- CBOT grains have shown a glimmer of life today, trading into positive territory and prompting some to ask if the falls are sufficient for now. The gains appear to have been prompted by US ethanol production jumping to record highs in advance of anticipated seasonal demand growth with margins for producers in positive territory and in the face of weaker corn and rising crude oil prices. Ethanol production reached 972,000 barrels consuming over 100 million bu of corn in the week, a record – the previous best going back to December 2011. One offshoot from such a large week of production is the volume of DDG’s which has to be consumed, mostly domestically, given the state of trade with China who are refusing to accept imports at present as a consequence of the non-approved (MIR 162) GM event in US corn and products, which we believe to be more politically than food safety motivated.
- In wheat the wet US Plains forecast and associated yield reduction fears have sparked some buying interest, more so in Kansas futures than Chicago, but prompting short covering in the latter market. This has in turn spilled over into EU markets. However, international FOB levels remain weak with many asking, “where is the bottom in this market?” With the Black Sea region harvest in our sights, most importantly with Ukraine having little or nothing on their forward book as far as sales are concerned, we would venture to suggest that there is further downside to come. Added to this, pressure from global sellers of corn looking for a market into which to sell the current upside in wheat prices does look to be limited.
- The US announced the sale of 140,000 mt of 2013/14 soybeans to “unknown” destination. The sale has come as a surprise, not only the size – two x 70,000 mt vessels, which would suggest Pacific North West loading to China, but also that US offers are so much more expensive than S American FOB prices. Some, including ourselves, question whether the trade will ship as old crop (if at all) and if US stocks are so tight why was the sale made in the first place – at a discounted price.
- Ukraine’s sunseed plantings are all but completed with over 5.0 million ha now seeded, which compares with 4.6 million last year. The likely total area will reach 5.5 million ha and conditions look to be largely favourable and a crop in excess of 10 million mt looks to be achievable, and exceeded if the weather plays ball. This will potentially be a further bearish factor as far as oilseed and oilseed meal prices (read soybean and rapeseed meal) are concerned into the coming winter.
- The EU’s Monitoring Agricultural Resources Unit (MARS) has released a generally positive EU grain crop yield in its latest bulletin. The outlook showed grain yields above the five year average with soft wheat 4.2% higher than the five year figure. It was not all good news however, concerns were raised over dry conditions in Spain. The UK was singled out with above-average temperatures being recorded over the last six weeks with above average rainfall and conditions were described as “close to optimal”.
- Stratégie Grains latest monthly grain report showed improved EU production month on month as a consequence of improved weather conditions. Soft wheat output output was increased 2 million mt month on month with both imports and exports showing declines, albeit small. Overall, end stocks for the 2014/15 season were reported to grow by 3.6 million mt over last year to 14.6 million mt. Of relevance was the point made by Stratégie Grains that stocks were seen to be higher in non-traditional exporting member states, which could be significant when looking further forward.