• Whilst the US is shut today and turkeys are scarce the EU continued to trade with limited input to influence direction of prices. Argentina’s 2013/14 wheat crop was estimated by the government at 8.5 million mt, down from 8.8 million mt when trade expectations were in the opposite direction. As a consequence MATIF wheat took cover and ran for the hills settling higher. The government are using their figures as a base for export policy whilst the trade are looking for 10 million mt plus.

• Brussels issued a further big week of wheat export licences with 596,987 mt bringing the season to 11.77 million mt, which is 3.7 million mt (45.8%) ahead of last year. Extrapolated numbers bring us to around 30 million mt annualised exports.

• The latest IGC numbers, released today, show the global 2013/14 wheat crop at 698 million mt an increase of 2 million mt month on month and global corn also up 2 million mt month on month at 950 million mt.

• Markets resume tomorrow but are expected to be thin on the ground as many players will extend their holidays into the weekend.

• Today marked (yet) another wheat tender by Egypt’s GASC who purchased only 60,000 mt for late Dec ’13 shipment, this time from France. It would appear that the one US offer, which was for late Jan ’14 shipment, could well have been “in the frame” price wise to the tune of nearly $3.50/mt on a C&F basis. Russian offers amounted to a big fat zero, one Romanian offer that seemed to be cheaper but it appears there was an issue over freight which precluded the confirmation of business. Otherwise there were a number of additional French offers all at higher levels.

• Markets started the day higher, wheat receiving support from the Egyptian tender and this position has been maintained throughout the day. The soybean complex has moved lower as we approach the close and markets shut for Thanksgiving. Traditionally we see markets bullish into this particular holiday and we could well be setting or have set a “top” from which prices decline in coming weeks.

• The S American weather outlook remains favourable and there is talk that some US soybean export sales are being cancelled (or washed out) or switched to Brazil as forward prices begin to reflect cheaper levels. Both Brazil and Argentina have received beneficial rains and temperatures in Argentina look to be moving towards normal and crop prospects continue to look good.

• The technical outlook for soybeans has reached an extremely interesting point; Jan ’14 prices moved up to $13.41 today, the upper end of the current price channel stands at $13.42¾ and represents strong resistance. Prices today closed $0.23 below today’s resistance and adds to our confidence level on this specific point. Recent buying has created the price rally which began at $12.47 and we would now hope to see follow through selling to prove the “top”. Clearly we will either be proved right (or not) in coming days and weeks.

• As we approach the close this evening CBOT markets are nearly all trading lower in true “turnaround Tuesday’ style.The holiday shortened week already appears to be taking its toll as volumes appear to be less than normal.

• News that China has cancelled some 300,000 mt of US soybean sales has had a negative effect on the market despite additional new sales being reported. It was not long ago that we hinted at the possibility of cancellations as the “Armada” of soybean vessels approached Chinese ports. Added to almost ideal S American growing conditions, assuming the plague of caterpillars is dealt with, there seems more to encourage the bears than the bulls right now.

• Front month (Dec ’13) soybean meal has jumped up sharply as short covering has been a feature and the first notice day on the contract fast approaches. Once the exodus of shorts is done we would expect some “normality” to surface and price trends to move closer to our view, which is lower for those who may have forgotten!

• US crop conditions, in their last report until April next year, showed winter wheat rated as good/excellent 1% lower at 62% much as expected and was 93% emerged above the five year average of 89%. Corn was reported to be 95% harvested, which is above the 91% five year average.

• Key to price action moving forward is what level will Chinese demand for soybeans be, and when will it switch to S America. Next on the agenda will be can S American logistics cope with the demand – and this will be key particularly in the aftermath of last season’s vessel line up which extended to many, many weeks.

• The US is gearing up for its annual Thanksgiving holiday break and trade has already exhibited signs of reduced volume.

• EU wheat saw quite some volume of export trade over the weekend with a number of destinations seen as active buyers including Iran, who following their nuclear deal may well become a larger feature in coming months with some suggesting their requirements as high as 8 million mt rather than the USDA’s projected 4.5 million mt. On the bearish tack, India’s latest export tender could well surprise to the upside in terms of tonnage. Iraq purchased 200,000 mt of wheat from Canada (150,000mt) and Australia (50,000 mt).

