• Well, at last, the US has agreed to raise the federal limit taking “brinkmanship” to its extreme as national default loomed large. The US has raised its $16.7 trillion debt limit and (to coin a phrase used many times today) kicked the tin along the road until early February when many believe the same issue will rear its head once again. Regardless, we are now back on a more even keel, data will begin to flow once again and we will n to be complaining about flying blind – apart from the fact that the USDA’s October report is now formally not going to be published, but we expected that one yesterday.

• It seems that President Obama’s healthcare bill has emerged relatively unscathed and the Republican House Speaker is claimed to have said, “We fought the good fight, we just didn’t win.” Senator John McCain, the 2008 Republican Presidential nominee stated that (this was), “one of the more shameful chapters I have seen in the years I have spent here in the Senate.”

• Away from political commentary, which is not our domain, markets found some support on a weaker US$ in early trade and CBOT markets finally settled in the green with soybeans and meal finding the best gains. Reuters reports continue to supply positive harvest data with soybean harvest approaching the halfway mark and corn around a third complete. The reported yield data on both crops continues to be positive with some very good yields reported, and the trend appears to be one which suggests that the most up to date overall yield will surprise to the upside. We look forward to formal confirmation of this in due course!

• Brussels weekly export licences saw a marked reduction, for the first time this season, with 295,469 mt bringing the season total to 8.39 million mt which is 3.179 million mt ahead of last season (61%). Interestingly, EU corn imports are higher that expected at more than 400,000 mt due to the discount which Black Sea corn has in relation to mainland EU wheat. Evidentially we see May/Aug ’14 corn purchases being made by UK feed producers as corn is trading at a discount to wheat on a delivered basis.

• Some good news emanated from Ukraine today as their AgMin reported that winter planting losses would be only 0.5 million ha rather that the formerly suggested 1.5 million ha, they also added that any crop shortfalls would be in barley rather than wheat.

• In summary, we do not see major threats to supplies and continue to view price rallies as selling opportunities, our stated preference to consumers is not to chase prices higher but to exercise patience and wait for lower levels.

• The good news today is that we have seen reports that the US Senate has reached agreement (at last) to reopen the Federal Government and restore some normality to daily activity. On the other hand it would seem likely that the USDA will cancel (late) publication of the October reports purely because the November report is due to be published on 8th November.

• US weather continues to look dry for the coming fortnight with limited frost whilst in Brazil the next two weeks appear to offer favourable rains which will encourage planting progress, particularly in the north where delays have been reported. The Southern Russia and Ukraine weather is forecast warmer which will aid late planting and early crop development.

• Reuters published a story (and we choose this description as opposed to “report”) that China’s COFCO (China’s largest food processing, manufacturer and trader) estimates wheat imports to be no more than 5 million mt in 2013/14. Following what is believed to be some substantial early season crop damage many analysts believe some 10 million mt will be a more realistic import figure, and if we add up US, Australian and French sales commitments to date we arrive at a figure in excess of 6 million mt – hence our opener to this paragraph!

• Lanworth have updated their 2013/14 crop estimates with global wheat and soybean output unchanged at 706 million mt and 286 million mt respectively. Global corn was estimated 1 million mt lower than a month ago at 952 million mt with the Brazilian contribution 300,000 mt down at 73.8 million mt.

• CBOT soybeans (and meal) and wheat closed in the red whilst corn made some gains today. The key to corn’s contra movement is likely due to some short covering and unwinding of spreads amid positive yield results which continue to materialise. The Reuters report that India could be about to reduce its minimum wheat price to exporters (by up to $40/mt) could well have been a trigger for the drop in Chicago, which was (interestingly) not mirrored in European levels today. If the report proves correct this would allow Indian wheat to be more competitive in global markets and reduce the current level of stocks in India, which are becoming an almost embarrassing issue with reported government holdings in excess of 36 million mt. This level is substantially above the target stockholding of 11 million mt.

• There has been some improved weather news from Russia and Ukraine where dryer conditions have allowed winter plantings to reach 64% and 73% respectively. Wheat and corn prices in the region have continued to rally potentially as farm selling slows due to fieldwork pressures as farmers rush to finish corn harvest and plant wheat. It would appear likely that the total planned wheat acreage will not be fully seeded and as a consequence increased spring plantings of corn and sunflower seed will take up some or all of the area.

• The US harvest is progressing north, and the latest Reuters forecast, in the absence of any other official data, suggests that corn is at 31% complete, up from 20% a week ago, and that soybeans are 45% done, compared with 22% last week. Yield data continues to remain above earlier expectations although we will have to wait for official confirmation in coming months. The US debt issue has (still) not been resolved, and it looks like it will be an 11th hour deal if a default is to be avoided.

• There are forecasts calling for colder, and potentially freezing, temperatures later this week in the central US although it seems crop maturity has advanced sufficiently to avoid significant crop damage.

• Internationally, it appears that China is still active in the soybean procurement arena whilst their crush remains profitable, and it is suggested that they have purchased as far foreword as April ’14 amid concerns that the logistical issues which plagued Brazilian exports earlier this year will be repeated in early 2014.

• Black Sea planting progress remains delayed as late harvesting of corn and sunflower creates a knock on delay with wheat planting. Happily, there is a warmer and drier forecast for the coming week or so which will assist although it remains to be seen as to whether or not “normal” progress will be reached before the weather closes in.

Weekly overview:

• We end a second week without the usual data stream from the USDA as the Federal Government continues in its shutdown, which resulted from budgetary disagreement. This state of affairs continues to hamper trade to some extent with many feeling they are “flying blind”, and there has been a reduction in risk appetite by many.

• The good news is that harvest in the US is picking up pace and reported yields continue to surprise to the upside and this is being taken to heart by traders and appears to be capping rallies. Some growers are reporting record or close to record soybean yields and the weather has remained favourable this week with some 50 to 60% of the soybean acreage expected to have been harvested by the weekend. There is, in the absence of USDA figures, much talk of the US soybean crop exceeding 42 bu/acre and corn topping 160 bu/acre, clearly only further time will prove, or disprove, these numbers.

• On the other hand, we are seeing some strong spot demand for both corn and soybeans as new crop supplies become available and this has provided some slight degree of support to nearby futures contracts.

• It has been rumoured that the US corn based ethanol which is blended into gasoline may have its mandated inclusion lowered in 2014 from14.4 billion gallons to 13 billion gallons. The potential impact upon corn grind for ethanol would be to see a decline from of some 500 million bu, and this was sufficient news to trigger some selling in the market.

• Egypt’s GASC returned to the wheat tender market for the first time in a month, only to walk away from any purchases due to “high prices”, which the market is attributing to a lack of quality supplies from Russia. It is widely expected that they will return to the market place as and when prices ease back. Clearly there is no such guarantee that prices will move in their favour and the key question has to be, “Is there sufficient wheat of the required quality in the Black Sea region to meet the needs of Egyptian buyers?” Should the answer be “no”, then it will likely fall to French exporters to fill the gaps.

• Brussels granted another huge week of wheat export licences, maintaining the record pace of exports, with 866,791 mt bringing the season to 8.095 mmt, which is close to 3.4 mmt ahead of last season (72.4%).

• In summary, we continue to look for further price pressure on both soybean and corn prices as the US harvest progresses. In wheat there is less direct pressure, as Egypt have found this week, and it may well be that we need to see significant pressure from corn prices to trigger a downward trend in wheat prices.

• CBOT wheat, soybeans and meal all closed in the red whilst corn bucked the trend by closing marginally higher. Throughout the day markets markets have traded either side of unchanged possibly indicating the state of mind which traders have in the absence of official data and information. There has been only limited farmer selling in the US leading to consumers bidding up and nearby markets have reacted accordingly.

• In the absence of official US data we are pleased to add Brazilian information provided by CONAB to flesh out tonight’s report: the 2013/14 wheat crop is estimated at 4.77 million mt, down from 4.95 million mt last month whilst corn is seen in the range 78.4-79.6 million mt, down from last year’s 81.3 million mt. Soybean output is estimated in the range 87.6-89.7 million mt, a sizeable increase from last year’s 81.5 million mt.

• Additionally we have Lanworth’s latest 2013/14 crop estimates; world soybean output at 286 million mt, a 2 million mt increase month on month, the US accounting for 3.16 billion bu, an increase month on month from 3.112 billion bu. Their global corn estimate comes in at 953 million mt, a 4 million mt increase month on month of which their US figure is 13.708 billion bu, up from13.483 billion bu last month.

• We continue to hear reported US harvest data exceeding earlier expectation which will no doubt cap rallies for the time being. One final snippet comes from Reuters, who report that an Ohio based ethanol plant which has been idle for five years is to restart next week. The Three Rivers Energy owned plant has the capacity to produce 50 million gallons of ethanol from 36 million bu of corn, and is reported to be taking corn delivery from the middle of next week. Is this an example of reduced corn prices stimulating the ethanol industry in the US?

• I will be travelling for the next two days, in the Republic of Ireland, and anticipate limited internet access. Consequently reports and information may well be limited for which I apologise in advance. I will endeavour to catch up upon my return. At least there seems to be no USDA report to comment upon on Friday!

• In good old “turnaround Tuesday” fashion, we see US markets closing tonight lower as funds decided to sell as harvest data continued to surprise to the upside with better than expected yields. As we have reported previously, harvest pressure appears to be carrying the day (today). We see some wet weather in the US forecast, which will slow harvest progress, but this appears to be limited, and there appears to be limited risk of freezing conditions for the next week or so.

• The US spring wheat harvest has surprised, to the upside, as N Dakota yields hit 46 bu/acre, which equals the 2009 record. Cool summer conditions are reported to be responsible for improved yields.. N Dakota is significant insofar as it is the US’s second largest wheat state after Kansas.

• Closer to home, Stratégie Grains have forecast EU soft wheat imports to decline in 2013/14 to 3 million mt, some 600,000 mt below 2012/13 despite more competitive prices from Black Sea origins. However, the volume available from Russia and Ukraine is unlikely to become a major import threat at this time because of the initial high export volumes seen this season.

• Lack of official data from the “closed” USA coupled with a quiet EU market, which is heading to the European Bourse towards the end of the week, means we will be in for an unsurprising week of lacklustre data.

• Life becomes somewhat more difficult whilst the US remains “closed for business”. The Federal Government shutdown of “non-essential” departments, now in its seventh day due to lapse in funding, includes thousands of crop scouts who are (or rather, were) in the process of compiling their survey data in advance of next Friday’s USA crop report and WASDE (World Agricultural Supply and Demand Estimates) report. Today the department confirmed that the report would not be released. One commentator is quoted as saying, “It leaves the market in a bit of a fog.” something of an understatement in our opinion!

• There have been rumours (unconfirmed) of significant Chinese buying in corn today, which would not be reported as normal due to the government shutdown. Cynics might view this as an “under the radar” stealth raid by Chinese buyers, although we do not subscribe to that particular theory. The rumour has, however, been sufficient to place some degree of support under the grains in today’s trade, where it is reported that Dec ’13 corn volume has reached in excess of 100,000 contracts. Soybeans and wheat have been less active, and it is believed that the lack of data is, unsurprisingly, leading towards a “risk-off” attitude.

• Once again, as a result of the shutdown, we will not be getting updates on crop condition or harvest progress, however, it is estimated that around 20-22% of the soybean crop is harvested and 19-21% of the corn crop gathered. Clearly, the more of the crops which are harvested the less important the reports will become as we will be dealing with actual harvest data rather than estimates and survey derived information.

• In the absence of hard fact we can only report that we continue to hear of Midwest corn and soybean yields continuing to provide a pleasant surprise, being better that previously thought. The prospect of a larger US soybean and corn harvest is looking more and more likely right now. This will place a cap on any price rallies, and we continue to believe these will prove to be selling opportunities when we look back.

• Russian winter grain planting acreage is expected to be smaller this year due to bad weather; rain is expected to curtail overall plantings, including wheat, which is a precursor to reduced exports in 2014 and a potential “pinch-point” for next year’s global supplies. Russian grain exports this year (2013/14) are officially expected to be 20 million mt, of which 9.1 million mt have already been exported in the July – September period. Included in this figure are 7.5 million mt of wheat and 1.2 million mt of barley. Not only is weather an issue, but domestic restocking by the government together with a reported lack of quality wheat, are all expected to lead to less competitive export activity – particularly compared with other Black Sea operators such as Ukraine.

• The Russian news has the potential to pave the way for a continuation of the fast pace of EU wheat exports with the potential for a total tonnage in the order of 26 million mt being freely discussed.

Weekly summary:

• This week’s big news is probably the partial shutdown of the US Federal Government following Congress’ failure to agree a new budget. The Republican-led House of Representatives insisted on delaying President Barack Obama’s healthcare reform, dubbed “Obamacare”, as a condition for passing a bill. More than 700,000 federal employees face unpaid leave with no guarantee of back pay once the deadlock is over. This is the first shutdown in 17 years and the dollar fell early on Tuesday when the news broke.

• The impact upon markets is less than clear, but one thing is sure, and that is that uncertainty is far from helpful. US export data, scheduled for release Thursday this week was not issued, and there are suggestions that the USDA’s October crop report is far from certain to be released on schedule. Under these circumstances, it is likely that a combination of actual corn and soybean harvest data and trade estimates will become the pillar upon which markets will function in the short term.

• The US soybean harvest is beginning to gather pace as it moves northwards and as we continue to hear of better than anticipated yields, it is difficult to argue against a continued bearish pattern particularly in the context of rising overall oilseed output across the globe as a whole.

• In corn too, harvest is well under way, although there is likely to be a weather interruption for a few days, and the market having dropped to below $4.40/bu, basis Dec ’13 CBOT, is now lacking direction, and feels resigned to sympathise with its cousin, wheat. Global importers continue to source non-US origin supplies from both Brazil and Black Sea, both representing better value to the buyer for the time being.

• Wheat has a somewhat less bearish feel to it right now with three key markets (CBOT, Paris and London) all displaying a potentially bullish “double bottom” chart formation in front month contracts, and CBOT has recently gained in excess of $0.50/bu (around 8.8%) in the Dec ’13 contract from it’s contract lows. Brazil continues to look further afield for wheat supplies due to reduced Argentine availability, and both US and Canada appear to be likely origins. Some relief to the wheat market may appear in the form of a forecast weather window assisting the wet weather hit plantings in Russia and Ukraine where progress is currently well behind average. The delay has raised concerns on overall grain output for 2014 and the potential impact upon export availability in the region.

• Brussels has granted another big week (the largest so far this season) of wheat export licences with 757,832 mt, which brings the season total to 7.228 million mt. This is an increase of 2.945 million mt over the same time last year (68.8%).

• In the UK DEFRA have released their latest update (Sep ’13 compared with May ’13) to 2012/13 grain balance sheets, which whilst academic in the historic sense, have relevance insofar as they impact opening stock levels and therefore the 2013/14 balance sheet. For wheat, commercial end stocks rose by 251,000 mt; this was a result of increased imports (407,000 mt) and a reduction in exports (63,000 mt) offset by increased domestic consumption (219,000 mt). Barley stocks also increased, but only by 43,000 mt leaving a combined additional grain stocks total close to 300,000 mt with which to start to 2013/14 season. Both empirical and anecdotal evidence shows that early season import volumes have remained elevated this season as millers looked to imports to ensure sufficiency of supply, particularly in the early part of the season. In the light of latest UK harvest estimates it would appear that the domestic S&D position is not as tight as was first feared.

