Once again we see the old “turnaround Tuesday” trick being pulled out of the hat as CBOT markets clawed back some of yesterday’s losses which were blamed on hurricane Sandy pressuring commodity sales to pay prospective equity margin calls.
The biggest news, hurricanes aside, comes from S America with headlines from Argentina proclaiming storms to have cut corn output by as much as 20% and soybeans by 10%. Parts of the Argentine corn belt are reported to have received as much as a full 12 months worth of rain since September. Argentina is the worlds No 2 corn and No 3 soybean supplier and much reliance is being placed upon decent crops this year to help restore some stocks to the increasingly tight global supply and demand picture.
The reports received some confirmation from noted crop analyst Michael Cordonnier forecasting an 80 million mt soybean crop in Brazil, which is lower than the 81 to 83 million forecast earlier and he added that the Argentine corn crop would be reduced following recent persistent rainfall which has left “fields two feet deep in water as far as the eye can see.”
The impact of the rainfall has left Argentine corn planting at 38% complete, which is behind the 58% planted at the same time last year. Regardless it would appear that S America may well switch significant corn acres to soybeans which can be planted later in the season than corn. Brazil’s soybean plantings are similarly behind in some regions with the south suffering from extreme wet weather and the north awaiting further rains to break the prolonged dry spell.
Closer to home the EU grain balance sheet is, as we have previously highlighted, extremely tight with both stocks and stocks/use ratios at historically low levels; projected stocks of some 22 days are less than “pipeline” requirement. Current export rates, particularly in wheat, exacerbate the problem placing a requirement for grain imports to meet livestock feed demand later in the season. These are likely to be in the form of corn from either Ukraine or Brazil, with projected volumes in the order of around 8 million mt required to only just maintain last years record low feed grain stocks. Given the tight global corn supply situation this is an additional demand which, when fully recognised, is likely to spark prices higher
US soybean sales to China were once again in the news with a further 8 to 10 cargoes reputedly sold. Again cash basis has firmed, particularly from an export perspective underlining the potential for stronger CBOT levels in coming weeks.