compared to 70s F previously," said Martell Crop Projections.

Wheat: Jul 12 CBOT Wheat closed at USD6.61 3/4, down 2 1/4 cents; Jul 12 KCBT Wheat closed at USD6.83, down 3 1/2 cents; Jul 12 MGEX Wheat closed at 8.43 3/4, down 1/2 cent. Funds were said to have sold around 2,000 Chicago wheat contracts on the day. The USDA's weekly export sales report for wheat of a combined 842 TMT were well ahead of the 300-500 TMT expected - the only one of the big three to beat trade forecasts. The Argentine government estimate the 2012/13 wheat area to 3.8 million hectares versus a previous estimate of 4 million (which is also that of the USDA). Farmers there are seen planting less wheat in protest to government intervention in the grain markets. Libya and Iraq are tendering for 50,000 MT each of wheat on the international stage. Algeria is said to have bought 600,000 MT of probably French wheat and Japan bought 108,500 MT of US wheat in it's regular Thursday tender.

EU Grains Close

21/06/12 -- EU grains closed mostly higher with Jul 12 London wheat up GBP1.25/tonne to GBP179.75/tonne and Nov 12 also GBP1.25/tonne firmer at GBP159.75/tonne. Aug 12 Paris wheat closed EUR1.75/tonne firmer at EUR212.00/tonne, whilst Nov 12 was EUR1.75/tonne higher at EUR214.25/tonne.

This was the highest close for Jul 12 London wheat since early September 2011, and the best for a front month in a year. New crop Nov 12 London wheat posted its best closing level in exactly a month.

Pretty impressive, and ever so slightly bizarre, considering that outside markets offered little in the way of support. It was quite the opposite in fact, with Brent crude slumping to an 18-month low and US WTI crude down below USD80/barrel for the first time in more than 8 months.

Reports that Algeria bought 600,000 MT of optional origin wheat, thought likely to be French material, was supportive today. Apart from that though there was precious little fresh bullish news about.

The general consensus seems to be that EU wheat and barley production prospects are greatly improved following widespread and heavy rainfall throughout most of the region in the last 8-10 weeks.

Much more rain could however start to damage quality before long. Yields however will surely beat last year in many of the major producing countries.

RMI Analytics described the condition of French barley as "superb" - according to a report on Agrimony.com: "French crops looked fabulous...We were seeing levels of 1,000-1,200 ears per square metre – unbelievable."

EU Rapemeal Prices

21/06/12 -- Rapemeal prices on the continent are lower today as some of the protection that had been built into prices following recent steep gains in Chicago soymeal is taken away.

Latest guide prices for EU rapemeal today, basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session: