• Today’s USDA report, the key information eagerly anticipated today, offered little in the way of either excitement or surprise. US export volume adjustments were made as expected and needed, and focus now turns to the key driver which will be S American weather and crop prospects, particularly size! The January report will now be looming large in everyone’s mind. It is difficult, if not impossible, to see sustained price rallies succeeding unless we see a dramatic change in weather conditions in S America.

• One key factor is that the USDA failed to alter Chinese corn imports despite the MIR 162 issue which has not (yet) gone away. Cargo rejections continue and it has been rumoured today (as we suggested at the weekend) that aggressive DDG testing for MIR 162 is now underway. It is only a question of time before the strain is found. There is speculation that approval may be granted by the end of Q1 2014, obviously there is no confirmation of this at the present time.

• Brazil’s CONAB today raised its 2013/14 soybean output forecast to a record breaking 90.03 million mt and at the same time increased corn output to 78.8 million mt.Their estimate for the wheat crop was also raised by 11% to 5.36 million mt. “Favourable weather”, unsurprisingly, was claimed to be the key factor in the marked improvements across all crops.

• To download today’s USDA report summary as a PDF file please click on the link below:

USDA 10 Dec 13 Recap

• CBOT grains started the week mixed with soybeans and meal taking a stronger turn in advance of the USDA crop report tomorrow.

• In terms of fact based data, it would appear funds were adding to soybeans, meal and corn in moderate volume. China continued to be a buyer of soybeans although the trend would seem to show the buyer’s desire to secure “optional origin” in order to switch to S American product when available. If Brazilian weather plays ball we could well be seeing shipments in the second half of February, which could well reduce overall US shipment volumes.

• S American weather continues to be favourable, dryer in Argentina to assist planting and rains across Brazil to assist soybean crop development. It seems difficult, right now, to imagine anything other than massive S American crops in the coming harvest.

•  Other news has been thin on the ground as the market awaits tomorrow’s USDA report.

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

Weekly Update 6 December 2013

• Hot on the heels of this Tuesday’s GASC purchase for Egypt, from Romania, which we suggested might struggle to get executed, we hear today that the contract has been cancelled by the buyer due to “problems with the seller’s documents”. Apparently GASC declined to comment upon the situation. The fact that front month CBOT wheat is down $0.14/bu (basis Tuesday’s close to midday today) presumably has little to do with the matter!

• In Russia’s key southern wheat producing region conditions have grown dry over the past four or five weeks. Stavropol, Krasnodar, Rostov and Volgograd, which are the four key winter wheat producing districts, have also had subsoil moisture deficit as significant rainfall has been lacking since September. There is an expectation of some 1.5” of rainfall/snow which will ease crop stresses over the next few days.

• Argentina’s crop planting delays have left vegetative development in a worse than average condition according to latest satellite images collected in the latter part of November. Spring planting weather was cold and dry for some time delaying field work and planting and farmers have not caught up. Ministry officials claim that just 44% of corn and soybeans were planted by 28 November; full season, high yielding corn, is usually planted by the end of November although mid season, lower yielding, corn may still be planted through to end February. There are suggestions that farmers may switch unplanted corn acres into soybeans, which may be planted through to 5 January and still obtain high potential yields.

• Rumours of a reduced export tax on Argentine soybeans and products over Q1 2014 continue to circulate. However, getting the farmer to part with his estimated 13 million mt stockpile of soybeans in an effort to generate export sales revenue is proving difficult as fears of Peso devaluation and continued high inflation persist in  having just the opposite effect.

• In a further crop estimate update, Brazil’s AgroConsult has estimated the 2013/14 Brazilian soybean crop at 90.7 million mt, which is an increase from their last estimate of 86 million mt. The corn crop was also estimated higher at 76.1 million mt, an increase from 75.7 million mt.

• Brussels has again issued another big week of wheat export certificates at 600,995 mt, which brings the season total to 12.374 million mt. This is 3.556 million mt (40.3%) ahead of last season’s same date total.

