Nogger's Blog

EU Grains Lower On The Day, Mixed For The Week

25/07/14 -- EU grains markets closed lower on the day, although mixed on the week.

The day finished with Nov 14 London wheat down GBP1.45/tonne at GBP126.30tonne, Nov 14 Paris wheat ended EUR1.25/tonne easier at EUR179.75/tonne, Aug 14 Paris corn was down EUR2.50/tonne at EUR156.25/tonne, whilst Aug 14 Paris rapeseed fell EUR1.50/tonne to EUR317.75/tonne.

For the week that puts London wheat GBP2.70/tonne lower and Paris corn EUR10.50 easier. Paris wheat did however manage a small rise of half a euro, as too did Paris rapeseed. Quality problems with the respective harvests of the latter two have supported prices for those this week.

Reuters reported that although protein levels are said to be OK, large proportions of this year's French wheat crop has Hagberg levels of 160 or less, rendering it virtually useless as milling wheat, and certainly not up to the standard wanted by traditional North African homes for French wheat.

FranceAgriMer reported that the French winter wheat harvest had advanced to 44% done as of last Monday, up from only 5% complete a week previously.

Reuters also reported that France had already exported, or was currently loading, 262 TMT of barley for China in July so far. That's more than their previous 5 year average annual barley exports to the Far Eastern buyer of 180 TMT per annum.

The Ukraine Ag Ministry reported the early grains harvest there at 64% complete at 20.526 MMT,  with average yields at 3.26 MT/ha versus 2.99 MT/ha a year ago. Wheat accounts for over 14 MMT of that total, with barley production contributing almost 6 MMT more.

The Ukraine Ag Minister said that around half a million tonnes of this year's grain crop could be lost due to the ongoing conflict in the east of the country.

The Russian Ag Ministry said that the 2014 grain harvest there was almost 23% complete at 37.2 MMT, with yields averaging 3.48 MT/ha versus only 2.84 MT/ha this time last year. Wheat accounts for 31.4 MMT of that total off nearly 34% of the planned area.

Brussels confirmed yesterday that they'd issued 262 TMT of soft wheat export licences this past week, taking the 2014/15 marketing year total so far to 763 TMT. They also granted 220 TMT worth of barley exports, taking the seasonal total to date to 789 TMT. In addition they also issued 247 TMT of corn import licences, which takes the 2014/15 total so far to 891 TMT.

Separately, the EU approved 40,557 MT worth of Ukraine wheat imports under the existing preferential duty free tariff agreement, along with allowing 30,000 MT of corn and 10,400 MT of  barley into the bloc from the same country.

Turkey bought 165 TMT of milling wheat and 65 TMT of feed barley, both of optional origin for Aug/Sep shipment.

European Commission estimated EU 28 2014 soft wheat crop at 137.5 MMT, unchanged from their previous estimate and up 1.9% from 2013. They also estimated the EU 28 2014 barley crop at 55.9 MMT, up from a previous estimate of 55.3 MMT, although down 5.9% from 2013.

Chicago Closing Comments: Monster US Corn Crop On The Way?

24/07/14 -- Soycomplex: Beans closed firmer following impressive weekly export sales. These came in at 226,700 MT for old crop and 2,451,100 MT for new crop. Pre-report estimates had been for sales of 150-250 TMT of old crop and 1.2-1.4 MMT of new crop. China (who else) bought 158,800 MT for 2013/14 and 1,283,500 MT for 2014/15. There were also net sales of 949,600 MT to unknown for 2014/15 shipment. Benson Quinn also note that "New crop meal sales remain extremely strong at 348,900 MT this week which takes accumulative sales to record pace and 3 times higher than last year’s accumulated sales for same period." The market is clearly thinking "why do we need to go lower, given this sort of demand at these levels, even with a record large US crop looming?" As far as the latter is concerned, Allendale estimated US 2014 soybean yields at 46.2 bu/acre, even if they did throw in the caveat of "we reserve the right to alter that" with the crucial yield-determining month of August still to come. Doane’s Midwest crop tour estimated Iowa soybean yields at 50+ bu/acre. Today was the last day of the western leg of the tour. The eastern leg starts on Sunday and ends Tuesday. Aug 14 Soybeans closed at $12.07 1/2, up 6 1/2 cents; Nov 14 Soybeans closed at $10.84 3/4, up 8 1/4 cents; Aug 14 Soybean Meal closed at $395.30, up $3.80; Aug 14 Soybean Oil closed at 36.24, up 4 points.

