To download the USDA September stocks report summary as a PDF file please click on the link below:

USDA 30 Sep 2014

• Today has been about month end (with its associated fund shenanigans – cash withdrawals, bonuses, etc) as well as the USDA crop report that was released at 5pm today. Many suggested that the data in the report would be interesting but of no significance, potentially a “speed bump” in the general market decline, whilst others were more sceptical suggesting it would resemble “road kill” in the overall scheme of things. Regardless, the data is here – and the market (with mere minutes to go until the close) is down!

• The data as released is as follows:

US 2014 all wheat crop: 2.035 billion bu, below estimates of 2.037 billion bu up from 2.03 quarter on quarter and down from 2.13 year on year.
US quarterly wheat stocks: 1.914 billion bu above estimates of 1.88 billion bu up from 590 million bu quarter on quarter and up from 1.87 year on year.
US quarterly corn stocks: 1.236 billion bu above estimates of 1.185 billion bu down from 3.854 billion bu quarter on quarter and up from 821 million bu year on year.
US quarterly soy stocks: 92 million bu below estimates of 126 million bu down from 405 million bu quarter on quarter and down from 141 year on year.
US 2013 soy crop: 3.358 billion bu, below estimates of 3.362 billion bu, up from 3.289 estimated last.

• The report was received in mixed mode but, as anticipated, was regarded as something of a non-event, and we anticipate trends to resume mid-week once the report has gone cold.

• Away from the report, there are suggestions that the Russian harvest may not be as good as previously anticipated. The numbers are all down to “implied” totals extrapolated from current harvested percentages. Current data suggests that a wheat output of 64.2 million mt is likely compared with 65.11 million mt previously and the USDA’s 59 million mt. Current harvest, at just over 83% complete, stands at 57.8 million mt with yield at 2.74 mt/ha, which is above last year’s 2.41 mt/ha. Barley and corn figures follow a similar pattern, I.e. Implied totals below last estimated numbers but still above the USDA’s latest figures.

• The latest US crop condition and progress report showed corn condition to be unchanged week on week at 74% good/excellent. The crop was 12% harvested vs. 7% a week ago and 21% as the ten year average. Soybeans were rated 72% good/excellent, an improvement of 1% over last week and compares with the ten year average of 57%.The crop is 10% harvested vs. 3% last week and the ten year average of 18%. Winter wheat planting has progressed to 43% vs. 25% a week ago and the ten year average of 40%. Spring wheat harvest stands at 94% compared with 86% last week and 95& last year.

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

Weekly update 26 September 2014

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

Fund positions

• Midday comments:

• Overnight and early trade saw optimism that US wheat could benefit from improved exports through the Great Lakes, which kept a bid under the market for a while. However, as we have previously stated, technically the market is still very oversold and the Commitment of Traders report shows a heavy net short position. Agricultural “cycle” traders look for key season dates, 22 September big one such date as it is first day of Autumn, and this could have impacted the market somewhat (although we are sceptical of this!).

• In corn there has been discussion overnight that there is now more upside potential than downside, particularly in view of the decline we have seen since late April or early May. “Bargain hunters” could well view this as their trigger to make purchases, and this added a degree of support overnight. That said, harvest conditions in the US continue to look favourable and we struggle at present to see much upside for now. As harvest ramps up and supplies come to market amid a scenario of tightening freight, this will impact cash basis negatively and leave prices on the defensive, in all probability into October.

• One commentator described the soybean market as “weak at the knees” as harvest moves forward and cash markets sink. Soybean oil let the move up yesterday whilst meal prices were pressured lower. As S American plantings begin in earnest next month we are looking at a potentially record sown area. One private analyst put the area expansion in Brazil at 5% year on year, potentially adding to the growing global stockpile.

• Evening update:

• Markets have declined as reports of huge yields continue to hit the headlines, and fund sellers have reemerged pushing the market to fresh lows. Support, if it can be called that, appears (by consensus) at $9.00/bu for Nov ’14 soybeans and $3.20/bu for Dec ’14 corn. Weekly US export data showed huge soybean sales as expected (see below), but this has not deterred the selling spree. The yield numbers being widely discussed are 50+ bu/acre for soybeans and now a massive 180+ bu/acre on corn. The ongoing “how big is big, and how low is low” debate rages on and it has been calculated that a corn yield above 180 bu/acre would result in prices of $2.90/bu, whilst a soybean yield north of 49 bu/acre would leave prices at $8.00/bu. On the basis of this, it appears soybeans have a greater downside than corn as we head into the Oc tober USDA crop report.