• US weekly export data released today is as follows:

Wheat; 229,200 mt, which is below estimates of 450,000-550,000 mt.
Corn; 593,600 mt, which is below estimates of 850,000-950,000 mt.
Soybeans; 1,160,000 mt which is within estimates of 900,000-1,200,000 mt.
Soybean meal; 130,900 mt which is below estimates of 250,000-300,000 mt.
Soybean oil; 1,400 mt which is below estimates of 20,000-40,000 mt.

• Today’s biggest new was probably the report from StatsCan who released their latest crop estimates which included a record breaking all wheat output for 2013 at 37.53 million mt, which is way above estimates of 33.8 million mt, a 37.9% increase from 2012′s 27.21 million mt. Canola (rapeseed) at 17.96 million mt also set a record and is an increase of 29.6% from 13.87 million mt in 2012. Year on year gains of 10.32 million mt and 4.09 million mt for all wheat and canola (rapeseed) respectively are clearly significant and the only negative note that is being placed upon them is a question mark over the ability of Canada’s export infrastructure to cope. We believe the data, which we presume to be correct, can only be construed as bearish from a price perspective. The prospect of a global record large canola (rapeseed) crop in addition to large US and S American soybean output should not allow for significantly higher prices than we are seeing at present.

• Yesterday’s news of non approved US GM corn being found in material shipped to China has resulted in rejection of 121,000 mt of material according to Reuters. This volume amounts to the largest recorded rejection, is in addition to last month’s 60,000 mt rejection, and could well point towards a sharp decline in new business. There have been suggestions that the Chinese government may well wish to slow import pace in the face of stronger than anticipated supplies. The news must have shippers, who have close to 2 million mt of material on the way to China, somewhat nervous, and shipments will no doubt be subjected to stringent sampling and testing prior to being accepted at destination. The GM event, MIR 162 or Agrisure Viptera which is an insect resistant strain, has been in the US supply chain since 2011 and is approved in Japan, S Korea, Russia and even the EU who are slow in issuing approval of GM events. We consider the news to have longer term bearish implications for corn pricing, particularly if there are further rejections in coming weeks.

• It is probably evident from the above that we continue with our longer term bearish outlook.

• We have been catching up with the last two days of travel and updating information, and will be limited in commentary tonight.

• Today has seen some short covering which has left markets a touch firmer albeit on limited volume. As prices rallied it was noted that producer hedge selling became a feature from S America as well as US growers, a point we have made previously and one which, if followed through as we believe, will keep a lid on prices going forward.

• Arrivals of soybeans in China are creating some downward pressure on crush margins and there is talk of resale offers being made, added to which the discount which Brazilian soybean prices have in relation to US supplies from Feb ’14 onwards is likely to limit price hikes.

• Yesterday we heard of further discoveries by Chinese authorities of unapproved GM varieties in US corn shipments. The discovery is likely to result in rejection of the material, which was the outcome following the first shipment found to contain the non-approved variety.

• Australia’s ABARES have unexpectedly increased their forecast for 2013/14 wheat to the third largest on record at 26.2 million mt, a 7% increase on September’s estimate. The gains appear to be a result better rainfall in the southwest of the country. Western Australia, the largest wheat producing state, saw a 31% leap in forecast output which is offsetting reduced output in eastern states. In contrast, the Commonwealth Bank of Australia have only predicted the crop to come in at 23.6 million mt blaming Eastern Australian drought and claiming that despite improved conditions in Western Australia, they were insufficient to compensate for losses in New South Wales.

• Informa Economics has released its latest batch of agricultural crop forecasts for 2013/14, including an increase in the Ukraine corn crop at 28.5 million mt, which is a 1 million mt increase, Brazilian soybean output at 88 million mt is an increase from 86.7 million mt last month whilst Argentine soybean production is left unchanged at 59.5 million mt. The Brazilian corn crop is reduced by 0.5 million mt to 70.6 million mt.

• Egypt’s GASC was once again back in the market with a purchase of 60,000 mt of wheat for late Dec ’13 shipment, from Romania on this occasion. Interestingly several commentators are questioning whether, or nor, the contract will ever be executed. The price paid, on a C&F basis, was around $8/mt below last week’s purchase from France. Offers were absent from Russia, Ukraine and the US. It is expected that Egypt will tender again for Dec ’13 shipment, and given the time frame, it will likely be sooner than later.