• Markets are trading lower in subdued volume as traders shun additional risk prior to the New Year break. S American weather continues to improve and US DDG’s continue to fall in price by over $20/ton following China’s rejection of material following the discovery of the non-approved GM event, MIR 162, in a number of containers. New trade to China is currently non existent and material will have to find new homes. The additional supplies will reduce US domestic demand for soybean meal and there is evidence of a weakening cash basis as a consequence.

• It is interesting to note the price of soybeans, in relation to corn, is near historic highs. Soybean growers the world over should take note, particularly as the Brazilian harvest is getting under way.

• We would anticipate further liquidation of long soybean positions in advance of the USDA’s January report as expectation of additional soybean and corn yield is a very real threat.

• We would like to thank all our subscribers for their interest and patronage during 2013 and wish one and all a safe, happy and prosperous New Year.

• A quiet day as expected in the run up to the Christmas holiday break. EU wheat futures did not follow CBOT lower and closed a touch higher.

• CBOT soybeans closed lower Monday evening despite higher early trade, news of rains in Argentina seemed to trigger the selling.

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

Weekly Update 20 December 2013

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

Fund positions

• We saw lower levels for much of yesterday, particularly is soybeans and meal, as liquidation continued although later on the market turned a touch firmer as support was found in some short covering and profit taking. One thing was clear, and that is the overall lack of direction which seemed to underpin trading and highlighted any real market news or information upon which direction could be found.

• In corn the market rallied a touch on short covering triggered by better than anticipated export demand. Wheat trade was mixed but ended slightly lower once again; exports were above estimates and news that Australia and Canada may have even higher output all added to pressure.

• Brussels issued wheat export licences amounting to 840,137 mt, which brings the sea on to 14.029 million mt. This is just over 4 million mt (40%) ahead of last year’s volume at this stage of the season. This level of exports adds further validity to a season total in the order of 26 to 28 million mt.

• US weekly export figures were announced as follows:

Wheat; 659,100 mt, which is above estimates of 300,000-400,000 mt.
Corn; 872,200 mt, which is above estimates of 550,000-750,000 mt.
Soybeans; 495,800 mt, which is below estimates of 700,000-900,000 mt.
Soybean meal; 77,100 mt, which is below estimates of 150,000-300,000 mt.
Soybean oil; 27,000 mt which is within estimates of 10,000-30,000 mt.

• Soybean and meal export levels were both well below expectations and are potentially reflecting not only the time of year, but also a concern that cancellations will begin to appear as the Brazilian harvest approaches. Any recent S American weather concerns which were lending support in recent days appear to have evaporated and we do not see much in the way of bullish input in coming weeks.

• Wednesday was a “red” day with losses both sides of the pond. CBOT soybeans finally gave in to the bears as the bulls failed to decisively breach $13.50 (basis Jan ’14) despite having attempted the level a number of times. As a consequence we now have a “bearish engulfing pattern” on the chart, which could pave the way to lower levels as we have been suggesting (for some considerable while). The next target is the open chart gap at $12.92½ (again basis Jan ’14 electronic).

• News that China has rejected 600,000 mt of corn as a result of positive tests for non-approved GM presence (MIR 162) since mid-November added little to any enthusiasm. US officials have urged China to speed up the approval process; we continue to think there is a connection with the record corn harvest in China – but we have been called cynical on previous occasions!

• CBOT wheat made yet another contract low (Mar ’14) and funds reportedly sold once again as there was an absence of any supportive news. In Argentina there has been a suggestion that the government is about to release 1.5 million mt of export licences (which were paid about eight months ago!). Despite that, Brazil purchased a further 50,000 mt of US hard red wheat and continues to pick off Uruguayan because they continue to worry about Argy availability.

• Informa Economics updated its 2014/15 US acreage estimates and lowered its outlook for soybeans to 81.929 million acres, down from 83.814 last, however this would still be a record planted acreage if achieved. Output from this area, at trend yield, and consumption at current levels would leave a large surplus indeed. The potential price implications should not take much calculation. Informa’s corn estimate was 91.846 million carers, an increase from 91.546 last. Winter wheat was estimated at 42.9 million acres, down from their last estimated 43.1 million acres.

• The US’ Federal Reserve has announced a reduction in their bond purchase programme to $75 billion per month, a $10 billion decline. It added that positive signs in the employment market  and an improved outlook were in large part a factor in the decision. A commitment to longer term low interest rates was also noted.

• Once again we saw Egypt’s GASC return to the market, this time for wheat for late Jan ’14 shipment. The successful  bids were made by Romania (again) and Russia, each securing 60,000 mt. Prices were about $6 to $7 higher than last week, basis C&F. French offers were some $8 to $10 higher, German even more expensive and the one US offer was good value on an FOB basis but freight killed it.