Corn: The corn market closed slightly lower. Weekly export sales came in at 291,500 MT of old crop and 1,143,400 MT of new crop. That was a bit better than trade expectations on the new crop which were in the 400-600 TMT region. Bearish news came from Allendale forecasting US 2014 corn yields at a bin-busting 174.1 bu/acre, the largest estimate I've seen yet. It's also miles above the USDA's 165.3 bu/acre. "Allendale said that its forecast implied a record US harvest of some 14.6bn bushels, well above the 13.86bn bushels that the USDA is factoring in," said Agrimoney.com. That's a record crop by some considerable distance, and would also be the second in a row for the US. "The broker believes that futures will hit $3.30 a bushel in the autumn, when the weight of supplies from harvest typically depresses markets to seasonal lows," Agrimoney added. On the weather front "the GFS model is predicting temperatures 5-10 F below normal to close out the month. The 6-10 day forecast continues exceptionally cool," said Martell Crop Projections. The market continues to view this cool scenario as not being a problem - at least for now. However, it will "further retard Midwest crop development, increasing the risk of freeze damage in the fall," Martell noted. "China has officially asked the USDA to certify a 0% tolerance for the MIR 162 trait on shipments of DDGs for export to that country," reported Benson Quinn. That would seem to effectively close the door to US DDGs exports to China. It also hints that the country's stance on MIR 162 is unlikely to change any time soon, casting a cloud over US corn acceptance in China too. Sep 14 Corn closed at $3.61 1/2, down 1 cent; Dec 14 Corn closed at $3.69 1/2, down 1 1/4 cents.

Wheat: The wheat market closed around 1-4 cents lower. Weekly export sales of 443,200 MT were in line with expectations, if unspectacular. Separately, South Korean buyers bought 27,400 MT of US wheat for Dec shipment and 30,700 MT of US wheat for Dec-Jan shipment. Japan bought 94,586 MT of food wheat for September shipment comprising of their regular mix of US, Canadian and Australian origin. The Wheat Quality Council’s 3-day wheat tour estimated US 2014 spring wheat yields at 48.6 bu/acre (said to be the highest since 1992). That's up from 44.9 bu/acre a year ago and compares favourably with the five year average of 44.7 bu/acre. Reuters reported that the Indian government is to release 10 MMT of state-owned wheat stocks onto the open market. French wheat prices rose for a third day as traders remain jittery over possible large-scale quality downgrades there. Russia continues to report very impressive wheat yields, and suggests that the quality of this year's crop is good, with 83% of the Stavropol wheat harvest said to be of milling grade for example. They've harvested 29.2 MMT of wheat so far off 32% of the intended area, with yields averaging 3.6 MT/ha versus 3.06 MT/ha a year ago. Russian 12.5% milling wheat is said to be offered around $238-242 FOB the Black Sea. Although Egypt bought wheat off Russia, Romania and Ukraine yesterday, many buyers are shying away from the latter for the time being due to the political uncertainty and unrest in the country. Dryness is said to be potentially damaging wheat yields in Australia. Sep 14 CBOT Wheat closed at $5.28 3/4, down 2 cents; Sep 14 KCBT Wheat closed at $6.20 1/2, down 3 cents; Sep 14 MGEX Wheat closed at $6.19 3/4, down 1 1/4 cents.

French Wheat Prices Rise For Third Day

24/07/14 -- EU grains closed mixed, but mostly higher. Paris wheat has now finished higher for three sessions in a row, it's been a while since we've been able to say that.

