News today includes a further update from SovEcon reporting the Russian 2012 wheat crop at 38 mmt down from their last estimated figure of 39 mmt. In addition the Ukraine 2012/13 grain export figure is reduced to 20 mmt down from 22.8 mmt yoy. These figures appear the day before the Russian meeting to discuss grain output, exports and potentially the future of the region’s exports for the remainder of the season. A Russian industry leader has emphatically suggested that there will be no intervention in the free market; we remain unconvinced at this point in time. It seems inconceivable that Russia, and in turn Ukraine, will permit free exports until such time as the stock situation requires imports from either EU or US origins to supply the already high priced domestic flour and wheat markets. We will be watching developments closely tomorrow.

According to ADAS the UK harvest has reached midway and yield figures vary hugely as predicted. Low specific weights appear to be the key talking point although Hagberg levels are also lower than normal.

The “saviour” of the global soybean and corn crop deficit emanating from the poor US harvest which is expected to emerge from Brazil’s next crop may be blighted by a particularly mild El Niño weather pattern. However, at least it does appear that it WILL be an El Niño rather than another La El Niña with its predominant dry conditions. It is far too early to make a definitive call on what may or may not emanate from Brazil next season, although our conversations with growers in the region suggest early and large plantings are favoured with the opportunity to double crop and capture high priced markets whilst opportunities remain.

Overnight we received an update on US soybean export levels which have persisted at record pace, exceeding even last years record levels. This has resulted in stronger Gulf basis levels despite record prices achieved over the last couple of months. Current export volumes are 38% above the previous record of 2000/1; the US soybean balance sheet is likely to take a hit when next published by the USDA in their September report.

The principal destination for the most recent export shipments is China, cumulative volumes exceed each month last year with an anticipated total in excess of 59 mmt for the marketing year. The message is clear, currently price is not creating the required rationing necessary to preserve global stock levels, coupled with potentially disappointing US yield it would lead us to conclude that we will have to see further price increases before to long.