• Chicago markets have been a deep shade of green this morning as fund short covering in the grains and end user pricing in soybean oil added support. Tropical veg oils have trended higher on tightening global supplies and strong global demand. And this has led the Chicago soybean complex higher.The oil share in the soybean crush calculation has grown to 34%, close to the 38% it reached earlier in the year. A strong close tonight will add conviction to our belief that August lows have been scored.

• Chicago is today focussing on demand as we suggested would eventually become the case; however, we would caution against chasing the rally as demand led bull markets usually provide an entry point at some stage!

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

USDA-Recap-12-August-16

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

Fund positions

Our USDA contemplation can be downloaded by clicking on the link below:

• Brussels has issued weekly wheat export certificates totalling 491,794 mt, which brings the season total to 3.289 million mt. This is 801,015 mt (32.19%) ahead of last year. Barley exports for the week reached 49,810 mt, which brings the season total to 881,149 mt, which is 1.08 million (55.07)% behind last year.

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

Wheat: 607,600 mt, which is above estimates of 350,000-550,000 mt.
Corn: 1,610,500 mt, which is above estimates of 1,000,000-1,500,000 mt.
Soybeans: 3,100,200 mt, which is above estimates of 2,100,000-2,900,000 mt.
Soybean Meal: 98,400 mt, which is within estimates of 90,000-450,000 mt.
Soybean Oil: 12,500 mt, which is within estimates of 10,000-35,000 mt.

• Chicago soybeans have caught a bid on the back of significant export volume data released today as well as fresh daily sales announcements, whilst the grains are languishing on spreads and long profit taking ahead of tomorrow’s August report. Grains volume is reported to be high and the current thinking is that farmer selling is responsible as growers clear corn stocks ahead of the report, US farmers were believed to be sitting on large corn volumes and looking for buyers.

• Stratégie Grains’ latest 2016 EU soft wheat crop estimate is once again lower month on month at 137.9 million mt, which is 7.7 million mt behind last month and 9% down year on year. Their corn estimate is also reduced to 60.6 million mt, a full 1.1 million down month on month and 6% behind last year. The downgrade in wheat output is on account of French woes, added to which German prospects are also reduced. On a slightly better note UK output was predicted to be 14.8 million mt a mere 200,000 mt behind last month’s estimate, and early harvest quality is looking better than earlier thought.

• Today we have seen pre report positioning take the front spot with grains catching a bid whilst soybeans turned lower as the Nov ’16 contract tested the psychologically important $10.00/bu level and price action reversed yesterday’s trends. The lack of soybean sales announcements to China, after ten consecutive days of sales, created some profit taking and the stronger US$ helped the grains higher.

• We would expect to see a continuation of strong export sales announced on Thursday with soybeans potentially above 2 million mt and corn in the 1.3-1.6 million range.

• News continues to circulate regarding heightening Russian/Ukrainian tension in Crimea, and the potential impact on grain markets should not be ignored. At this time there is no evidence of any risk premium in prices.

• 2015/16 full season UK wheat exports reached 2.85 million mt, the highest since 2008/9.

• Little else in the way of fresh news today as the markets await Friday’s data release from the USDA.

• Chicago markets started the day with grains either side of unchanged and soybeans extending their rally on continued strong Chinese demand and an expectation that the USDA figures on Friday will show a substantial reduction in 2015/16 end stocks on the back of increased export demand. The trade is braced for a 2016 US corn yield of 171-174 bushels/acre with some even higher than this, consequently the potentially record US corn crop is weighing on prices.

• Brazil’s CONAB reported a slight reduction in their 2016 soybean and corn crops with soybeans pegged at 95.4 million mt vs. 95.5 million in July with corn at 68.5 million mt vs. 69.1 million in July. Despite the reduction being close to expectation, it should be noted that output is inching ever closer to domestic usage and fob premiums are rising to levels now some $0.40-$0.60/bu above other origins. The positive spin is that with cash corn prices in Brazil reported to be as much as 70% above last year we should anticipate some significant expansion in new crop acreage.

• The markets are now looking for objective N Hemisphere yield data and some indication as to whether, or not, production gains can keep pace with improved export demand  specifically as far as US soybeans are concerned. We would expect the US corn market to stabilise at its multi-year low levels as growth in stocks to use appear to be less than initially feared as the US’s share of global export trade has the potential to improve. As we write this it seems that even high quality wheat is starting to attract attention from major importers with the prospect of a further widening in premiums for milling grades over feed supplies.

• Chicago markets start the week in the green as corn, wheat and soybeans push close to last week’s highs. Big crop mentality continues to overhang the market and cash sellers are around to place a cap on any strong upside. It should not be forgotten that the US corn harvest will begin before too long in the Delta and midwest producers are keen to empty storage bins before new crop price pressure eliminates any remaining old crop premium.

• Friday’s report will be watched closely for record large corn and soybean output, which if absent may well trigger price reaction. There are some who are looking for output some 5% above previous bests although we are, at this time, doubtful of such large upside. The main question is, “How BIG is BIG?”

• Initial crop size is awaited from Friday s report and, again, August is seasonally a weak period for agri markets. However, China’s recent interest in soybeans, along with record soybean export shipments, should not be ignored. We should all keep in mind that the US will be the world’s only soybean supplier through to early 2017, with the Gulf corn market becoming increasingly competitive, and all that comes with it.

