Monthly Archives: September 2014

3 September 2014

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  • Midday comments:
  • US crop conditions showed an improvement in both corn and soybeans week on week with the former at 74% good/excellent (vs. 73% last week) and the latter 72% good/excellent (vs. 70% last week). Spring wheat rated good/excellent fell 3% to 63% and harvest is disappointingly slow at 38% complete compared with 61% last year and the ten year average of 73%.
  • However, news that a ceasefire in Ukraine was “agreed” has eased tension and markets have reacted accordingly in early trading. President Putin has suggested that a ceasefire is unnecessary as his troops are not involved in hostilities. He should truly be on the stage!
  • Overnight corn markets came very close to contract lows amid Ukraine news and weakness in wheat markets. Suggestions that Russia might be suspended from high-profile international cultural, economic and/or sporting events appears to have pushed a resolution ever closer. Corn fundamentals continue to weigh heavily to the downside and if geopolitical distractions are lessened we may well see the way clear for a true reflection of value in coming weeks.
  • Overnight soybean markets remain oversold from a technical perspective yet the fundamentals continue to pressure prices. Short-term support from harvest weather delays may offer some support, although this is likely to be short lived in our opinion. Disease issues continue to be a talking point although there is little evidence, right now, to suggest that this is a widespread issue. The improvement in crop condition is probably more important to price direction than disease discussion.
  • Egypt’s GASC has issued a tender for early October shipment wheat, the results will be available for part two of today’s update. Expectation is for Black Sea origins to continue to be competitive.
  • Evening update:
  • The markets have traded lower into the close with sharp losses across the board. Soybeans shed a touch over 1% whilst the grains gave 3% back to the market. The drivers include Ukrainian peace talks, crop condition reports as well as continued analyst’s reports supporting yield estimates.
  • Reuters forecasting arm, Lanworth, has estimated the Brazilian 2014/15 corn crop at 79 million mt, an increase from 78.6 million mt year on year and soybeans at a record 98 million mt, an increase from 85.7 million mt year on year.
  • Brokerage and analyst Allendale Inc has pegged the US corn crop at 14.409 billion bu and a yield of 171.9 bu/acre. Their soybean estimates show the crop at 3.884 billion bu and yied at 46.4 bu/acre.
  • Intl F C Stone’s latest figures forecast US corn output at 14.595 billion bu, yield at 174.1 bu/acre, soybeans at 4.0 billion bu with yield 47.6 bu/acre.
  • The USDA’s August data showed corn at 14.032 billion bu and 167.4 bu/acre, and soybeans at 3.816 billion bu and 45.4 bu/acre.
  • In a slightly contrarian move, Lanworth trimmed back its US output estimates for corn to 173.7 bu/acre (down 0.8 bu/acre) with output down 200 million bu to 14.6 billion bu.
  • Next week we will receive the USDA’s September report, and many (including ourselves) would expect to see an upward revision in their numbers – time will tell, as always.
  • Egypt purchased 120,000 mt of wheat, with France and Romania sharing the deal. This is the first French win since January, and (obviously) the first this season as rain damage during harvest has reduced wheat quality to the point where many were questioning whether any sales would be concluded to Egypt at all this year. Of interest was the sheer volume offered by France, five Panamax size vessels, all at GASC spec, but most importantly $4-$12/mt below the cheapest Russian offer. Moisture allowances will see prices reduced a further $5/mt (plus costs) and our reading of the situation is that France has now woken up and smelled the coffee, realised they are deep in the “doo-doo”, and playing catch up in their export efforts. This may week have a knock on effect by troubling Russia, who will (like us) be shocked by the price levels of today’s business. What price the next tender? Egypt has played a very cute game by picking off the two cheapest offers today, leaving all others out in the cold.
  • Closer to home, Stratégie Grains have released their latest oilseeds report which includes an upward revision in EU rapeseed output from a month ago. Their latest output figure stands at 23.2 million mt, a 300,000 mt increase, whilst sunflower seed output is increased 400,000 mt to 8.6 million mt.

2 September 2014

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  • Midday comments:
  • The morning after the holiday weekend started with weaker grains as rain across Kansas proved a bearish force and provided Russia and Ukraine leave their ports open for business, their exports should help to keep world prices low and possibly lower. Thursday’s CBOT price gains, which were not sustained into the close, were fully given back (and more) on Friday. Regardless of other issues, it it the Russia/Ukraine issue which grabs the attention, and Ukraine says it is seeking NATO protection following what both Kiev and its western allies describe as open participation by the Russian military.
  • The IGC forecast 2014/14 global wheat output at 713 million mt, an increase 702 million mt Monday, the USDA’s latest figure is 716.09 million mt for comparison purposes. The key drivers for the IGC’s increase include larger output in Russia, EU and China as lack of significant weather issues has left crops to develop well.
  • Corn markets this morning remain in something of a sideways pattern, traders are viewing it as cheap in relation to alternatives. Thursday’s gains aided by the Russia/Ukraine inspired wheat gains were largely given back on Friday. There has been positive weather over the weekend in key corn growing regions, and the IAG crop tour across some of the biggest corn producing states has seen what has been describes as “massive yield potential”.
  • The IGC 2014/15 global corn forecast came in at 973 million mt, an increase from 969 million mt month on month, compared with 985.39 million mt as forecast by the USDA in its latest report.
  • Soybeans posted early gains as the markets reopened after the holiday weekend as some were suggesting that there was too much rain across Iowa and Minnesota, but our belief is that the warmer, wetter trend is almost ideal and adding to yield rather than detracting from it. The longer term outlook feels even more bearish as S America looks set to add to planted acres (at the expense of corn).
  • Evening update:
  • Data today shows Ukraine’s 2014/15 season grain exports to date at 5.01 million mt, of which wheat accounts for 2.75 million mt, barley 1.89 million mt and corn 377,000 mt, and compares with 3.3 million mt year at the same time last season. This gives little reason for concern right now, so what price “risk premium”?
  • As the US awoke and returned to trading desks following the holiday extended weekend break, it is probably fair to report that some surprise exists that grains are down and soybeans are up! Most expectations were the reverse basis Russia/Ukraine, yet wheat has posted double digit losses and soybeans double digit gains, the latter appears to be on the back of continued strong soybean meal demand.
  • In general, there are some reports of money exiting the commodity space on account of poor returns, gold, silver and crude oil all posting sharp losses and risky assets have lost some of their former shine.
  • Weather reports continue to suggest a lack of cold/freeze risk into September 18 or 20, which will keep the bulls at bay, and early harvest data from the Delta and Gulf states remains record large and well above expectations. As an example, Louisiana and Mississippi soybeans are reportedly yielding 65-90 bu/acre leading to a question as to whether national yield could hit 49-50 bu/acre by the time harvest is done. Early corn yield reports across the Delta and S Midwest are equally impressive with 190-240 bu/acre yields being reported, well above producer expectations.
  • Closer to home, despite fresh one year low in the € Paris wheat ended with little changed. Anecdotal evidence is suggesting that Swedish/Baltic/Polish wheat is trading specifications equivalent to Algerian requirements at substantial discounts to French, which must be cheesing off the French–big time! The next Algerian tender will be at telling one, whether Algeria supports its long time ally, or price – we will watch with interest.
  • In corn, closer to home, Ukraine premium decline is significant, jeopardising US exports. Given the likely US harvest in the US this development must come as a worrying development to US producers, exporters and (maybe even) government forecasters!