• We have the September NASS stock report due next week, and it is widely viewed that any adverse data will be a mere “speed bump” in the current marketplace.

• US weekly export data, released today showed the following:

Wheat; 396,200 mt which is within estimates of 350,000-500,000 mt.
Corn; 1,106,300 mt which is above estimates of 600,000-900,000 mt.
Soybeans; 2,565,500 mt which is within estimates of 1,500,000-2,700,000 mt.
Soybean meal; 80,800 mt which is below estimates of 135,000-265,000 mt.
Soybean oil; 3,000 mt which is within estimates of minus 5,000 to 40,000 mt.

• Brussels granted weekly wheat export licences amounting to 630,785 mt, which brings the season total to 6.739 million mt. This is 269,238 (4.2%) ahead of the same time last year. Despite the export pace, Matif wheat shed a further €2.00/mt, the reality is that we are in a quiet market, and buyers are scarce, the majority have cover in place and it will likely be cheaper tomorrow anyway! Corn import licences amounting to 71,009 mt were granted, which brings the season to date up to 2.266 million mt, and this compares with 958,731 mt last year (1.307 million mt ahead!).

• A slew of various data has been issued including the IGS’s latest forecast for 2014/15 world wheat output, which they have increased by 4 million mt to a record 717 million mt. The increase is reflecting improved EU (2.3 million mt to 153.1 million mt) and Ukraine (1.5 million mt to 23 million mt) production according to their report. 2014/15 global corn output has been increased by 1 million mt to 974 million mt, which is lower than last year’s record 983 million mt.

• AgroConsult estimated the Ukrainian grain crop at 58.5 million mt down 1.1 million mt from their last forecast; corn was reported at 25.9 million mt, down from 27 million mt last estimated. The grain harvest is reported to be 73% complete at this time.

• Brazil’s AgMin estimates the 2014/15 soybean crop at 90 to 96 million mt, whilst Abiove’s figure is 91 million mt, their 2013/14 estimate is 86.3 million mt down from 86.5 million mt month on month.

• The market has had something of a “Turnaround Wednesday”, 24 hours after initial expectation with wheat, corn, soybeans and soybean oil all posting some gains at close of business in Chicago, the market bucking this trend was soybean meal which closed a touch easier.

• It seems the market is taking a breather in its decline, which is constructive and (in the normal course of events) will permit lower levels without an escalation in the oversold status which has been a feature in recent weeks.

• Talk of additional US wheat export sales out of the Great Lakes has led to some support but fresh news is scarce right now. There is a fairly wide expectation that soybean export sale numbers, due for release tomorrow, will be “huge”, including the Chinese frame contract signed last week. In our opinion, this is not a significant piece of fresh news and any rally based upon this information should be sold.

• Matif wheat managed its first higher close in ten sessions and only the third in three weeks. The AgMin in Ukraine cut its all grain output estimate by 5% to 60 million mt (with no product split) with little in the way of additional information or explanation. Overall, the Black Sea is losing out on export demand yet buying in the interior is reported to be tough despite the weaker currency. Consumer interest in expensive Russian wheat at current prices is non-existent, and unless more northern regions run out of quality wheat early next year (which should not be discounted) Black Sea prices can not hold current price levels for long.

• EU corn SnDs, based upon increased early yield data, suggest that imports are likely to drop even more significantly that previously thought. The likely import volume could drop as low as 2 million mt, compared with 16 million mt last year and the USDA’s latest estimated figure of 10 million mt, which we strongly suggest to be way over the top.

To download the spreadsheet please click on the link below:

LIFFE Closes wc 19 September 14

• Midday comments:

• The purchase by Egypt of US wheat for the first time this season appears to have provided some confidence to the trade that US wheat IS competitive in the global market place and may just be sufficient to give some support – short term. There has to be a degree of caution though, how far up can wheat move given the abundant supplies in France, Germany and the Black Sea and with new crop harvest just around the corner in Australia and S America. It has been suggested that Russian wheat has to shed as much as $10/mt to be competitive into Egypt going forward.

