- EU wheat area forecasts for the 2019/20 season are now officially forecast lower (by the EU’s MARS unit). Heavy rainfall and cold conditions have impacted not just the UK but much of Western Europe (Germany, France, UK, Ireland and Benelux countries). The planting window is now officially over as soil temperatures have fallen, but it has been known for farmers to continue to plant winter wheat as late as January despite the inevitable reduction in yields. Returning winter wheat seed to merchants is an almost impossible task and rather than waste it, planting when conditions allow is an option. Spring wheat acreage is forecast to jump dramatically assuming sufficient seed is available.
- Early sown crop development is reported to be favourable whilst later sown crops are displaying some developmental delays. Central and Eastern European wheat crops were planted in better conditions and appear to be developing well.
- UK provisional wheat acreage has been cut 9% year on year to 1,645,000 ha from June’s provisional 1,815,000, which if realised would see the UK’s wheat crop area at its lowest since 2013, which also experienced a wet planting season. It is estimated that as much as half of the winter crop remains unplanted, and the provisional figures above could well be subject to some sizeable revisions in time. Of course, for late planting and spring planting to take place it will be necessary for conditions to return to a more “normal” pattern, which again leaves room for adjustments.
- Interestingly, the DEFRA “early bird” survey is scheduled to be rerun in the new year to provide some more hard data upon which decisions can be made.
- Chicago futures are lower in moderate to light volume with spreading the key feature ahead of first notice day on Friday. Active March-December corn spreading has been noted at 11 cents March premium while the short covering in Chicago wheat has slowed. Soybeans have broken down on the charts with a fall in January below $8.91. We look for a lower Chicago close with end users well covered into 2020 and their seeing no need to make forward purchases amid favourable S American weather. A S American weather problem or US/China trade deal needs to occur before bearish Chicago price trends will change.
- Chicago brokers estimate that funds have sold 6,200 contracts of soybeans, 4,300 contracts of soymeal and 1,000 contracts of soyoil. In the grains, funds have sold 2,000 contracts of corn while being flat in wheat. Some early selling in Chicago wheat uncovered additional fund buying.
- Brazil was willing to allow their currency, the Real, float lower. The Brazilian economic minister visiting the US stated that his country will not support the Real. This caused the Real to drop from 4.15 to 4.26:1 US$ in quick order. The currency move raised Brazilian new crop bids to farmers to 76-83 Reals/bag of soybeans, the best in the past five years. New crop corn bids range from 44-48 Reals/ bag, close to a record high. The financial incentives for Brazilian farmers to seed more soybeans/corn is strong. Winter Brazilian corn seedings could be record large based on today’s financial incentives. Chicago reflected the potential for a more aggressive Brazilian export posture.
- We would anticipate WASDE raising their 2019 Brazilian corn production estimate (last year) based on prevailing shipping data on corn. Last week Brazil exported another 1.035 million mt of corn. This is 675,000 mt more than the prior week and 360,000 million mt more than last year. Brazil has now exported 36 million mt of corn and likely will see that export total grow to 43 million mt by the final count.
- As to other corn exporters, Argentina shipped out 755,000 mt and the Ukraine 859,000 mt, while the US exported 605,000 mt of corn. At least into the end of the year, the US corn export pace does not look to be recovering, leaving a modest 3-4 month window in which it can compete against the Ukraine.
- Argentine Grain Tax rumours abound with most expecting the wheat/corn taxes to rise to 15% vs the current rate of 7%. Soybean taxes are pegged at 33-35%.
- The Argentine ag export tax hike is expected to be announced by Dec 6, before President elect Fernandez takes office on December 10. The Argentine Peso has fallen by 2% to 59.9 pesos vs the US$ this morning.
- The S America forecast is favourable with heavy rains for the dry central area. The rest of Brazil looks to see at least normal rain with any dryness focused on Argentina. This area has enjoyed heavy rains in the past 24 hours but follow up moisture will be required after December 6. The good news is that there is no evidence of any above normal temperatures for Argentine crops with highs in the 70′s to the mid 80′s. The Brazilian new crop soybean crop is off to a favourable start.
- The strong US$ is the talk at midday with S American cash grain prices to farmers at or nearing 5-year highs (in their respective local currencies). Farmers are currently seeding and final seeded area could end up being larger due to better profits. No fresh news is offered on a US/China trade deal with the US silent on progress. Chicago trends are down and few users want to extend their forward coverage ahead of US holiday.