The day ended with new crop Nov 14 London wheat closing GBP0.15/tonne firmer at GBP127.75/tonne, Nov 14 Paris wheat was EUR1.50/tonne higher at EUR181.00/tonne, Aug 14 Paris corn was up EUR1.00/tonne to EUR158.75/tonne and Aug 14 Paris rapeseed fell EUR2.50/tonne to EUR319.25/tonne.

French, and possibly German, quality downgrades are what's been supporting the wheat market this week. FranceAgriMer will update us with some harvest progress figures tomorrow, but as far as some hard facts on quality are concerned we remain stuck with only anecdotal reports for the time being.

"Wet conditions experienced in recent weeks have certainly degraded lots of common wheat and durum wheat, with some crops sprouting and with very low Hagberg falling numbers," is the best translation I can offer you from one leading French agricultural website.

Closer to home, the HGCA estimated that the UK winter barley harvest is around 35% done, with the winter OSR crop in the region of 45% cut, along with the first few bits on winter wheat.

In southern counties as much as 80% of the winter barley and rapeseed crops have already been harvested, they said.

OSR yields are above average, although perhaps lower than farmer expectations, and range anywhere from 2.2-5.2 MT/ha, with the high end coming from "virgin" OSR land, they reported. Oil content is generally in the 42-46% range, they added.

Winter barley yields are "promising" with a tentative early forecast on national yields being around 7.0-7.2 MT/ha, they said. That's considerably higher than the 6.49 MT/ha forecast by the EU Commission's MARS unit earlier in the week.

Impressive early grain yields meanwhile keep getting reported out of Russia. The Stavropol region is already said to be 90% harvested, producing a crop of 7.27 MMT so far, with yields up 25.6% on last year at 3.87 MT/ha and with 83% of the wheat harvested making milling standard. The Rostov region is 73% harvested at 6.5 MMT (including 5.8 MMT of wheat), and yields here are said to be 45% up on a year ago at 3.2 MT/ha.

On a national level, the Russian Ministry said that 22% of the planned area has been harvested producing a crop of 35.6 MMT to date, with yields at 3.47 MT/ha, a 20.5% hike on last year. Wheat accounts for 29.2 MMT of that total, off 32% of the planned area, with yields up 17.6% at 3.6 MT/ha.

Egypt's GASC paid around $256.60/tonne for a combo of Russian/Romanian and Ukraine 12.5% milling wheat yesterday, that's a touch under GBP151/tonne including shipping and handling costs.

Russian/Ukraine feed wheat FOB the Black Sea is said to be offered around $198/tonne, which is in the region of GBP116.50/tonne. Romanian feed wheat CIF Spain is said to be offered at EUR163/tonne, which is less than GBP130/tonne including freight. Ukraine new crop corn offers meanwhile have now slid to around $185-187/tonne, which is below GBP110/tonne on an FOB basis.

EU Rapemeal Prices

24/07/14 -- Rapemeal prices on the continent are a bit firmer, in line with higher soymeal levels last night and again this morning.

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

Chicago Grains Move Higher

23/07/14 -- Soycomplex: Beans closed with some decent gains on talk of a drier pattern developing in the 6-10 day and 8-15 day weather outlooks. August is the most important pod-setting month for determining US soybean yields. The weather has been kind up until now, and prices have slumped to 2 1/2 year lows, so even the slightest hint of a weather scare will be enough to cause a few ripples. China only sold sold 54,945 MT out of the 354,470 MT of soybeans on offer in yesterday's government auction. With US soybean prices having tumbled lately I suspect that Chinese buyers would prefer to buy "fresh" supplies rather than government stocks that have been around for some considerable time. Doane’s crop tour continues to indicate very high yield potential in the western belt. Dr Cordonnier was said to have estimated US 2014 soybean yields at 45.0 bu/acre, unchanged from his previous estimate. Lanworth were said to have estimated US yields at 45.2 bu/acre with production at 3.671 billion bushels. Ag Canada estimated the canola crop there this year at 14.5 MMT versus a previous estimate of 14.8 MMT and down 19.4% versus 18.0 MMT in 2013. They now see 2014/15 canola ending stocks at 1.1 MMT versus a previous estimate of 1.7 MMT and compared to 3.0 MMT at the end of 2013/14. Trade estimates for tomorrow's weekly export sales report for soybeans are 150-250 TMT of old crop and 1.2-1.4 MMT of new crop, with China buying the latter quite heavily. Aug 14 Soybeans closed at $12.01, up 17 cents; Nov 14 Soybeans closed at $10.76 1/2, up 18 3/4 cents; Aug 14 Soybean Meal closed at $391.50, up $9.70; Aug 14 Soybean Oil closed at 36.20, up 27 points.

