• Today’s USDA (NASS) Small Grain & Stocks report sparked some interest into what was, last week, a pretty dull affair. The report has been construed as bearish for soybeans and corn, whilst being supportive for wheat, and the market has traded accordingly with Dec ’13 corn (at last) breaking below the mid-August low and reaching a low (so far) just above $4.42/bu. Prices look set to test the much discussed $4.25/bu level as harvest gears up and supplies become more freely available. Soybeans fell amid funds liquidating some of their long positions with the Nov ’13 contract breaking below the $13.00/bu level and trading close to $12.84/bu. Wheat markets bounced around with the Dec ’13 contract trading close to a $0.20/bu range before settling lower towards to close.

Sep 1 stocks of corn were reported as 824 million bu, which is above estimates of 681 million bu and below last year’s Sep 1 figure of 989 million bu
Sep 1 stocks of soybeans were reported as 141 million bu, which is above estimates of 124 million bu and below last year’s Sep 1 figure of 169 million bu
Sep 1 all wheat stocks were reported as 1,855 million bu, which is below estimates of 1,913 million bu and below last year’s Sep 1 figure of 2,105 million bu

• ABIOVE, the Brazilian Vegetable Oil Industries Association, has in its latest forecast pegged the 2013/14 soybean crop at 86 million mt, an increase from 81.6 million mt year on year. Exports are also seen higher at 44 million mt, which would be a 2.5 million mt increase year on year.

• In other news we are picking up on reports of the planting delays in Russia and Ukraine becoming more serious with persistent cold and wet conditions. Some areas are reported to have received as much as 4-6 times the normal rainfall, and field conditions have beed described as “atrocious”. At the end of last week Russia had achieved grain plantings of 7.6 million ha, which represents 46% of the potential planted area, and compares with 11.4 million ha at the same time last year. In Ukraine the planting pace is slower with only 25% of the planned area sown. The significance of this news is greater in the region due to the northern latitude and reduced period available for crop establishment and development. Late sown crops have poor foliage and root system development, which can reduce winter hardiness and lead to greater susceptibility to winter kill as well as reduced tillering (hence lower yield) in surviving crops. For the region to produce to its capability will require an extremely swift change of weather pattern to enable planting to continue and crops to establish prior to onset of cold winter conditions.

To download the weekly update as a PDF file please click on the link below:

Weekly Update 27 September 2013

Our weekly fund position charts can be downloaded by clicking on the link below:

Fund positions

• CBOT grain markets saw a day of consolidation following Wednesdays strong performance and the soybean market was the subject of some profit taking. There was little in the way of fresh news (once again) and it appears the trigger for gains in grain were based upon fears over the Argentine wheat crop weather, the possibility that China may need further supplies, and Russia’s intervention purchasing. None of these are “fresh news” and prices rose in what appears to be thin volumes, hence our view that the rally will be short lived, and provides a selling opportunity.

• The USDA released its weekly export figures as detailed below:

Wheat: 620,200 mt, which is within estimates of 500,000-700,000 mt.
Corn: 640.100 mt, which is above estimates of 400,000-600,000 mt.
Soybeans: 2,826,300 mt, which is above estimates of 2.300,000-2,800,000 mt.
Soybean Meal: 246,700 mt, which is above estimates of 95,000-230,000 mt.
Soybean Oil: Minus 300 mt (as a consequence of cancellations), and is below estimates of 10,000-20,000 mt.

• Brussels has issued weekly wheat export certificates for 471,238 mt, which brings the season total to 6,470,103 mt. This is above last year by 2.768 million mt (74.8%).

• CBOT markets, and European grains, are all trading in positive territory tonight as wheat leads the way forward. Technical triggers, namely trading above the 50 day moving average, have stimulated fund buying and this has lifted corn and the soybean complex to higher levels. Added to this there are concerns over recent Argentine frost and the potential for further demand from China (estimated at a further 1 million mt above existing commitments) which the bulls have taken to heart. Recent news that Russia is shortly to embark upon an intervention purchase programme also lent another degree of support to the positive tone. The final bullish note comes from news that Brazil may add to its waiver of import tax upon non S American supplies of another 600,000 mt of wheat, this is more than likely to be of benefit to US hard red wheat, hence supportive.

