• Brussels has issued weekly wheat export certificates totalling 455,784 mt, which brings the season total to 5.95 million mt. This is 1.35 million mt (29.3%) ahead of last year. Barley exports for the week reached 71,672 mt, which brings the season total to 1.09 million mt, which is 2.09 million mt (65.7)% behind last year.

• US export data was released as follows:

• Chicago has seen mixed trade with the grains and soybeans trading in opposite directions. Soybeans picked up a bid whilst the grains sank on fresh fund related selling. Buyers remain reluctant to chase the rally with harvest immediately ahead whilst farmer sellers are reluctant to sell at current levels – stalemate and choppy, rangebound trade anyone? Yield data and buyer aggression will determine if, and by how much a rally develops in October, and we are still of the opinion that a low has been (or will be) formed during September.

• Wednesday saw a quieter day of trading in Chicago soybean futures, which left them slightly weaker with products mixed. Meal traded quietly,just above the monthly lows whilst oil slipped to a five week low before ending about unchanged. The theme of big crop and big demand is still intact, and this will likely see markets continue to trade a broad range. Both crush and export programmes are expected to be record large in coming months, while record yield and revenues (well above insurance values) look as if they will work to cap rallies.

• Corn managed a slight rally despite weak energy markets. E Midwestern yields appear variable although this appears to be improving as work moves further north but currently it is failing to match 2014 (prior record) levels. It feels very much as if we are at, or have been at, the low end of the trading range although it must be noted that the fundamentals are not bullish at this time.

• With the US$ lower wheat ended in Chicago a touch higher amid any real fresh news. We hear that Black Sea offers or quotes are hard to come by, maybe exporters are backing off at current pricing, which may add to or confirm that we have seen the lows. Quality remains an issue in much of the European crop.

• Tuesday saw an interesting start as markets digested Monday’s USDA data and raw materials saw a sea of red as the higher than expected yield estimates encouraged long liquidation, particularly in soybeans whilst the stronger US$ and sharply weaker energies added further pressure. Even wheat participated following better than anticipated Australian output figures from ABARES overnight.

• China is reported to be more active in sourcing soybeans on the break and we would expect to see further activity on these lower prices. Energy pricing is expected to remain weak into 2017 according to the US’s EIA due to a large global supply glut.US crude stocks remain high despite a decline in August yet gasoline stocks are 6% up year on year and ethanol is up just over 10%. The next report is expected to show further stock build underlining the position still further.

• Many are pointing to potential enlargement of corn and soybean acres via Monday’s FSA (Farm Service Agency) loan programme enrolment update. We can assume a normal amount of acres will be added (600-800,000) in October and November and we would anticipate 100-400,000 in the upcoming release. However, more important to overall yield will be a function of pod counts/ear weight rather than acres in our view.

• Tuesday saw soybeans weaker with liquidation featuring throughout, new crop export programmes are off to a very strong start and look to accelerate in coming weeks, potentially cushioning cash basis declines into harvest. Corn was plagued by the stronger US$ and falling energies, which if our comment above holds true, looks likely to keep prices capped. Wheat fell in sympathy with corn despite firm global cash prices despite the fact that there is no shortage of wheat in the world and ABARES latest figures (a touch over 28 million mt vs. USDA’s 27.5 million) attest to that very point. Weaker European currencies may account for the firming cash basis and seasonal global price trends rarely show weakness beyond mid-September.

• It remains that if prices are to see a strong recovery demand has to be found otherwise the more than ample supply position will continue to dominate although we struggle to see major bearish price action at current levels.

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

September 16 USDA contemplation

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

Weekend summary 9 September 2016

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

Fund positions

• Brussels has issued weekly wheat export certificates totalling 540,869 mt, which brings the season total to 5.494 million mt. This is 1.454 million mt (36%) ahead of last year. Barley exports for the week reached 39,079 mt, which brings the season total to 1.021 million mt, which is 1.712 million mt (62.65)% behind last year.

• US export data will be published tomorrow, a day later than usual due to the holiday closure on Monday.

• Chicago is once again a mixed picture with the grains, corn and wheat higher and soybeans trading just in negative territory. There is little market moving fresh news again, and the market is awaiting the USDA report data. Average trade guesses feature a lower corn yield next week (173.4 vs. USDA’s 175.1), and a slightly higher bean yield (49.2 vs. USDA’s 48.9), and early harvest results display the same trend so far. Soybean yield potential is very good; corn yields have been lower than expected  although it’s far too early to determine a nationwide trend.