Corn: The corn market closed a couple of cents higher in sympathy with beans. The potential for a drier beginning to August isn't seen as much of a threat to corn, as July is a more important month in determining final yields. The ongoing Doane crop tour is reporting back some fantastic yield potential. Lanworth upped their forecast for US 2014 corn yields to a record 172.8 bu/acre versus a previous estimate of 172.1 bu/acre. They see the average Illinois corn yield at 204.9 bu/acre, with Iowa coming in at 193.8 bu/acre. They now forecast the US 2014 corn crop at a record 14.635 billion bushels versus a previous estimate of 14.562 billion, despite lower plantings this year. Dr Cordonnier was said to have gone for a more modest 167.0 bu/acre, unchanged from his previous estimate. IMEA estimated Mato Grosso’s 2013/14 corn crop at 17.1 MMT versus a previous estimate of 15.0 MMT. They said that the state's safrinha corn harvest is about a third done. Ag Canada forecast the 2014 Canadian corn crop at 11.3 MMT versus a previous estimate of 12.4 MMT and compared to 14.2 MMT in 2013/14. They now have 2014/15 ending stocks estimated at 1.9 MMT versus a previous estimate of 2.7 MMT and compared to 3.1 MMT at the end of 2013/14. The US Energy Dept said ethanol production in the States this past week was 959,000 barrels/day, up 16,000 bpd from the previous week and the second largest week of the year. EU corn closed at 4 year lows on ideas that a greater proportion than normal of the EU wheat crop may only be suitable for animal feed this year. Trade estimates for tomorrow's weekly export sales report are around 300-500 TMT of old crop and 400-600 TMT of new crop. Sep 14 Corn closed at $3.62 1/2, up 2 1/4 cents; Dec 14 Corn closed at $3.70 3/4, up 2 1/2 cents.

Wheat: The wheat market closed with modest gains in consolidation trade following recent heavy losses. Egypt's GASC bought 235 TMT of Black Sea wheat. They booked two cargoes of Russian origin, along with one each of Romanian and Ukraine wheat for early September shipment. The average price paid was around $4/tonne cheaper than the price they last bought at two weeks ago. US wheat wasn't offered, and neither was French origin. There's widespread talk of this year's French wheat crop suffering quality downgrades. There's rumblings that German's crop may also see some rain-related damage. Earlier this month the USDA said that this year's poor US winter wheat crop production would be more than compensated for by a rise in spring wheat output. A crop tour in southern parts of North Dakota (which produces around 46% of the US spring wheat crop) found an average yield potential of 48.3 bu/acre versus 43.3 bu/acre in 2013 and the tour’s five-year average of 42.9 bu/acre. "I think we have seen an extraordinary crop," said one tour participant. The USDA currently rates spring wheat crop conditions in the state as 82% good to excellent, whilst neighbouring South Dakota is 80% G/E. Russia's 2014 wheat harvest is said to be 30.7% done at 28 MMT, with average yields up 16% at 3.6 MT/ha. Ag Canada estimated the 2014 Canadian all wheat crop at 27.7 MMT versus a previous estimate of 29.6 MMT and compared to last year's record crop of 37.5 MMT. They have all wheat ending stocks estimated at 9.2 MMT, unchanged from their previous estimate and down from 10.9 MMT at the end of 2013/14. Trade estimates for tomorrow's weekly export sales report are a fairly modest 350-500 TMT. Sep 14 CBOT Wheat closed at $5.30 3/4, up 6 1/4 cents; Sep 14 KCBT Wheat closed at $6.23 1/2, up 2 1/4 cents; Sep 14 MGEX Wheat closed at $6.21, up 2 1/4 cents.