• In corn continuing news of huge global supplies continues to weigh heavy on the market and the increase in EU import tariffs on corn, sorghum and rye to €10.44 from €5.32 previously suggests strongly that domestic feed grain supplies are more than adequate. The level of competition between the USA, Ukraine and Brazil is likely to ramp up into the likes of Japan and S Korea. US harvest progress will continue apace as the weather window in the coming week looks favourable, adding pressure.

• Soybeans traded up and down in early markets before making new lows basis Nov ’14 once again. Chart patterns can only be described as bears, which when coupled with favourable harvest weather makes for “happy bears”. On point to bear in mind is that the record fund net short position hangs over the market almost like the Sword of Damocles, the market has shed over $1.00/bu in the month of September alone as beans are viewed expensive in relation to corn. Brazilian planting conditions, which look favourable right now, add to overall bearishness.

• US crop condition and progress was reported after the close last night and showed corn condition to be unchanged week on week at 74% good/excellent vs. 55% last year and 57% as the ten year average. Corn was reported to be 7% harvested, up from 4% a week ago and below the ten year average of15%. Soybeans were rated good/excellent were 71%, a point below last week and compares with last year’s 50% and the ten year average of 56%. Soybeans are reported to be 3% harvested, as was the case a year ago and compares with the ten year average of 10%. Spring wheat is 86% complete vs. 74% last week and com pares with the ten year average of 92%. Winter wheat is25% complete, up from 12% a week ago and compares with the ten year average of 25%.

• Evening update:

• Markets have moved back and forth throughout the day in uninspired volumes with some hedge selling offset by some short covering. Harvest continues to both gather momentum and attract more attention, but one story remains fairly constant, and that is yield statements such as, “off the charts”, “astounding”, or from the more reserved “better than expected”.

• Our anticipated “Turnaround Tuesday” has not materialised despite an early attempt, and it appears the market is awaiting more solid harvest data before deciding “how low is low?” It is likely that harvest will have to reach 25% before confidence in above trend-line yields is truly established.

• The ability of the US to gain an increased share of world markets is compromised by aggressive competition from elsewhere, and this looks likely to continue for the foreseeable future.

• In Paris, the Matif wheat market flirted (briefly) below the €150.00/mt level before staging a recovery into the close. It feels very much as if it is only a matter of time, and maybe not much of that, before resistance is firmly breached and the level gives way as the next price leg down gets under way. There is very much a feel of, “don’t buy today what you can put off until tomorrow” which will continue to see the market grind lower.

• Matif corn slumped again to its third straight day of contract lows and has now shed €10.00/mt (which equates to $0.35/bu) in four trading sessions, double the losses in Chicago, and this is despite € weakness! Harvest data in France is scant but follows the US trend with yield reported as “off the chart”. Russian data follows suit with suggestions that last year’s crop will be exceeded by as much as 3 million mt. The conclusion is simply that the world is awash with corn – in addition to wheat – feed grains show no sign of supply problems in the foreseeable future.

• Saturday saw the announcement by Egypt’s GASC that they had secured 55,000 mt of US wheat in their latest tender for late October shipment, which elicited over 700,000 mt of offers between France, Russia and Romania. The price of the US wheat was reportedly $244.22 C&F, which compared with the cheapest French offer at around $5.50/mt more expensive on a like for like basis. Romanian and Russian offers were dearer still.

• There are a couple of possibilities which may arise from this latest tender, either we are beginning to see a bottom forming in this marketplace or Russian and French prices will push lower once again to restore their competitive status once again.Both countries have a big surplus to shift this season, and missing out on this latest tender means they will have bigger stocks in the second half of the season. Our current view is that we have not yet seen the season low in this market.

• Markets have started the week lower, once again, with Nov ’14 wheat in London breaking below the £110.00/mt level before staging something of a recovery into the close. Matif wheat also shed in excess of €2.00/mt and similarly closed off the lows of the session. Further contract lows have once again been a feature and weekend news of big harvest yields in the US has encouraged further selling.