• In Russia, the AgMin reported that 76% of their wheat area has been harvested with output at 46.9 million mt. Whilst it is wrong to extrapolate this information into final output, we felt duty bound to do so! The answer, for those interested, reaches 61.7 million mt – however, before becoming too excited, it is important to remind that yield data to date is unlikely to be replicated on remaining acreage (unfortunately).

• Reuters crop forecasting arm, Lanworth, today updated their forecasts with 2013/14 global corn output increased 7 million mt to 949 million mt; Brazil is forecast to account for 75.9 million mt and Argentina 28.2 million mt. Their latest global soybean output numbers for 2013/14 stand 3 million mt higher at 284 million mt, Brazil accounting for 88.3 million mt and Argentina 56.9 million mt.

• To put the other side of the equation, early US corn yields continue to impress although the pace of progress is behind hoped for levels, but with positive weather prospects in the near term. Soybean harvest data is still to early and too scant to suggest any sort of trend however, initial numbers are encouraging. On the back of both corn and soybean new crop availability the previously strong cash basis continues to weaken as buyers back off and await supplies coming to them rather than chase availability.

• We find ourselves watching a seasonal “cat and mouse” affair which will continue to unfold in coming weeks.

• CBOT wheat, at a $2.10 premium to corn (basis Dec ’13) seems a bit strong to us, but that is where it closed tonight as corn closed lower and wheat, along with soybeans and meal, closed a touch higher. The overnight crop ratings, which showed corn gaining 2% in the good/excellent category (to 55%) and soybeans remained unchanged at 50%. Add the crop rating to encouraging yield data and we see selling pressure although the 13 August low $4.45¾ (again basis Dec ’13 contract) has still not been breached – yet!

• Corn harvest in the US is close to 10% and gathering pace, and soybean harvest is only just getting going but is expected to pick up speed this week if weather remains favourable.

• Other news is thin on the ground again, it is expected that Russia will begin its intervention purchasing, supporting domestic values and potentially taking them out of their competitive export position.

• In the latest wheat tender, this time by Iraq, offers were in a massive range; from $310 (Ukraine) to $395 (US) on a C&F basis. This range highlights the competitive (or not!) nature of global trade today.

• Monday dawned with markets showing marginal declines in what can only be described as lacklustre trade. As the day has worn on some short covering has allowed levels to rise, but marginally. CBOT corn (Dec ’13 contract) has had a bash at testing its recent lows set in the middle of August but has not quite pulled it off (yet).

• The next “trigger” which may move prices could be next Monday’s September stock report and the following USDA October crop report on 11 October. In the absence of any new news, it will be actual yield data which will drive price direction in coming days.

• We make little apology for our brevity, which is driven by lack of real news.

To download the weekly update as a PDF file please click on the link below:

Weekly Update 20 Sep 2013

Our weekly fund position charts can be downloaded by clicking on the link below:

Fund positions

• The anticipated end to US QE3 has failed to materialise and the ensuing drop in the US$ led to a sharp short covering rally which has pushed equities, metals and energies higher along with ags. The dollar induced rally will be, we expect, short lived as the US harvest looms large and the US export market look uncompetitive in the global context.

• Early US harvest data is providing good news as yield data is exceeding expectations in both corn and soybeans. Whether this trend will continue as harvest moves north remains to be seen.

• The USDA has today released its weekly export figures as detailed below:

Wheat: 701,900 mt, which is above estimates of 500,000-650,000 mt.
Corn: 437,400 mt, which is below estimates of 450,000-650,000 mt.
Soybeans: 923,300 mt, which is above estimates of 650,000-750,000 mt.
Soybean Meal: 46,600 mt, which is below estimates of 100,000-230,000 mt.
Soybean Oil: 20,600 mt, which is above estimates of 5,000-15,000 mt.

• Stratégie Grains today reduced their estimate for UK bioethanol output based upon the slow startup of the Hull based Vivergo plant. Consequently, their estimate for domestic wheat consumption in bioethanol production is similarly reduced (by 75,000 mt) to 870,000 mt in the 2013/14 season.

• Brussels granted wheat export licences totalling 589,335 mt bringing the season total to close to 6 million mt. This is 2.7 million mt ahead of last year’s total (82.9%).

