30 January 2013

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  • Once again it seems that focus is falling on S America with suggestions of the Argentine soybean crop falling below 50 million mt and the corn output below 24 million mt. In Brazil harvest is underway, albeit with interruptions for rain, and early reports are pointing at lower yields in the key soybean growing state – talk is beginning to emerge of a sub 80 million mt crop. It is, of course, far too early for such discussions to be considered as hard fact but the market is trading upwards on the news.
  • To put some meat on the bones, private forecaster Lanworth estimates the Argentine soybean crop at 53.1 million mt, a reduction of 2.1 million mt from a month ago and their corn crop at 25.6 million mt, which is only 400,000 mt below last month’s figure. The Brazilian estimate from Lanworth stands at 80.9 million mt of soybeans, which is an increase from 79.4 million mt in December and corn also showing a 300,000 mt increase to 75.8 million mt.
  • Technical pictures on corn and soybeans are looking somewhat more bullish and it would appear that some buying has emerged as a result, adding to the strength of the picture. Cash prices in the US for both corn and soybeans remain firm as farmers retain stock in what can only be described as a tight old crop position.
  • The latest outlook for winter wheat in the US makes for poor reading with further deterioration as a result of continuing drought conditions. Top producer, Kansas, crop ratings of good to excellent dropped 4 points to 20% since December. Maximum moisture in the state was well below average at just one inch, and higher than average temperatures added to soil  moisture depletion. Nebraska fared no better with ¼ inch of moisture or less and little in the way of snow protection leaving the crop rated at just 8% good to excellent, down from 14% last month.
  • News from Canada of higher output as a result of greater plantings next year took eyes away from what we consider to be the main event, the forthcoming US crop! Potential abandonment rates, which we tentatively discussed as possibly reaching 25% some weeks ago, are now being put even higher, figures of 30% and higher are being quoted.
  • In another move, which we regard quite cynically as a diversionary tactic, the Russian Ag Minister is openly talking of enlarged crops and export capabilities. There is a far more pressing and immediate need, and that is their old crop tightness! We were always well drilled in our formative years that borrowing new crop stocks to relieve old crop stresses is not an easy task to accomplish with success; and we haven’t changed our opinion.