- Midday comments:
- US crop conditions and progress data was released after the close last night and revealed that corn condition was unchanged from last week at 74% good/excellent which compares with the ten year average of 62% . Soybeans were rated 73% good/excellent, a 1% improvement week on week which compares with the ten year average of 58%. Spring wheat was reported to be 96% harvested compared with 94% a week ago, winter wheat is 56% planted which and is exactly the same as the the ten year average and compares with 43% a week ago. Corn is 17% harvested, behind the 20% expected figure and the ten year average of 30%. Soybeans are 20% harvested, behind expectations of 23% and compared with the ten year average of 37%.
- It is worthwhile reminding that this year’s crop is forecast to be a “monster” and will doubtless take longer to harvest, so the numbers are not all doom and gloom. Clearly there is some delay caused by cooler and wetter (I.e. beneficial) conditions that have boosted the crop and there is some tradeoff with the time it will take to gather.
- US wheat export inspections were 650,000 mt for a season total of 9.544 million mt, which is 33% behind last year. Soybean inspections reached 974,000 mt for a season total of 2.475 million mt, 36% ahead of last year. For completeness corn inspections were 884,000 mt with the season total at 4.026 million mt, which is 69% ahead of last year.
- Yesterday’s rally has taken many by surprise, not insofar as the rally has existed, but more the sharpness, and that it has extended into Tuesday. The lower US$ has undoubtedly added some fuel to a fire which seemed to self-ignite ahead of this week’s USDA report. The key for the market appears to be about money coming off the table and managing risk particularly with some uncertainty in the air over the NASS/FSA acreage data.
- The gains seen in Matif Rapeseed have lasted six straight days and we are (this morning) at a ten week high, the two week gain is €21.00/mt. Explanations are scarce and varied but one common theme suggests some insecticide bans and the impact upon pollinating honey bee populations may be behind the uplift in prices. Frequent spraying to control aphids, particularly at and immediately after crop emergence, has been the norm. Some news from Germany suggesting that the inability to spray is already displaying some damage to the newly emerged winter planted crop. There is no empirical data to support this at present, and the discussion can only be one of the suggestions behind the price jump. An alternative explanation hinges on the perceived delay in the US soybean crop mentioned previously.
- Evening update:
- Early trade suggested we were going to see a reversal as prices in Chicago eased, however this has not been the case. Yesterday’s “Mystery Rally” took many by surprise particularly given US harvest data that continues to point to a very big crop. There are few who are suggesting corn yield will come in above 180 bu/acre and soybeans above 50 bu/acre. In addition, world grain crop sizes keep on growing with many suggesting the EU corn crop will reach in excess of a record 72 million mt, which will further restrict imports. It should not be forgotten tat last year the EU was the world’s 2nd largest corn importer. Ukraine will have to compete with the US for S Korean and N African markets in order that new crop supplies ultimately reach market rather than remain in farmer’s sheds. In the light of the global grain surplus it is difficult to see the current rally being sustained for too long.
- Harvest weather conditions across the N Plains and N Midwest look set to remain fair into the weekend, a large area of rain appears likely across the S Plains, S Midwest and Delta into early next week with drying forecast thereafter.
- There have been rumours circulating (currently unconfirmed) that China has secured as much as 2 million mt of corn from Ukraine in recent days. There is a high degree of credibility to the rumour given that China lent £3 billion to Ukraine in 2013 and 3 million mt of corn imports could well be the expected route to payoff. The purchase, if confirmed, is not viewed as market bullish, and it should be noted that China has not relaxed its demand for non-MIR162 corn, which currently all but eliminates the US, whilst Ukrainian corn is argued to be GM free.
- Neither Black Sea or EU wheat values have followed the CBOT rally with Black Sea FOB levels actually dipping slightly in the day. This suggests to us that US values are pushing into a position of reducing competitiveness in a marketplace which dictates that the reverse is somewhat more desirable. The US cannot afford to miss export demand (neither for that matter can other origins).
- The sharp market price declines seen in recent weeks/months are being countered by the current rally, which we view as a short-term market correction ahead of Friday’s key USDA report. We continue to suggest that neither corn or soybeans have scored their seasonal lows at this time.