• The French corn harvest continues to struggle in wet weather and lends unwelcome upward price pressure to the nearby marketplace.

• The ongoing pressure on prices is clearly driven by strong nearby cash demand from users (crushers, exporters fulfilling commitments, China etc) who were faced with tight supplies as the last crop year closed. The duration of the pipeline fill has come as a surprise to many, including ourselves. We believe that Q1 2014 will see global supply pressures take the lead in terms of market direction and prices fall, as we have suggested previously. Rallies remain, in our view, selling opportunities.

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Weekly Update 22 November 2013

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• The US has reported its weekly exports as follows:

Wheat; 618,100 mt which is above estimates of 375,000-475,000 mt.
Corn; 982,800 mt which is above estimates of 750,000-950,000 mt.
Soybeans; 1,376,400 mt which is above estimates of 650,000-850,000 mt.
Soybean meal; 116,000 mt which is below estimates of 200,000-350,000 mt.
Soybean oil; 95,800 mt which is above estimates of  30,000-80,000 mt.

• The higher than anticipated exports have left CBOT markets pretty much in positive territory today.

• S American weather continues favourable particularly in Brazil where rainfall is close to normal with temperatures near to below normal. These conditions combine to provide what has been described as almost perfect weather for corn pollination and soybean development. This, with Argentina’s soil moisture described as adequate to surplus, leaves us feeling very comfortable with the potential which exists in the continent.

• In Australia both the grain and oilseed crops have suffered a setback with less than favourable conditions and reported disease issues. Western Australian wheat has received unseasonable rains whilst eastern regions have had frosts to contend with. As a result there have been concerns over both yield and quality which will take time to unfold. Western Australia’s canola (rapeseed) crop is also reported to have heavy sclerotinia infection which can impact yields, possibly as much as 0.5 mt/ha.

• Brussels has again issued another big week of wheat export licences with 638,353 mt granted. The cumulative total now stands at 11.176 million mt, which is 3.55 million mt (46.6%) ahead of last year’s total.

• MATIF wheat in front month positions managed to peak at close to six month highs as farmer selling slowed to a crawl. Forthcoming aid payments to French farmers and their locally held view that they are the only holder of wheat left in the world has strengthened the feeling that there is little pressure for them to sell in the near term, hence today’s peaking prices.

• Markets have been relatively quiet today with CBOT trading either side of unchanged with losses in wheat, corn and soybean meal at the close. MATIF wheat rose on the back of € weakness despite a weaker cash market in the aftermath of yesterdays Egyptian tender and statements to the effect that France was “too expensive”.

• S America continues to look good from a weather perspective, with Brazilian rains at or above normal in the coming week or so and the next two weeks looks dry in Argentina with rains forecast to follow.

• The Reuters forecasting arm, Lanworth, released (another) updated forecast which suggested that 2013/14 global soybean output would be 1 million mt below their last figures at 289 million mt, and global corn output for 2013/14 would be 5 million mt higher at 963 million mt. In the same release China’s 2014/15 corn output was viewed at 220 million mt.

• There appears to be little in the way of fresh news.

• Overnight news saw US crop conditions reported with winter wheat rated as good/excellent dropping 2% to 63%, which is well above last year’s 34%. The fully planted crop was reported to be 89% emerged, again better than the five year average of 85%. Soybeans are 95% harvested and corn 91%, both figures at, or very close to, trade expectations.

• Across Europe bio-ethanol producers are “making hay” whilst the sun shines, or more properly, taking advantage of lower grain prices and the imposition earlier this year by the EU of anti-dumping duties on imports of US bioethanol to boost output and make good margins – for now. Their outlook for the future is less rosy as ethanol prices look set to decline into the winter period. One tangible sign that things have improved is the announcement by Ensus of their restart ing production (once again). Quite how the future for EU bioethanol will pan out will be interesting to monitor as production capacity turns on and off, and blended ethanols are imported in an effort to bypass duties. In addition Brazil’s exports to the US market may well look to the EU in the wake of last week’s EPA announcements.

