• We continue to see the trade focus on the huge line up of vessels in Brazilian ports with load times reportedly exceeding 60 days. Chinese soybean crush margins remain at, or close to, record levels which ensures steady demand for physical supplies, and shipping delays in S America sees continued switching to the USA where availability appears to astound us given the tightness of supply particularly going forward.

• The US weather in the Delta is a focal point right now as planting has started albeit in patchy conditions and possibly on the wet side. Overall it seems that soil moisture is adequate, possibly even encouraging, and current pace of field work is average.

• In Russia the southern grain regions are turning to unfavourably dry after a month long dry spell. If crops are to reach their full potential, a prolonged period of soaking rains is needed to relieve parched soil conditions. These conditions are to some extent mirrored in the East of Ukraine. January precipitation did assist conditions following a dry last quarter of 2012, but rain is needed – and right now!

• We have seen CBOT soybean prices decline somewhat as harvest progress is made in Brazil. Top producing state, Mato Grosso, is reported to be 75% complete, but logistic issues continue to plague the country as evidenced by the record vessel line up. We expect this situation to continue for at least the rest of March and possibly into April, which leaves the US under pressure to come up with supplies.

• Friday’s USDA report had little in the way of significance, as we anticipated, and whilst we might take issue with some of their numbers, the market has shrugged it off almost as a non-event, and we look forward to what is likely to be a more influential report on 28th March.

• Some commentators are beginning to report that the long lived selling pressure and markets are oversold right now. Where have we heard that before? This could well suggest that if there is any sign of a “trigger” we could well see funds booking their profits in equity markets and transfer monies back into relatively cheap commodities – with potential upside for prices.

• Markets showed some glimmer of strength as Chinese buyers looked, once again, at US soybeans amid fears of loading delays and shipping disruption in Brazil. Some consider that normality is unlikely to be restored to Brazilian shipping until at least April; if this is the case pressure will remain on US stocks as buyers look to secure supplies leaving an ever tightening position.

• The long standing US drought situation and its consequent worries are easing fast as heavy rains continue to wash over the MidWest. Key corn producing states have received as much as two to four times normal precipitation in March so far. A drier period is forecast for this week which will be welcomed as we approach April and fieldwork in preparation for the busy planting season. Further north deep snows in North Dakota still cover the spring wheat growing areas. A rapid onset of thaw is needed to allow timely seedbed preparation, although an overly fast thaw would create flooding risks. It seems there is only a narrow band of optimal conditions!

• Probably the biggest single issue which stands out over the last week is Wednesday’s fall in CBOT grains, wheat in particular, which saw up to a 3.5% drop as improved weather across the Plains and Mid West gave funds further reason to add to their net short positions. This drop was also reflected in EU grains, which declined, albeit in a slightly more subdued manner.

• Current wheat prices are far from discouraging demand, and in spectacular style, once again, Brussels issued wheat export licences for 661,000mt bringing the season total up to 15,215 million mt. The increase on the same time last year now stands at 3.731 million mt, which represents close to a 32.5% uplift. We continually wonder at this level of exports and where late season grains are going to be sourced to meet demand; and we continue to draw the same conclusion – which is that we are unsure!

• That said it appears that demand and homes for the UK’s lower specific weight wheat is easing somewhat. As we approach the summer grazing season and feed demand starts to decline it is feasible that the long holders will be in a weaker position and something of a price decline kicks in. There is evidence that some of these grains are being hauled much greater distances from the surplus regions in the South into the tighter supplied North West. Once livestock are turned out this demand will ease somewhat and we could see a situation where sellers are looking for outlets.

• From a more global perspective, Egypt announced that its strategic stocks were in excess of 2 million mt, more than enough to last well into May; the prospect of the world’s largest importer being well stocked has added to negative sentiment. Additionally, the Egyptian Pound has fallen in value by some 8% this year (since Jan ’13) and Government reserves, necessary to support GASC’s (General Authority for Supply Commodities) letters of credit when purchasing, have dropped in excess of 30%. Maybe it is this rather than large stock levels, which is leaving them absent from tenders in recent weeks; or is that us being cynical once again?

• There has been some pre USDA report positioning in the lead up to the figures, which are due to be released at 17:00 (UK time) today. It is widely anticipated that soybean stocks will be reduced as a result of greater than forecast exports as well as larger domestic crushing. Corn stocks are predicted to rise following lower export numbers, and wheat is not expected to change materially. The USDA’s March figures do not have a strong track record of significant or unexpected numbers; consequently we have to wait until 28^th March for the grain stocks and prospective plantings report which is likely to have greater market significance.