• Technical support levels are difficult to calculate in these markets which are making fresh lows on a regular basis. Even the normally price savvy Chinese soybean buyers are staying relatively quiet particularly given their large volume purchases already on the books – at higher prices! Their economic outlook continues to lack sparkle and data confirms further slowdown, which could prove problematic on a more global scale in months to come – keep an eye on this one!

• Tomorrow could well give us a classic “Turnaround Tuesday” rally in prices given the level of decline that we have seen in recent days. Our view is that recovery, if any, will be limited as harvest is expanding in the US and rising freight and barge costs are pressuring cash prices lower, which will likely translate into futures markets.

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

Weekly Update 19 September 2014

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

Fund positions

• Midday comments:

• As EU wheat markets trend lower, export prices remain extremely aggressive and spread trading remains active the pressure remains to the downside on wheat. The global supply, which is looking large to say the least, is pressuring Chicago prices lower in order to maintain competitiveness against corn. Matif markets made four year lows yesterday and have dropped a further 3% today, Minneapolis and Kansas markets also pushed to new lows this morning. US weather conditions tend towards bearish with good rainfall expected across the western Plains in the next five to seven days.

• In corn, talks of higher yields and improved harvest weather are adding pressure to the market. For what it’s worth, an average yield of 175 bu/acre would add 275 million bu to end stocks which are already in excess of 2 billion bu. Weather over the ext seven days looks as if it will be favourable for harvest to progress into the central US, eastern corn belt and southeast. Seasonal barge freight on the Mississippi is rising and trucks are getting harder to find. Yields continue to surprise to the upside and moving the volume is becoming something of an issue as queues build at elevator reception points. This is the beginning, and we believe that cash basis will continue to weaken as the market leans further into the hands of the buyer leaving sellers with fewer options.

• Soybeans moved to new lows this morning and continue to remain under pressure into midday. Talk of yields reaching 48 bu/acre would mean an additional 118 million bu being added to the already high 475 million bu carryout projection. We are starting to see a massive supply coming onto the US market, planting is getting under way in Brazil and favourable harvest weather all point the market one way. As with corn, logistics are becoming something of an issue. Farmers appear to favour soybean sales over corn which will likely pressure cash basis. Brazilian farmers are awaiting a solid soaking rain in the central part of the country before plantings ramp up, whilst Argentine farmers  report rains to date have left soil moistures in “great condition” for planting soybeans. Remember the heavy rains in August which saw some wheat acres lost. In a mild El Niño year, such as this, Brazilian condition trend towards above normal precipitation, which would favour soybean production.

• Evening update:

• Informa Economics today revealed their latest 2014 US wheat output forecast with all-wheat at 2,046 million bu vs. 2,030 million bu as forecast by the USDA. Their 2014 winter wheat figure came in at 1,392 million bu vs. the USDA’s 1,397 million bu. 2014 spring wheat, excluding durum, was forecast at 590 million bu vs. USDA’s 572 million bu.

• Matif wheat has shed almost €10.00/mt in the week vs. London’s loss of just under £1.00/mt (both basis Nov ’14 contract) making the Sterling adjusted differential between the two back to £9.28, which is a far cry from the £19.00 level seen earlier this month. Given the alleged tightness in milling availability it feels as if the differential, at these levels, is too low.

• CBOT grains and the soybean complex are all lower into the close tonight posting new lows on favourable Central US weather, huge yield reports and the fact that end users have cover into early 2015. All of the foregoing leave a potentially weak demand pattern, which is unlikely to support the potentially overwhelming supply position. Volume trade remains low and funds continue on the sell side of the market.

• Current “chatter” is now pointing to a corn yield surpassing the 180 bu/acre level and soybeans above 49 bu/acre as early Midwest yield data confirms the early Delta and Gulf States’ figures.

• In a surprise move the Argentine government has passed a law allowing the government and/or military to confiscate business and cash grains (read soybeans) for “the betterment of the nation”. Farmers, unsurprisingly, are less than happy, and have vowed to fight, our view is that this is a fight they are unlikely to win – how will they fight if armed militia arrive at a farm to “confiscate” grain. There appears to be a similarity between Argentina and Venezuela developing.

• Tonight’s questions are, “How big is big?” in relation to harvest, and, “How low is low?” in relation to prices.