31 July 2014

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  • Midday comments:
  • In wheat we are looking at the start of a fund roll, which will impact CBOT markets and fresh export business has indeed lent some support but it feels as if the market requires a bigger input if the bearish tone is to be curtailed. Yesterday’s GASC tender and the lack of French offers on the back of quality concerns does not appear to be a long term detractor to the market as Black Sea quality supplies look to be more than adequate to keep the business to themselves.Of interest is the “reluctance” of Ukraine to become part of the general pool of sellers, particularly in the light of their potential crop.
  • We continue to hear of EU rain damage limiting milling quality and generally higher protein wheat, and whilst this is not an issue right now, any weather issues elsewhere (Argentina or Australia for example) could see quality premiums explode to the upside, at the expense of feed grains.
  • Corn in Chicago has seen some support from wheat as well as dryness in parts of the western corn belt and strong ethanol demand, all of which has conspired to limit downside. Weather forecasts remain pretty much unchanged and supportive to good crop development and limited crop stress levels. We are looking at a “promise” of rain which is limiting upside right now, and it is important for the price trend that this is ultimately delivered in the first couple of weeks of August.
  • The prospect of China limiting corn and sorghum imports due to their large corn crop, and rainfall in the US sorghum growing area of the western plains may well add to price pressures. China has large reserves of corn, some are suggesting as much as 100 million mt, and there is pressure to see this move this year, and imports of corn or sorghum will be seen as detrimental to such movement.
  • Soybean markets are displaying typical weather driven volatility as forecasts are updated as much as four times a day. Bearish forecasts into next week saw old crop supplies increase particularly from S America as well as remaining US long holders. Actual rainfall, as opposed to forecast rainfall, will be vitally important if bullish yield estimates are to grow as many suggest.
  • Suggestions that Argentine soybean sales are up in the face of debt default are widely discussed. S & P rating agency have already declared Argentina in default after the government missed an interest payment deadline. Regardless of the Argentine position it feels very much as if weather related risk premium is being withdrawn from the market as each day goes by.
  • Evening update:
  • The US has released its weekly export data as follows:

Wheat: 801,000 mt, which is above estimates of 350,000-550,000 mt.
Corn: 1,267,100 mt, which is above estimates of 800,000-1,250,000 mt.
Soybeans: 1,456,100 mt, which is above estimates of 900,000-1,300,000 mt.
Soybean meal: 751,100 mt, which is above estimates of 550,000-650,000 mt.
Soybean oil: 32,800 mt, which is within estimates of 0-65,000 mt.

  • The International Grains Council has released its latest deliberations which show global wheat output at 702 million mt, an increase from 699 million mt last month but down from 710 million mt last year. Russia was forecast at 55 million mt, up 4 million mt month on month and an increase from last year’s 52.1 million mt. Ukraine came in at 21.5 million mt, up from 20 million mt month on month but down from 22.3 million mt year on year.
  • Global corn output was forecast at 969 million mt, up from 963 million mt month on month, and down from 974 million mt year on year. Within this, the US was forecast at 353 million mt, up from 350 million mt month on month but down from353.7 million mt year on year.
  • The world soybean crop was estimated at 304 million mt, up from 300 million mt month on month and up from 292 million mt year on year.
  • Brussels granted weekly wheat export licences totalling 555,260 mt bringing the season total to 1.403 million mt, which is 305,278 mt behind last year. Corresponding barley exports for the week reached 118,000 mt bringing the season total to 907,000mt. Corn import licences of 217,000 mt were approved with the season total now standing at 1.1 million mt.
  • The UK barley harvest was reported to be 85% complete as of yesterday, slightly ahead of average. Yields  so far have been reported to be 6.34 mt/ha, which is above the five year average. Quality is average and moisture reported to be around 14%. The earliest wheat harvests have taken place with some 10% now cut and yield reportedly good. Quality test weights and Hagbergs are also reported to be good although protein levels are below average. It must be borne in mind that this is still very early and there is time for a turnaround in harvest fortunes. The latest Stratégie Grains UK output estimates stand at 15.492 million mt of wheat (vs. 11.921 million mt lat year) and 6.015 million mt of barley (vs. 7.092 million mt last year).
  • CBOT markets closed pretty much unchanged (corn a touch lower) and larger than anticipated US weekly exports provided support to both soybeans and meal yet growing global crop estimates and suggestions of improved US weather conditions (and the impact upon crop prospects) have placed a firm cap upon gains. The key number has been soybean meal exports which bring total new crop commitments to 3.7 million mt, which is a record and three times the rate of last year. So far, about half these sales are to “unknown” destinations leaving a degree of uncertainty as far as the 2014/15 soybean meal balance sheet is concerned.
  • EU weather next week is forecast to be completely dry, following a showery end to this week, which will come as a relief to growers and hopes will be high that some quality can be regained.