• Egypt’s GASC has once again made a wheat tender for mid-December shipment with Russia securing the 120,000 mt award in what many are suggesting may be their last. This was their first sale since September. The successful sale prices was a touch higher than that of last week’s trades. There were no offers from either Ukraine or Romania, and French offers (for the specification) were some $6 to $10 higher than last week. Many assumed that France would be the origin of choice this time around, but clearly this was not the case.

• India’s recent sale of wheat would appear to have achieved better than their recently lowered floor price might have suggested with 340,000 mt sold at an average price reputed to be $284/mt. There is an expectation that another tender is to be announced before long.

• In S America Argentina’s AgMin have reported their soybean plantings to be 26% complete, 4% behind last year and Brazil is 2% ahead of last year at 69% complete. Reports that Brazilian farmers are considering switching their traditional safrinha, or second, crop away from corn to soybeans have been confirmed to us today. Clearly this would provide further soybean output and a reduction in corn production, but is not without problems, the most significant being potential for disease build-up as soybeans follow soybeans rather than the more traditional corn following soybeans.

• CBOT soybeans and meal closed lower tonight whilst the grains, corn and soybeans made gains to close higher. Soybean prices are approaching key support levels, which if breached will likely pave the way for further selling pressure particularly in the face of the current growing conditions in S America. The grains held in positive territory on near term cash buying which lent support but this, we continue to believe, will be short lived in the face of globally growing supplies.

• The week has started with us digesting Friday’s late news from the US EPA (Environmental Protection Agency) that the new bio-fuel mandate proposal is to change. The change encompasses a reduced mandate for al bio-fuels to 15 to 15.2 billion gallons, around 16% less than the 2007 US energy legislation agreed volume of 18.15 billion gallons. Probably the biggest single item was the reduction from the agreed 3.75 billion gallon advanced bio-fuel blend in 2014 to a much reduced 2.0-2.5 billion gallon blend volume. Whilst not formally agreed, it appears that spring time will mark enactment, and the US bio-fuel industry has reached maturity.

• Outside of the advanced bio-fuel mandated range, the balance which is traditional corn based ethanol, will range from 12.7 to 13.2 billion gallons, compares with previous targets of 14.4 billion gallons – an 8.3 to 11.8% reduction! The outlook for corn prices in 2014 and planting prospects will become extremely interesting to say the least.

• In late trading corn prices declined over 2% to new lows (basis front month contracts) after a gap lower opening. The technical picture for corn looks far from bullish right now. Added to Friday’s news, reports from Reuters that China has rejected a cargo of corn because of unapproved GMO contamination, has done little to bolster prices. Further suggestions that the seemingly incessant demand for both corn and soybeans from China may have peaked has also spooked the market.

• S American weather conditions continue to be seen as broadly favourable, although there is a long way to go before crops can be considered as safe, and this is also weighing on price sentiment.

• On a slightly contrary tone, results from the latest Indian wheat tender would appear to indicate trade willingness to pay over and above the $260.00/mt floor price although final results are still awaited.

• Finally, the UK’s London wheat futures market has seen tenders submitted against 1,229 contracts against the November contract. This is the highest number seen in recent years, most in the East and South West and the only conclusion which can be logically drawn is that the futures market represent the best market. Friday 22 November marks the end of the Nov ’13 contract and its tender period.

• The week has come to a close with CBOT markets all closing lower, sharply so for soybeans and meal – at last say some! Front month (Jan ’14) soybeans are back below $13/bu and Dec ’13 soybean meal back below last Friday’s closing prices. Dec corn saw its fourth consecutive lower close, again closing below last Friday’s level. Dec ’13 wheat again closed lower reaching levels not seen since mid-September.

• US weekly export sales were reported as follows:

Wheat; 288,800 mt which was below estimates of 350,000-550,000 mt.
Corn: 1,202,800 mt which was above estimates of 800,000-1,000,000 mt.
Soybeans; 909,100 mt which was within estimates of 900,000-1,200,000 mt.
Soybean meal; 283,200 mt which was within estimates of 200,000-350,000 mt.
Soybean oil; 7.200 mt which was below estimates of 25,000-50,000 mt.

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Weekly Update 15 November 2013

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