• The US issued its weekly export data as follows:

Wheat: 828,100mt, which was above estimates of 350-550,000mt.
Corn: 156.500mt, which was below estimates of 450-650,000mt.
Soybeans: 1,382,600mt, which was above estimates of 900,000-1,250,000mt.
Soybean Meal: 119,300mt, which was below estimates of 200-300,000mt.
Soybean Oil: negative 19,700mt, which was below estimates of 5-15,000mt.

• Cumulative soybean exports have hit 96% of the USDA’s full annual forecast midway through the season, there is little room for additional sales if their forecast is to remain intact. The hope seems to be that S American supplies kick in big style – and soon! Soybean Meal sales are also at the upper end of USDA forecasts, having hit 94% of full year estimates, which leaves little room for manoeuvre going forward.

• Markets started the day in positive territory in reaction to yesterday’s declines with value being seen at some of the lower levels and buyers emerging from the sidelines. With half an hour to the CBOT close, front month soybeans are once again hovering above $15/bu, corn is a touch lower and wheat levels are showing slight gains.

• Markets are showing a degree of caution ahead of Friday’s USDA report – expectations are for a reduction in soybean stocks due to increased exports and domestic crush levels, corn stocks are expected to rise due to reduced exports, and wheat is anticipated around unchanged. This report will pave the way for the more important stock and plantings report issued 28th March.

• Brazil’s Conab has issued its latest update on the 2012/13 soybean crop at 82.1 million mt, a reduction of 1.3 million mt mom, albeit a big improvement on last year’s 66.4 million mt. Their estimate of the 2012/13 corn crop remains unchanged mom at 76.1 million mt. Interestingly the soybean decline was blamed on both too much, and too little rain; too much in Mato Grosso during February, and too little in southern states in January.

• India has, as expected, confirmed its 5 million mt increase in wheat exports to make room for the forthcoming harvest. High stocks and limited storage capacity are believed to be the reason behind the move, and a push towards pre June movement is likely to beat new crop Black sea supplies to market.

• Brussels has today issued another big week of wheat export licences, the figure hitting 661,000 mt bringing the season to date total to 15.215 million mt. The increase on the same time last year now stands at 3.731 million mt, which represents close to a 32.5% uplift. We continually wonder at the level of exports and where late season feed grains are going to be sourced to meet demand; and we continue to draw the same conclusion – which is, “we are unsure!’

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LIFFE Closes wc 1 Mar 13

• Markets have taken a turn to the downside with wheat leading the way, CBOT markets dropping over 2% and corn following in similar style. European wheat markets followed with losses also up to 2% being posted on the close.
• India’s statement that it will prioritise wheat exports ahead of rice and oilseed meals in the run up to their new harvest has led to views that an additional 5 million mt of wheat exports are in the offing. In addition, Lanworth, the Reuters owned crop forecaster, has raised its estimate of the US wheat harvest following recent snow and rains, which have improved spring growth prospects.
• Fund selling in wheat, where an existing net short position already exists, has added to today’s declines. It was also reported that funds were feature sellers of corn in addition to wheat. Technically, wheat is approaching some significant price support, which, if breached, will pave the way for further declines, conversely if it holds it could pave the way for higher levels.
• Earlier today we saw front month soybeans topping $15/bu once again, clearly this triggered some profit taking which has impacted prices throughout the rest of the day. It would appear that fears of being the last one holding old crop US soybeans before S American supplies are freely available is the “Sword of Damocles” which overhangs this market right now. However, we reiterate our often stated view that there is likely to be a supply issue in the US if demand continues at its current pace.

• Most of the day has seen CBOT markets displaying green numbers signifying higher price levels. This, despite improved Plains soil moisture levels following recent rain and snowfall. The latest USDA crop condition report shows improved wheat condition in Kansas and Oklahoma.

• The market continues to look at S American conditions, and despite March improvements (early days) due to better rainfall in Argentina it may be overly optimistic right now to forecast bumper harvests. Planting delays and extremely dry conditions in the mid summer period will likely have taken their toll on potential. Recent rains will, no doubt, have improved the crop outlook but overall output will have been compromised to some degree. We do not have to look back too far in time to recall sodden fields leading to planting delays and crops ultimately being sown in less than ideal conditions.

• As a consequence we received news from Argentina’s RGE (Rosario Grain Exchange) reducing their estimate of soybean output to 48 million mt from 53 million mt last; corn output was also reduced to 25.5 million mt, a 1 million mt reduction.