• Added to the UK’s “good news”, COCERAL’s latest forecast for the combined EU soft wheat crop is 132.5 million mt, an increase of close to 4.5 million mt from their last estimate. This level of output, if realized, would add credibility to suggestions of overall EU exports this season reaching 26 million mt.

• Wednesday this week saw something of an explosion to the upside in Paris rapeseed, caused by news that there is to be an import tax on Indonesian and Argentine bio-diesel with the resultant EU domestic crush growing. This news was sufficient to raise not only Paris, but also Canadian rapeseed and provide some support into CBOT beans. The close in Paris saw the market give back nearly half of the day’s gain, and the remainder of the week has seen little in the way of change.

• In other news, we have today heard that StatsCan have all but confirmed record wheat and canola (rapeseed) crops as September weather boosted already good looking output. They forecast wheat up 22% on last year to a record 33.02 million mt, and canola up 15.9% to 15.96 million mt. Canada is the world’s number one producer and exporter of canola and the number two exporter of wheat.

• In summary, we continue to look for lower levels, particularly in corn and soybeans as the US harvest gets into full swing, and if these materialize would also expect to see further downward pressure brought to bear upon wheat prices.

• CBOT and EU prices have all displayed stronger tones throughout most of the day despite broker, F C Stone Intl, increasing its estimate for 2013 US corn output yesterday. Their forecast output now rests at 14.15 billion bu, an increase from 13.942 billion bu last month; yield is pegged at 158.7 bu/acre, up from last month’s 156.4 bu/acre. 2013 soybean output was also increased month on month to 3.163 billion bu from 3.146 billion bu. Yield was marginally increased to 41.4 bu/acre from 41.2 bu/acre. For comparison purposes, the latest USDA numbers are; corn 13.843 billion bu with a yield of 155.3 bu/acre, and soybeans 3.149 billion bu with yield at 41.2 bu/acre.

• Stratégie Grains have reported on the French corn harvest which is just getting under way, and have estimated output marginally down at 15.526 million mt, a decrease of 80,000 mt from a month ago based upon slight reductions in both acreage and yield. If achieved, output will be slightly behind last year’s output of 15.614 million mt.

• Reuters today announced that the USDA will not be issuing its usual weekly export sales data due to shutdowns in the Federal Government which Congress has yet to resolve. Others are questioning the timeliness (or otherwise) of the forthcoming October crop report – no doubt time will tell on that!

• In the UK DEFRA have released their latest update (Sep ’13 compared with May ’13) to 2012/13 grain balance sheets, which whilst academic in the historic sense, have a relevance insofar as they impact opening stock levels and therefore the 2013/14 balance sheet. For wheat commercial end stocks rose by 251,000 mt; this was a result of increased imports (407,000 mt) and a reduction in exports (63,000 mt) offset by increased domestic consumption (219,000 mt). Barley stocks also increased, but only by 43,000 mt leaving a combined additional grain stocks total close to 300,000 mt with which to start to 2013/14 season. Both empirical and anecdotal evidence shows that early season import volumes have remained elevated this season as millers looked to imports to ensure sufficiency of supply, particularly in the early part of the season. In the light of latest UK harvest estimates it would appear that the domestic S&D position is not as tight as was first feared.

• Brussels has granted another big week (the largest so far this season) of wheat export licences with 757,832 mt, which brings the season total to 7.228 million mt. This is an increase of 2.945 million mt over the same time last year (68.8%).

• Despite what is written above, real news continues to be noticeable by its absence! Global weather seems to be broadly favourable and early US harvest data continues to impress when compared with some of the earlier “gloom and doom”. One fact appears clear right now, and that is that the premium attributed to US wheat continues to grow and will no doubt ration exports to some extent.