• Egypt’s ergot saga continues. Today, Romanian exporters say a cargo of wheat wasn’t rejected this week but rather the exporter declined to ship based on Egypt’s change in quality specifications. Similar battles over Egyptian wheat shipments will continue until the policy is changed, and note that another cargo of Russian origin has been moored off Egypt since July.

• Clearly all eyes are on the upcoming report and pre-report positioning is evident. The supply debate will focus upon a corn yield of 170-175 bu/acre and soybean yields of 48-51 bu/acre. Barring any major surprises or upsets it seems that fair value for soybeans is in the $9.50-$10.50.bu range whilst corn at $3.20 to $3.60 into late year. Doubtless export sales will become as important supply in coming days and weeks.

• We have seen a mixed start to the week in Chicago (closed yesterday for Labor Day holiday) with the soybean complex higher and grains a touch weaker at midday (which remains the position into the close). It was soybeans that first caught a bid on news of better than expected export shipments and forecast soaking rain across much of the Midwest this week. It is the grains that are lacking excitement – for now! Next Monday sees the next USDA report and it could be that if record corn yield is confirmed we could well see the season low formed and trade move on from there; we will have to wait until Monday for that one!

• The US soybean export numbers (see above) were once again impressive with 45.3 million bu of beans shipped (to week ending 1 September) vs. A mere 3.0 million bu  last year. 38 million were scheduled for shipment in the 2015/16 crop year, which should see final US exports at, or close to 1,940 million bu. This is some 60 million above the USDA’s August figure, and if reflected next week, should see end stocks decline by a similar amount to 195 million bu. This, in turn, will place pressure on new crop yield unless we are to see new crop end stocks below 300 million bu.

• In corn the position is similar, but to a much lesser degree with final exports potentially 15 million bu above the USDA’s August level. This is less of an issue than is the case with soybeans but could also see season lows confirmed.

• CONAB further lowered its estimate of total Brazilian 2015/16 corn production to 67 million mt vs. the USDA’s 68.5, and so Brazilian corn production continues to inch closer to domestic consumption forecasts. We note that Brazil’s ship lineup is in retreat, a majority of Brazilian corn export sales should be finished by late September or early October, and we maintain that Brazil’s exportable surplus will be closer to 16 million mt than the USDA’s 17.5 million. CONAB’s soybean production forecast was left unchanged at 95.4 million mt vs. the USDA’s 96.5 million. Brazilian soybean exports are now struggling amid a lack of offers.

• The US$ was sharply lower, reported to be on account of disappointing non-manufacturing economic growth figures in August leaving the US$ below last week’s low, which adds to upside price pressure.

• Overall, the bears continue to cite record yields and rising private soybean production estimates whilst the bulls cite the US’s newfound status in world markets (much more competitive) as well as record export potential. The outcome will doubtless be clear in the next three to four months but, for now, it is too tight to call either way although we would not wish to be short at current price levels.

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

Weekend summary 2 September 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: 594,100 mt, which is within estimates of 300,000-600,000 mt.
Corn: 1,464,500 mt, which is above estimates of 600,000-1,250,000 mt.
Soybeans: 1,119,600 mt, which is within estimates of 950,000-1,800,000 mt.
Soybean Meal: 177,600 mt, which is within estimates of 75,000-325,000 mt.
Soybean Oil: 12,500 mt, which is within estimates of zero-50,000 mt.

• Brussels has issued weekly wheat export certificates totalling 581,266 mt, which brings the season total to 4.95 million mt. This is 1.28 million mt (34.9%) ahead of last year. Barley exports for the week reached 7,135 mt, which brings the season total to 982,118 mt, which is 1.62 million mt (62.3)% behind last year.

• Chicago markets have had little in the way of selling pressure today and fund short covering has produced something of a solid bounce, the first upward move of note in some time. End user covering was also noted at low prices but this appears to have eased as prices moved north. It is interesting that price support in corn futures now lies solidly at the $3.00/bu level, set at the time of the US meltdown in 2008 and early 2009!

• Seasonal price trends would have us looking for prices to rally, from harvest lows, into October as the N Hemisphere harvest draws to a close. Consequently we remain of the view that downside risk in the grains is low, and in soybeans the likelihood of a tradable bottom forming is growing. Our view is compounded by the size of the funds short positions, which (as we report on a regular basis) provides a potential springboard for prices to spike from.

• We await crop estimates from FC Stone and Informa Economics tomorrow and the market could well pick up on any overtly bearish (or bullish) input from these data releases.