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

Weekend summary 5 August 2016

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

Fund positions

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

Wheat: 370,500 mt, which is within estimates of 350,000-650,000 mt.
Corn: 1,227,400 mt, which is above estimates of 800,000-1,200,000 mt.
Soybeans: 1,670,400 mt, which is above estimates of 1,100,000-1,700,000 mt.
Soybean Meal: 215,800 mt, which is within estimates of 65,000-300,000 mt.
Soybean Oil: 36,600 mt, which is above estimates of 4,000-30,000 mt.

• Brussels has issued weekly wheat export certificates totalling 420,389 mt, which brings the season total to 2.797 million mt. This is 699,616 mt (33.3%) ahead of last year. Barley exports for the week reached 92,113 mt, which brings the season total to 831,339 which is 53.81% behind last season.

• It has been a mixed, and frankly speaking, boring session so far in Chicago. Good, solid old and new crop soybean export sales have allowed some small gains whilst the grains have languished just below unchanged in the absence of fresh news. Nearby MATIF wheat prices are €uro 2/mt lower on news of recent imports into France from Romania, which are suggested (not confirmed) to be for delivery against MATIF futures.

• We reiterate our view that the market needs to better understand and have confidence in the size of US wheat, corn and soybean crop output prior to turning attention to demand issues. We continue to anticipate a seasonal low price in the next few weeks.

• Chicago soybean markets saw a lighter “inside” day of lighter trading with prices closing firmer on the close. There was little in the way of fresh market news aside from large export announcements and daily weather updates, which continue to project non-threatening conditions into mid-August. Soybean yield predictions are at, or near, record levels, and it is this which has been a key price driver in recent weeks whilst the huge export shipment and sales volumes have been largely ignored. These will likely become a more significant price driver going forward as soybean prices attempt to move up from key price support levels.

• Corn futures settled a touch higher as energy prices rebounded and new crop sales were announced. Thursday’s export sales figures are expected to be high in both old and new crop given a small drop in US Gulf basis levels and a slight hike in Black Sea premiums; the US appears to now officially be the cheapest corn origin through to November, and potentially so into early 2017! Dramatic boosts in export volume are unlikely but a sizeable export programme will doubtless build in time. Crop finishing weather across the midwest appears mixed into mid/late August with plenty of rain in the coming ten days but lingering and potentially damaging heat remains (high 90’s to low 100’s) across some of the region. Crop yields are being forecast as variable although a 168 bushels/acre number is widely anticipated and the earlier 173 plus bushels/acre level looks more remote given the warmth this summer so far. Continued lack of strength appears the theme although the stage seems set for a decent price recovery in mid to late autumn.

• In wheat the European cash markets eased a touch although quality concerns are spilling over into Germany. Russian wheat remains the world’s cheapest, and yield estimates there continue to grow. As we have previously suggested it seems that wheat quality premiums will continue to grow, certainly in Europe. This could bode well for US quality wheat export potential in coming months. The developing La Niña appears a heaven sent blessing to Australian farmers as better than average precipitation fell in July and vegetative health maps suggest better than trend yield potential is on the cards. Forecasts are calling for additional soaking rains on both coasts in the coming 10 to 12 days, which will continue to benefit crop potential. Australian cash fob prices have declined some 6-8% since late June and it feels as if Aussie exporters will be aggressive in holding on to Asian business this season.

• The latest US crop condition report (detail above) has kept pressure on the US summer row crops of soybeans and corn. Added to this the latest FS Stone yield and crop estimates hit record levels and this has added to pressure. Nov ’16 soybeans breached the significant 200 day moving average support level ($9.555/bu), which sparked further selling and new lows have been scored across the big three of corn, soybeans and wheat.

• Chicago markets have been in almost constant decline since late June and the outlook for big crops should not come as a surprise to any readers who have been following our commentaries. There looks to be potential for corn and soybeans to yield as much as 5% above trend given normal weather into harvest. Should this materialise we can see Dec corn futures  prices coming close to $3.10/bu, which equates to some 20 cents of downside. Clearly the market will try and retain some weather risk premium but time is eroding for this to impact yield and output significantly. With current cash prices at two year lows, end users are understandably not shy in adding to forward cover on price dips, and it is this which is a limiting factor to prices declining significantly from current levels.

• Wheat prices are following corn but global levels are rising as N Hemisphere harvest advances. Offers were made to Egypt’s GASC in their latest tender for September shipment, Russia, Ukraine and Romania were evident with France once again noticeably absent. This absence is likely a cause for less aggression seen in offers although 60,000 mt was secured from Russia at a price reported to be $177.09/mt basis C&F. Black Sea producers seem to view storage as their best financial option at present, and we would not disagree with their opinion at this time.

• Funds are still exiting stale wrong bean long positions while US crop sizes keep being talked larger amid non threatening weather. China has purchased another 4 to 7 cargoes of soybeans today out of the US. The tone of the market is bearish but we would continue to advise against becoming overly so at current low prices. September corn futures are approaching the 2014 lows at $3.185/bu while September Chicago wheat has fallen below $4.00/bu.