French Crop Concerns Support EU Wheat And Rapeseed Markets

23/07/14 -- EU grains closed mixed with Nov 14 London GBP0.05/tonne lower at GBP127.60/tonne, Nov 14 Paris wheat was up EUR1.50/tonne to EUR179.50/tonne - although just failing to stay above the important EUR180/tonne level. Aug 14 Paris corn was down EUR2.50/tonne at EUR157.75/tonne and Aug 14 Paris rapeseed jumped EUR7.00/tonne to EUR321.75/tonne.

Continued talk of widespread problems with the quality of this year's French wheat harvest supported the Paris market today. The wetness that is causing the problems for wheat is viewed as beneficial for corn however, and it also potentially means that there will be more feed wheat on the market in 2014/15, in direct competition to corn.

Could the London and Paris wheat markets go in opposite directions? In dollar terms tonight's close puts the spread between the two Nov 14 contracts at around $24/tonne. That's the largest differential since May 2013. However "back in the oft-cited year of poor quality of 2007 we saw the spread between the two jump to $60/tonne, so we’re not seeing anything historic just yet," says my Twitter chum Tregg Cronin at Halo Commodities in the US.

"The currency influence and the lighter volume can make these spreads volatile, but the Paris Wheat/UK wheat spread is worth paying attention to," he notes. It may also be worth keeping an eye on the wheat/corn spread too.

Reuters report a French exporter this week buying Polish milling wheat to cover existing sales that they would have expected to fulfil with French material. French traders have also been said to be seeking/buying German wheat this week.

Egypt's GASC bought 235 TMT of Russian, Romanian and Ukraine wheat in their tender for Sep 1-10 shipment. The prices paid were said to be around $256.60 C&F, that's down from around $260-261 C&F paid for Romanian wheat for late August shipment a fortnight ago. Some might see the fact that there were no French offers made as being significant.

Jordan passed on a tender to purchase 100 TMT of optional origin hard milling wheat and immediately re-tendered for the same, in their usual way. Iran is said to be looking for 50 TMT of Black Sea wheat for prompt shipment.

Russia's 2014 grain harvest is now 20.8% complete, producing a crop of 33.6 MMT to date, with average yields of 3.47 MT/ha, an 18.8% increase on this time last year. Wheat accounts for 28 MMT of that total off 30.7% of the planned area. Wheat yields are averaging 3.6 MT/ha versus 3.1 MT/ha a year ago, say the Ag Ministry.

The Ukraine early grains harvest (which excludes corn) meanwhile is already 60% complete producing a crop of 19.1 MMT. Yields are averaging 3.22 MT/ha, up more than 9% on a year ago. Wheat accounts for 13.1 MMT of that total with yields at 3.49 MT/ha. The Ukraine Ministry say that 63% of the wheat harvested so far is of milling standard (versus around 70% a year ago).

The French rapeseed harvest has progressed to the north east of the country, and yields so far are disappointing and seed sizes are small. Wet weather in Germany means that the rapeseed harvest there has stalled, giving rise to yield and quality concerns.

The UK rapeseed harvest meanwhile is said to be around halfway done, with yields "slightly above average" but with the prospect of better yields to come, according to ADAS. Even slightly above average would be a big improvement on a year ago. Earlier in the week MARS increased their forecast for UK yields from 3.76 MT/ha a month ago to 3.81 MT/ha. That's 28.1% up versus 2013 and 11.4% above the 5-year average.

Wheat prospects in the UK also still look promising. After a couple of poor harvests in a row, maybe we were due a change of luck in 2014?