• Late news saw Reuters reporting a cut in Argentina’s 2013/14 wheat acreage to 3.4 million ha, from 3.9 million ha previously, as a result of dry conditions. Corn acreage was also anticipated to be reduced, by nearly 7% year on year, at 5.7 million ha.

• CBOT closing prices saw soybeans and meal lower and the grains closing higher, unwinding of spread trades would seem the likely cause.

• Today has once again been interesting with the US soybean market again giving little credence to what at first appeared to be bullish news, the first “real” news in some time, and placed more importance upon the more bearish fundamentals. It seems that the looming harvest and availability of physical supplies is having more of an impact upon prices than the FSA’s reported increase in abandoned spring plantings caused by the wet weather. The implied knock on effect is one of a reduced harvested acreage and lower output. Offsetting this is the latest, wetter, weather which has created mixed opinion on whether or not here will be any benefit to soon to be harvested crops.

• It remains our view that soybean prices are overpriced, particularly in relation to corn and other oilseeds (sunflower seed especially). There is a supply pressure particularly from Eastern European farmers who have a significantly reduced storage capacity when compared to their S American and US soybean farming counterparts, which ensures that their crop reaches market early in the season. Prices for rapeseed (and canola) still appear to be looking for a bottom and with news that the Canadian crop could yet exceed earlier estimates of output potentially adds to downward price pressure.

• Yesterday Informa Economics reduced their forecast for 3013 US corn output to 13.8 billion bu from 14.013 last. They also lowered their estimate for the US soybean crop to 3.22 billion bu from 3.239 last estimated some 11 days earlier. The reduced forecasts were attributed to acreage adjustments following release of the FSA data together with their update on yield.

• Reuters commodity forecasting arm, Lanworth, today raised its US corn output estimate slightly to 13.843 billion bu with a yield of 152.9 bu/acre. They attributed better projected yields in some states to their upgrade. For comparison the USDA’s latest estimates are 13.843 billion bu for corn and 3.149 billion bu for soybeans.

• Of interest is the news that Brazil has purchased (unconfirmed) two cargoes of wheat from Poland. The logic of ongoing purchases of US wheat at significant premium prices has been questioned by us in the past, and the obvious question is, “how much volume can this become for EU exporters before prices align across the Atlantic?”

• UK wheat imports to start the 2013/14 season were at their fastest pace for over 20 years with 328,500 mt imported in July. Early purchases amid poor crop prospects and a delayed harvest were probably the principle cause of the increased tonnage. In addition it is likely that millers decided to secure quality supplies to ensure suitable grists were available pending confirmation of domestic quality. Questions are being raised as to the possibility (???) that the UK will ultimately be an exporter of low grade milling wheats later in the season.

•  Today’s firmer opening prices gave way to lower levels this afternoon as the soybean complex led markets down. Markets would appear to have had difficulty in digesting FSA data and how the USDA’a NASS (National Agricultural Statistics Service) is likely to interpret the data.

• The 2013 prevented corn planting figure was reported as 3.573 million acres with overall plantings including failed acreage at 91.428 million. Soybean 2013 prevented planting acres were reported at 1.687 million acres with overall planting including failed acre at 74.659 million acres. Initial reactions suggested that a bullish soybean market could see the $14/bu price level being retested although this has not followed through in today’s market.

• US weather has seen more rain falling and forecast, which is splitting opinion as to whether it is too late or whether it will benefit the soybean (and corn) crop given the late development and harvest. If nothing else, the “gap lower” on yesterday’s opening prices has been followed through in today’s market. It appears that the bulls have little in the way of fresh news to feed them and, as we all know, an unfed bull tends to lead to declining prices!

• In other news today, Oil World reported their forecast for record global rapeseed output at 70 million mt based upon higher Canadian and EU production. Global sunflower seed is also forecast higher at 40.2 million mt, a 13% increase year on year, with Russian and Ukraine output accounting for 18.6 million mt. Global palm oil production was forecast to grow to 58.85 million mt, an increase of nearly 2.8 million mt. Finally, Brazilian soybean plantings are slower in Mato Grosso as farmers await rains but a record area is still forecast and farmers want to plant as soon as possible in order to get the follow on corn crop into the ground.