• Wheat and soybeans in Chicago are lower this evening and the wheat corn spread, which was at well over $2.00 not so very long ago, is all but a dollar today! How things change and wheat is pacing the decline today reaching five month lows.

• The USDA has today released its weekly export figures as detailed below:

Wheat: 507,600 mt, which is within estimates of 350,000-550,000 mt.
Corn: 986,800 mt, which is below estimates of 700,000-1,000,000 mt.
Soybeans: 501,200 mt, which is above estimates of 300,000-500,000 mt.
Soybean Meal: 158,600 mt, which is within estimates of 50,000-225,000 mt.
Soybean Oil: 5,600 mt which is within estimates of 5,000-20,000 mt.
There was little, if anything, to raise an eyebrow over in the sales data.

• Brussels issued weekly wheat export certificates totalling 551,358 mt, which brings the season total to 22,610,567 mt. This is 737,869 mt (3.4%) ahead of last year’s record pace.

• Our understanding is that Brazilian farmers have been active cash sellers of soybeans today as the Real crept higher hitting 3.1 vs US$ – talk of ½ to 1 million mt sales are rife.

EU Wheat Evaluation

European exporters have flooded the market this year, following a sizeable surplus for the second consecutive year. How long will the EU remain a top exporter? In the table below, it is assumed acres are steady, trend yield and a slight boost in domestic use. Without a major weather problem in the next 2-3 months, Europe’s surplus looks to persist. This is partially a function of 5-year high carryin supplies. Spot Chicago futures are down 24% from March ’14. EU futures, however, are down only 14% as the €uro has struggled in the last three months. This has been a dominant theme in non-US markets: weaker currencies are partially – or more than fully, as in the case in the Black Sea – offsetting sharply lower CBOT prices. Lower EU wheat production in 2015 will be a function of yield rather than acreage.
EU Wheat Supply/Demand Balance:

Projections show total European domestic wheat use in 2015 at 125.5 million mt, up 1 million mt from 14/15 and the highest since 2011. But notice in the graphic that domestic use has been rather stagnant in recent years. Since 2008, domestic wheat use in the EU has fluctuated in narrow range of 67-70 million mt, and gains in production have spilled directly into the export market. As of now, European exporters are trying to find any remaining old crop wheat demand to alleviate the projected 60% build in stocks – but to no, or at best limited, avail. Assuming production of 150 million mt in 2015 (unchanged seedings, trend yield) record exports are needed for sub-15 million mt ending stocks. And the European market in recent years has shown little concern over tight stocks/use ratios.

The initial new crop EU balance sheet features production 25 million mt above domestic consumption, down 6 million mt from last year. But this will be offset exactly by higher carry-in stocks, and so EU exports of 30 million mt in 2015 appears a reasonable estimate. Note also that Russia’s available surplus in 2015 is initially projected at 20 million mt. (Like the EU, lower Russian production in 2015 will be mostly offset by higher carry-in supplies.) Combined EU and Russian available exportable wheat supplies in 2015 are projected at 50 million mt vs. 51 million mt in 14/15. The US will again be a modest player in the world wheat market, and US offers must be much more competitive in the coming crop year to boost global market share. More and more work implies that highly adverse weather is needed to trigger any lasting rallies in the grains beyond periodic short covering.

• A “down day” today with some sharp losses seen in Chicago across the board. Brazilian truckers have said they are focussing on the capital city, Brasilia, in the hope of cutting a better tax deal on diesel, and this has eased problems and ports are reporting growing truck lines awaiting discharge.

• Russia’s AgMin have increased their 2015 grain production estimate to 100 million mt, a mere 4 million mt below the prior year, and an improvement on the 85-100 million mt range previously quoted. As always, caution should be the watchword when factoring statements from Russia! Improved weather is the key behind the higher numbers, and if it persists we could see late June marking the end of the export tax. The potential for a big old crop carryover should not be forgotten, and that will doubtless impact new crop price structures. Our thoughts, at present, centre on the fact that winter sown crops are not yet out of dormancy and spring crops not yet planted – how and why has the position become more favourable all of a sudden?

• News from Brazil as far as the trucker’s dispute is concerned today shows that the disorganised protest is moving closer to a disorganised ending. Protests are reported in only two states this morning, Rio Grande do Sul and Santa Catarina, and soybeans are flowing to the ports of Paranaguá and Santos where vessel loadings have not been disrupted so far. Over the weekend it is reported that 530 truckloads of soybeans reached Paranaguá, whereas 900 per day would be the norm, Santos is reported to be at normal volumes and both ports are said to have sufficient stocks to outlaid for the remainder of the week.

• The Brazilian president is said to have ordered additional police and the national guard onto highways to hand out heavy fines to help prevent further blockages. 10th March marks the date on which truckers are due to meet with the government in order to negotiate over the diesel fuel tax rates although rising haulage rates in the interior of the country are helping to resolve the issue, which is truly over the falling net incomes of the truckers. It feels likely that the issue will rumble on for a while but the likelihood of serious disruption to exports seems unlikely.

• Brazil has harvested 28% of its soybean crop and it has been suggested that they will reach 40-45% by the weekend. Mato Grosso should have reached 70% by the weekend and safrinha corn planting could well be completed within 7 to 10 days. Empirical soybean yield data continues to point towards a very solid national output this year.

• Reuters has reported that Argentine officials are to keep tracks on “hoarding” of soybeans by requiring sales of “silo-bags” to be recorded and reported to tax authorities. Farmer “hoarding” has become commonplace as growers in the world’s number three soybean exporting nation hold onto stocks as a hedge against ongoing double-digit inflation. The Argentine government has long been at odds with growers, complaining that soybean hoarding is cutting into tax income, particularly relevant now as it tries to increase spending ahead of the October general election. Additionally, reporting requirements are being tightened on all grain transactions between farmers and buyers as government officials try to keep tabs on the strategically important soybean and corn crops.

• Away from S America, Australia’s ABARES has put the 2015/16 wheat crop at 24.39 million mt vs. 23.61 million mt in 2014/15, if realised this will stand as the seventh highest on record. The 3% rise in output was said to be a result of increased acreage, 13.81 million ha, and yield would likely be hampered by dry conditions. The canola (rapeseed) crop for 2015/16 was seen at 3.264 million mt vs 3.413 million mt in 2014/15.

• Early morning buying in Chicago has turned into selling with soybeans and soybean meal forming reversal patterns on the charts. The 50 day moving average in May ’15 soybeans, at $10.12 ½, is being watched very closely as a breach of the support at this level level will likely pave the way for further declines. Both corn and wheat have also declined to current chart support levels and will also have a close watch out for and breaks lower.

• EU wheat saw Paris decline €2 amid the first trading day of the new milling contract, which traded at a premium of € 4-5 to the “standard” contract. The decline came on the back of volume cash FOB offers looking for buyers, lack of demand and the US Plains winterkill story being put on the back burner.