EU Rapemeal Prices

23/07/14 -- Latest guide prices for EU rapemeal today, basis FOB Lower Rhine in euros/metric tonne, with change from previous trading session:

Thoughts From The Frontline On The Milling Wheat Market

23/07/14 -- I'm going to shock you now. I'm starting to turn a little bit friendly to the wheat market, at least the milling wheat market anyway. I will try and quantify my reasons why, although many of the factors at play still very much fall into the "unpredictable" category, but I'll give it a go.

First and foremost we have the ongoing situation in Ukraine and rising tensions between Russia and the West. Exactly how this situation will be resolved is very far from being clear, but Big Bad Vlad is not a man known for his kowtowing to the West is he?

Further US and EU sanctions against Russia look likely, although we don't know in what form these will take. Only an idiot would expect no retaliation from Mr Putin, and he's not exactly short of some nice cards if it turns into a game of poker. For a start he could freeze Western assets in Russia.

Certainly Germany would want to adopt a softly, softly approach, and avoid an all out trade war. German exports to Russia totalled EUR38 billion in 2013 - the highest of any EU nation.

In addition, there's gas. Europe relies on Russia for 24% of its natural gas supplies, and in many countries closer to them than we are in the UK this percentage is very high - pretty much 100% in the case of Estonia, Latvia, Finland and Lithuania for example. In Belarus, the Czech Republic, Slovakia and Bulgaria it's said to be 80-100% reliance, and in Ukraine, Austria and Greece it's 60-80%.

An escalating trade war with Russia would be bullish for world wheat prices, as global demand switches to the West.

Meanwhile who knows what will ultimately happen in Eastern Ukraine? I'm hearing reports of farmers in the region considering it currently to be "too dangerous" to harvest their wheat.

I went to Ukraine a few years ago and remember then of being told stories of men with guns and lorries simply turning up at a farm one day and essentially saying that they'd come to take "their wheat" away. Unless you know bigger, more well connected men with bigger guns then that's the sort of thing that can happen over there I was told. And that was then, not now.

I don't imagine that it's too easy to get contractors in to harvest your crops if you're in the east of the country either.

All this, and the fact that your wheat/corn is/will only be worth less than the cost of production if and when it's harvested will also have your Ukraine farmer pondering "what the fcuk am I going to plant for 2015, if anything?" I'd have thought. "And where's the money going to come from?" Many that do plant will likely be using inferior home-grown seed too.

Right now you'd have to say that the prospects for Ukraine getting a third bumper grain crop in a row in 2015 look relatively low. Meanwhile, if I was a betting man (and I am), then I'd be tempted to suggest that Russia might be due a weather-related production problem of it's own next year. Let's make this clear, I'm not forecasting a Russian drought in 2015, I'm just saying that in a country that's had two market-moving droughts in the last 5 years, getting 3 bumper crops in a row there is also statistically unlikely.

Now let's throw into the equation that fund money is short in wheat. Let's also consider that reports coming out of France suggest they might have a rather large crock of shit on their hands this year as far as milling quality goes. And there are rumours that there could be problems in Germany too when their harvest finally clicks into gear.

Now if the French wheat crop does turn out to be a pile of pooh, then we need to consider that 38-39 MMT of pooh is an awful lot of pooh. I haven't seen that much pooh since I last watched the Lenny Henry Show. Add in some extra German pooh, comparable with say the Vicar Of Dibley. And we potentially to have a large European excrement surplus in 2014/15, which isn't exactly over friendly to feed wheat prices though note.

The jury remains out on Romania's 2014 wheat crop as far quality is concerned, even if they have been picking up sales to Egypt's GASC of late (they are back in the market today incidentally, tendering for Sep 1-10 shipment). Incidentally, even if you feel comfortable buying Ukraine wheat for 2014/15, a greater proportion of their crop is only thought likely to be up to feed grade than normal this year.

French corn prices meanwhile are on their arse, currently down EUR2.50-3.50/tonne again this morning to the lowest levels in over 4 years. It seems like the conditions that have led to the French wheat crop downgrades are seen as positively beneficial for corn, at least for the time being. Another negative for those with feed wheat to sell, I'm afraid. I'd certainly fancy putting some milling wheat cover on at these levels though.