• US soybean prices appear, despite recent gains, to remain attractive with exporters reporting sales of 345,000 mt to China in 2013/14 and a further 330,000 mt in the 2012/13 crop year to “unknown destinations”. These sales appear to have provided markets with a degree of support, albeit there is a suggestion that the interest in US supplies could well be driven by Brazil’s port congestion issues. Prices have today moved above the $15/bu level (basis March ’13 contract) before easing in the last hour of trading. A close above this level ($15/bu) would likely trigger further upside moves with technical targets above $16/bu looking possible.

• It appears there is some recognition surfacing in the marketplace that the US S&D can ill afford these additional exports, end of season soybean stocks are already forecast at historically low levels, and additional export sales will only add further pressures.

• As this is written we are seeing another day with CBOT markets displaying a marked divergence with the soy complex making gains at the expense of wheat and corn. Seemingly further fund selling in wheat has led the way a weighed on corn prices. The selling was preempted by further snow forecast across the Plains, which will aid new crop but does not impact old crop!

• As mentioned last week the technical chart picture across all three crops looks decidedly bearish albeit with oversold conditions fast approaching, which may lend some short term support. Price dips are certainly attracting consumer interest, China with its strong soybean crush margins, continues to appear as an interested buyer on the decline.

• Despite Paris wheat being dragged lower by CBOT, the most notable feature is the inverse, or spot premium, which widened €12.5 on the close. It is little wonder that the trade of choice is nearby export; who would wish to hold grain to sell at a lower level in two months time?

• Southern Russia and Ukraine have experienced an extremely dry February after a stormy January period which helped to replenish low soil moisture levels. It appears that the region is caught in-between north and southern jet streams. Southern Russia experienced a dry autumn which extended into December, unusually as the normal conditions would be wet. Whilst there is no current cause for concern precipitation is necessary in coming weeks if crop stresses are to be avoided.

• It feels as if spring has arrived in the UK this week, we have enjoyed almost three weeks of dry weather with some sunshine and drying winds which have done waterlogged ground a huge amount of good. On the last day in February, in a watery sunshine, we witnessed fieldwork progressing apace in a number of areas. The autumn rain induced delays of which we have spoken on many occasions are now about to be rectified – to some degree. The perceived wisdom is that the acres lost to winter wheat will not be replaced one for one with spring wheat, rather that an increase in spring barley is likely, seed availability permitting.

• In a more global context we saw speculative money increase its “short bets” on both wheat and corn, and at the same time the amount of “long bets” on soybeans increased (latest data as at 19^th February). The technical chart outlook on agri commodities looks increasingly bearish, which flies in the face of what appears to be increasingly bullish old crop fundamentals.

• In Europe, Brussels issued a further 455,000 mt wheat export licences this week, which brings the season total up to 14.554 million mt; this compares with 11.159 million mt at the same time last season. The additional 3.395 million mt represents an increase of 30.4% year on year, which is slightly lower than last week’s gains but still a huge increase, which looks as if it will create an issue at the end of the season if it continues. Added to this we hear reports that Germany has purchased 60,000mt of feed wheat from Brazil, which is scheduled for arrival in a few weeks. Perhaps this is the start of the outcome we have been discussing in recent weeks.

• The US Corn Belt has benefited from the recent snowfalls leaving an excess of soil moisture when compared to normal. For crop land to maximise the benefit from the snow an orderly and steady melt would be ideal; latest forecasts seem to be providing just that, a gradual warming with daytime temperatures above freezing and nighttime temperatures falling below. The early outlook is, for once, showing some improvement.

• In Brazil’s top soybean producing state, Mato Grosso, there are still fears that the periods of intense drought, which have been experienced may well jeopardise output. 4 to 8 inch moisture deficits and rainfall barely hitting 50% of normal were experienced throughout late 2012. Although January rains did increase significantly the conditions that followed in February were uneven with extended dry periods lasting 10 days or more. It must be borne in mind that this is very unusual in the tropics where daily rains are the norm and the high daytime temperatures dry out topsoils rapidly. Late planted crops, which are in their pod filling growth stage, will be most affected.

• One commentator has suggested that the crop does not feel like a record this year despite the 10% increase in acreage. The USDA’s latest forecast is for a crop of 83.5 million mt, others are pitching lower numbers ranging from 81 to 82 million mt.

• In Australia the wheat planting season, which begins in May and runs through June, is approaching. For crop prospects to look good, eastern Australia will need significant heavy rainfall to replenish drought parched land which has resulted from last year’s drought. New South Wales and Victoria also have serious moisture deficits in their soils. The southeastern wheat regions look better with rainfall and soil moisture close to average at this time.

• With the turn of the seasons we are edging, once again, towards the season of the “weather market” and all that it brings with it – buckle up for the ride!