25 September 2014

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  • Midday comments:
  • Overnight and early trade saw optimism that US wheat could benefit from improved exports through the Great Lakes, which kept a bid under the market for a while. However, as we have previously stated, technically the market is still very oversold and the Commitment of Traders report shows a heavy net short position. Agricultural “cycle” traders look for key season dates, 22 September big one such date as it is first day of Autumn, and this could have impacted the market somewhat (although we are sceptical of this!).
  • In corn there has been discussion overnight that there is now more upside potential than downside, particularly in view of the decline we have seen since late April or early May. “Bargain hunters” could well view this as their trigger to make purchases, and this added a degree of support overnight. That said, harvest conditions in the US continue to look favourable and we struggle at present to see much upside for now. As harvest ramps up and supplies come to market amid a scenario of tightening freight, this will impact cash basis negatively and leave prices on the defensive, in all probability into October.
  • One commentator described the soybean market as “weak at the knees” as harvest moves forward and cash markets sink. Soybean oil let the move up yesterday whilst meal prices were pressured lower. As S American plantings begin in earnest next month we are looking at a potentially record sown area. One private analyst put the area expansion in Brazil at 5% year on year, potentially adding to the growing global stockpile.
  • Evening update:
  • Markets have declined as reports of huge yields continue to hit the headlines, and fund sellers have reemerged pushing the market to fresh lows. Support, if it can be called that, appears (by consensus) at $9.00/bu for Nov ’14 soybeans and $3.20/bu for Dec ’14 corn. Weekly US export data showed huge soybean sales as expected (see below), but this has not deterred the selling spree. The yield numbers being widely discussed are 50+ bu/acre for soybeans and now a massive 180+ bu/acre on corn. The ongoing “how big is big, and how low is low” debate rages on and it has been calculated that a corn yield above 180 bu/acre would result in prices of $2.90/bu, whilst a soybean yield north of 49 bu/acre would leave prices at $8.00/bu. On the basis of this, it appears soybeans have a greater downside than corn as we head into the Oc tober USDA crop report.
  • We have the September NASS stock report due next week, and it is widely viewed that any adverse data will be a mere “speed bump” in the current marketplace.
  • US weekly export data, released today showed the following:

Wheat; 396,200 mt which is within estimates of 350,000-500,000 mt.
Corn; 1,106,300 mt which is above estimates of 600,000-900,000 mt.
Soybeans; 2,565,500 mt which is within estimates of 1,500,000-2,700,000 mt.
Soybean meal; 80,800 mt which is below estimates of 135,000-265,000 mt.
Soybean oil; 3,000 mt which is within estimates of minus 5,000 to 40,000 mt.

  • Brussels granted weekly wheat export licences amounting to 630,785 mt, which brings the season total to 6.739 million mt. This is 269,238 (4.2%) ahead of the same time last year. Despite the export pace, Matif wheat shed a further €2.00/mt, the reality is that we are in a quiet market, and buyers are scarce, the majority have cover in place and it will likely be cheaper tomorrow anyway! Corn import licences amounting to 71,009 mt were granted, which brings the season to date up to 2.266 million mt, and this compares with 958,731 mt last year (1.307 million mt ahead!).
  • A slew of various data has been issued including the IGS’s latest forecast for 2014/15 world wheat output, which they have increased by 4 million mt to a record 717 million mt. The increase is reflecting improved EU (2.3 million mt to 153.1 million mt) and Ukraine (1.5 million mt to 23 million mt) production according to their report. 2014/15 global corn output has been increased by 1 million mt to 974 million mt, which is lower than last year’s record 983 million mt.
  • AgroConsult estimated the Ukrainian grain crop at 58.5 million mt down 1.1 million mt from their last forecast; corn was reported at 25.9 million mt, down from 27 million mt last estimated. The grain harvest is reported to be 73% complete at this time.
  • Brazil’s AgMin estimates the 2014/15 soybean crop at 90 to 96 million mt, whilst Abiove’s figure is 91 million mt, their 2013/14 estimate is 86.3 million mt down from 86.5 million mt month on month.