• Chicago markets turned lower when it became clear that Egypt’s GASC was unamused with today’s US wheat offers in response to yesterday’s tender for mid April wheat shipment. The tender was pointed at US supplies and it was expected that Egypt would take advantage of the $100 million credit line offered by the US. Prices rose in early trade on the back of the tender announcement, but fell when it was announced that Egypt was going to “pass” prices which were some $50 to $100/mt over the last European levels purchased two weeks ago. In the wake of Chicago prices shedding as much as $0.10 (recovering a touch into the close) Matif followed with a €2 decline as more “long liquidation” was reported in the Black Sea. Shortly after the Russian AgMin proved (yet again) its mastery of the art of diplomacy by stating “it may review the export tax” once it has February export data!

• Soybean prices eased as Brazilian producers returned to the selling arena post Carnival, and this is expected to continue to weigh heavy as harvest progresses. It should not be forgotten that with the Brazilian Real at 2.83 vs US$, yesterday’s price uplift must have made farmers in Brazil think it was more like Christmas than Carnival! Soybean prices calculate at an equivalent of $13.40-$13.50.bu and with yields still being reported at record levels at farm level these sort of price levels are well above last year.

• Tomorrow sees the start of the USDA’s Outlook Forum conference and it is expected that new crop acreage and yield data will be available post keynote speeches. Initial ideas suggest soybean acres at 84-85 million and corn at 88-89 million.

• The reopening of markets following the US Presidents’ Day weekend holiday saw an early rally which quickly uncovered cash selling in wheat, corn and soybeans that saw prices lower by midsession. Volumes have been unspectacular and soybean meal has been the mainstay of higher levels in the face of EU buying/pricing trade.

• NOPA’s latest US crush data saw the January crash rate at 162.67 million bu, slightly below expectations but the fourth largest monthly total on record, and the largest ever January figure. The crush has clearly been fuelled by ample supplies from the recent large harvest and strong export demand. Being below expectation the number was viewed as being on the bearish side.

• The S American weather forecast contains little change and holds a favourable mix of sunshine and rain in the next couple of weeks. N and C Brazil will see enough dry weather to allow harvest to expand at a rapid pace whilst S Brazil and Argentine crops will see enough rain to allow crops to mature. Despite some recent pessimism over S American soybean output, Oil World’s latest estimate stands at 91-92 million mt for Brazil, and we still anticipate record yields in both Argentina and Brazil in the wake of one of the best growing seasons in a decade.

• Today’s fund buying in soybeans has seen an uplift in prices as they target the 100 day moving average (basis Mar ’15 contract). Given the supply side fundamentals we see this as a selling opportunity rather than a rally to be chased, and cash seller emergence would tend to support this view.

• France’s AgriMer has reported the French soft wheat crop to be 92% good/excellent, which compares with last year’s figure of 74%. We have heard that the Russian government has managed to buy a very limited volume for intervention and given the likelihood of end stocks there rising to 10 million mt, of which 1 million mt may be government held, harvest time is beginning to look potentially messy. Perhaps the aggressive stance taken by France in recent weeks will pay off for them in the longer term!

• With S America effectively closed for carnival celebrations and China and much of Asia beginning Lunar New Year celebrations international markets are likely to be subdued for the remainder of the week .

• With the US closed for business and Europe in lacklustre fashion it only remains for me to wish those who will shortly be celebrating the year of the Goat/Sheep/Ram (various terms for horned ruminating mammals) Kung Hei Fat Choy  and for those about to celebrate Mardi Gras Bom Carnival.

• At a loss for much else, it seems winter weather in Europe is pretty much over whilst in the US our cousins are freezing their extremities off. Eurozone/Greek negotiations look doomed given diametrically opposed positions and the ceasefire in Ukraine is beyond a joke.

• For fresh news we look to the US Outlook Conference at the end of the week.

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

Weekly Update 13 February 2015

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

Fund positions

• Another unexciting day leaving very little to say – so this will be brief!

• Grain markets drift on lack of news whilst soybean futures see some Chinese pricing business, which gives them a little support ahead of the Lunar New Year holiday next week.

• US weekly export sales were larger than expected but insufficient to boost the market. Surprisingly Chinese buying was ahead of expectation despite cheaper S American supplies from March onwards. Statistics for the crop year to date show US wheat exports are 241 million bu off, corn down 512 million bu and 2014/15 soybean sales are up by 115 million bu.

• Brussels granted weekly wheat export licences totalling 729,656 mt, which brings the season to 20.164 million mt. This is 706,043 mt (3.6%) ahead of last year’s record pace.

• Finally, Brazil’s CONAB have estimated the soybean crop at a record large 94.6 million mt which is down 1.3 million mt from their previous estimate. This aligns well with the USDA’s latest 94.5 million mt estimate. The corn crop was estimated at 78.4 million mt, 700,000 mt lower. This is made up of an increased main crop but reduced safrinha (second) crop.

• Today can be best described as “uneventful” with prices trading either side of unchanged in the wake of the USDA’s latest update, which gave little, if anything, to feed the bulls and maybe affirmed the bears’ longer term position.

• In Brazil the Real has fallen to its lowest level since 2004 at a shade under 2.87:1 vs. the US$. This represents a 24% drop since Brazilian farmers started their planting efforts, which probably equates to an exact offset of the CBOT or world soybean price decline across the same time frame. (12 months ago CBOT Mar soybean futures were trading $13.35, today $9.73, around 27% lower). Clearly the outcome is to see Brazilian farmers sell beans off the combine when realising good yields and prices that equate to last year’s levels.

• There are suggestions that Egypt is attempting to negotiate a deal with Russia to assure future wheat supplies free of export tax. They maybe have a couple of tenders to go before domestic supplies become available and if their negotiations are successful this could trigger interest from other world buyers. It is our belief that, unless we see an adverse weather event, it is likely we will see Moscow dropping or even removing their export tax on new crop supplies.

• The Rosario Grain Exchange today reported its 2014/15 estimate of Argentine soybean output at 58 million mt, which is 3.5 million mt above their last figure. They put corn at 23.5 million mt which is also higher by 1.1 million mt.

To download our USDA Recap as a PDF file please click on the link below:

USDA Recap Feb 15

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

WeeklyUpdate 6 February 2015

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

Fund positions

• Today’s news has to be led with the record level of EU wheat this week. Brussels issued weekly wheat export certificates totalling 1,706,940 mt, which brings the season total to 19,433,922 mt. This is 325,699 mt (1.7%) ahead of last year’s record pace. The sheer size of this week’s exports argues in favour of our comments earlier in the week, that total exports could reach 31 or even 32 million mt and that the French (in particular) are cheap sellers looking to offload old crop supplies ahead of the new crop harvest, which does not look threatened at this time.

• Second to EU wheat export is probably the plunging value of the Ukrainian Hryvnia, which fell over 32% this morning as the Central Bank scrapped currency auctions and moved to a freely floating currency! Seemingly the Central Bank was or has run out of US$ to defend the national currency any longer. Consequently, sellers of Ukrainian grain have withdrawn to the sidelines for now, undoubtedly they will re-emerge before long, and aggressively so at that time. Interior grain prices have soared to record levels and farmers are frantically searching for seed to capitalise on windfall high prices. Doubtless the costs of growing the crop will have risen too, but more importantly the selling price has moved to record highs.

• US wheat has also rallied on news that Egypt could purchase as much as six cargoes of US Soft Red Wheat. However, there are question marks over quality and whether the US grain can meet Egyptian specifications (vomitoxin for example).

• The USDA has today released its weekly export figures, which offered little in the way of surprises,  as detailed below:

Wheat: 487,000 mt, which is within estimates of 300,000-500,000 mt.
Corn: 852,000 mt, which is within estimates of 800,000-1,000,000 mt.
Soybeans: 496,700 mt, which is within estimates of 200,000-500,000 mt.
Soybean Meal: 302,300 mt, which is above estimates of 120,000-300,000 mt.
Soybean Oil: 15,100 mt which is within estimates of 5,000-50,000 mt.

• In summary, this week has been a roller coaster of whipsaw action in energies and currencies that has stimulated market volatility. Both bullish and bearish traders are catching their breath after the recent exhausting sessions. As a consequence we have seen uncertainty, and this is one thing that markets hate – with a passion!

• We look forward to a return of calmer days and more certainty – whenever that may be!

• Markets have been somewhat slower after yesterday’s frantic pace and surge higher with corn, soybeans pacing the way lower and wheat catching up into the close and entering negative territory to join remaining markets. Next week’s USDA report is a non-topic right now as everyone anticipates little, if anything, in the way of fresh news.

• The way forward will be interesting, S American outlook, as we reported last night, looks as if Brazil is slightly down and Argentina slightly up, the US Outlook Forum will be the next piece of significant news to suggest longer term price trends. The US’s 2015 corn and soybean acres will be the focus for market watchers.

• Cash markets have producer sellers with active orders just above yesterday’s highs – just in case the market decides to move higher, and this is seen as an effective cap to upside right now. Brazilian g=farmers in particular saw opportunity with a drop in the Real and the Chicago rise presenting an attractive proposition, which may look even more so in coming weeks if we see the old trend resume.

• S American yield data remains “stellar” according to some with Mato Grosso, Goias and Parana reporting big numbers. According to our contacts most fields are yielding near or above their previous 2011 record levels, which points towards national output over 94 million mt. Key, will be the level of output in RGDS, MDGS and Santa Caterina and this is unknown right now, anything approaching record harvests will see national output pushing above 95 million mt.

• This week’s US ethanol report was seen as bearish as stock levels rose to their highest since 2012 , almost 880 million gallons, production fell to just under 280 million gallons utilising 99 million bu of corn. To reach the USDA’s annual forecast a weekly grind of 97.7 million bu is required and this is viewed as optimistic given rapidly filling storage.

• The US lineup to load soybeans for China is declining, and fast, with fewer vessels presenting, clearly the seasonal shift to S America is under way. However, Chinese interest is minimal, surprising given yesterday’s price action which we would have expected to trigger some sort of response. Our guess is that a $9.00/bu price target is the aim of Chinese buyers at present, and we would be among the last to argue that level right now. Chinese crush margins, both spot and forward, have slipped as ongoing weakness persists in their domestic meal market.

• S American weather forecasts continue to be favourable and we would expect to see a resumption of the downtrend in prices as the Brazilian harvest progresses.

• The Russian wheat debacle continues; the race to ship before the 1st February tariff deadline may well be repeated as we move towards the end of the month because many believe the rumours of a more prohibitory tariff which will leave the farmer with no other option than to sell to the government intervention buyer. Globally this is not a significant issue but it is a huge spanner in the works for the exporter/end receiver who gets caught up in the red tape!

• StatsCan reported their 31 December stock levels, and the all wheat figure of 24.82 million mt was a touch short of the trade’s estimate of 25.1 million mt. Canola (rapeseed) was above estimates by 400,000 mt at 11.1 million mt, whilst soybean stocks at 3.48 million mt hit a record level.

• Finally, Stratégie Grains estimated 2014/15 EU soft wheat exports sharply higher at 31.9 million mt, which is 2 million mt above the 2013/14 record volume. Demand for French and British wheat in Asia is cited as the main driver for the updated figure with an increased volume of shipments anticipated in February and March. Germany and Poland were also expected to see increased demand, particularly from Saudi Arabia.

• In conclusion, in the light of an unchanged fundamental situation and no follow through on yesterday’s spike higher, we see little reason to change our long held bearish viewpoint.