• Markets staged something of a “Turnaround Tuesday” with soybeans leading the advance, corn hot in pursuit and wheat failing to cross the gain line. To be fair our description suggests bigger moves than really took place in CBOT, these were in reality relatively small and reflect limited appetite at present.

• Suggestions that Argentine weather may be too hot and possibly drying too fast and that parts of Brazil are too wet lent a touch of support though it is our contention that it is possibly a little too early to get overexcited about adverse conditions in S America just yet.

• The week started in quiet trade with fears over Chinese corn rejections, and potential DDG rejection, continuing to overhang the market. Wheat pressures came from improved snow cover offering protection in the US. The soybean market started the day lower, probably in something of a  show of solidarity with the grains, despite today’s NOPA crush data which was expected to be high at 161.3 million bu.

• In crop estimates released today we have seen the Russian AgMin put their 2014 grain crop 5 million mt higher than last forecast at 95 million mt, of which wheat would account for 55 million mt. COCERAL increased their estimate of the 2013 EU soft wheat crop from 135.2 million mt to 135.86 million mt and reduced corn by 600,000 mt to 64.78 million mt. Favourable conditions, I.e cool temperatures, a crop which got off to an excellent start and little in the way of weather threats on the horizon all conspire to make next season’s crops look good right now.

• The week looks destined to be quiet as market participants head into the Christmas and New Year holiday season, risk appetite diminishes and new money awaits the new year.

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

Weekly Update 13 December 2013

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

Fund positions

• It has been a down day today in soybeans and products, corn and wheat in Chicago as well as EU grains. Volume has been uninspiring, presumably for the reasons we suggested in our last update. S American weather continues to look favourable and values for soybean meal in China decline. Technical pictures fail to inspire and look bearish adding to the negative sentiment.

• US weekly export figures were released today as follows:

Wheat; 382,900 mt, which is within estimates of 300,000-500,000 mt.
Corn; 804,800 mt, which is above estimates of 600,000-750,000 mt.
Soybeans; 1,522,400 mt, which is above estimates of 750,000-950,000 mt.
Soybean meal; 83,000 mt, which is below estimates of 100,000-200,000 mt.
Soybean oil; 2,400 mt, which is within estimates of 0-30,000 mt.

• Brussels granted yet another massive week of wheat export certificates with 814,151 mt, which brings the season total to 13.188 million mt. This is 3.763 million mt (39.9%) ahead of last year.

• In the US a group of senators has proposed elimination of the ethanol mandate which has not added any support to corn prices. They suggested that mandated ethanol inclusions both escalate food and feed prices as well as harming the environment. Clearly the proposal will face a significant battle to progress very far but is a cautionary flag which should not be ignored totally.

• Without doubt we are in interesting and potentially changing times.

• Today appeared quiet in the aftermath of Tuesday’s USDA report and the “holiday season” looms large. As we know, month end, quarter end and year end, all of which occur in a few short weeks, tend to lead to length in positions being reduced as money is withdrawn from markets to pay dividends, bonuses and the like. New or increased positions are unlikely before the New Year.

• Egypt tendered for wheat once again and secured 300,000 mt, 180,000 mt from Romania and the remaining 120,000 mt from France. No Russian or Ukraine offers were made despite additional load ports being added to the list, and the premium paid for French was as large as we can remember at around $8.50 on a C&F basis. Also of interest was the fact that no US offers were made. It looks very much as though both Russia and Ukraine are now done for the season and, given last week’s Romanian cancellation, they may be getting close to the bottom of the barrel. Potentially we are looking at a battle between France, Germany and US supplies to see Egypt through to new crop.

• The GM issue in US corn arriving in China continues to rumble on. A further cargo has been blocked and three more could potentially be barred after further positive tests have detected MIR 162. The issue appears to be developing into a full blown trade dispute rather than an approval/non-approval issue as it is suggested by some that there is a focus upon particular sellers, although it must be stressed that this is unconfirmed. Arriving vessels are said to be delaying discharge until tested and the cargo approved in order to reduce possible cost implications should rejection occur. News that China is anticipating a record corn crop and a surplus as a result of reduced consumption by the animal feed sector presumably have no bearing upon the issue!

• Staying with China, yesterday Deutsche Bank warned of a change in farm price support policy in China, which may have potentially significant global price implications. The policy change could see a reduction in agricultural commodity stockpiles created by the minimum state procurement values for the likes of corn, pork and wheat, which bear little relationship to international values and create market anomalies and their knock-on effects. The suggested policy change could well see a switch away from price setting to insurance incentives or direct payments to farmers. The change, if implemented, could see domestic prices move more in line with international levels and see a reduced incentive to import.