- Weekly overview.
- Last Friday’s USDA report was, when the dust settled, a “something and nothing” affair leaving us and most of the trade looking forward to the stocks and prospective plantings reports to be issued on 28th March. Whether or not the report grasps the nettle and addresses the issue of extremely tight US soybean and corn stocks remains to be seen.
- It appears that some signs of corn stock tightness are creeping into the marketplace and prices are reacting accordingly. Cash corn prices have reflected strong premiums over CBOT levels for some time now and the marketplace is reporting stronger volumes of wheat being fed due to corn tightness. This reflected in Mar ’13 CBOT corn’s strong premium over May and we feel that the May ’13 contract is likely to exhibit similar tendencies as time progresses.
- Soybeans, on the other hand, have looked somewhat less strong presumably as a result of the Brazilian harvest which is progressing well. Debate on overall output continues to flow both up and down, but there is little doubt that whichever way we view it, the harvest will be a big one. Whether it is 80 83 million mt is probably of secondary importance. The big issue really is the ability of Brazil to cope with its logistical issues and finally be able to export the crop.
- We hear of many troublesome issues within Brazil, all conspiring to put a spanner in the export corridor. Vehicles travel in convoy on poorly maintained roads from the producing heartlands, mainly to assist each other when road surfaces prevent safe passage. Journey times which took two or three days now takes up to four or five! This is consistently adding cost with queues to discharge vehicles at ports being reported at 25km or more and delays of up to 24 hours when actually discharging at the port. None of these factors assist the cause or provide confidence to end consumers so there is little wonder the vessel line up and loading delays of 60 days plus are encouraging buyers to look elsewhere.
- The “elsewhere” in discussion just happens to be the US. We did pick up that some 8 or 9 further cargoes of soybeans could have been sold recently but were not because of the lack of availability of suitable freight. Seemingly the huge line up at Brazilian ports is having an impact upon the number of vessels offered for charter. At the same time, the tight US stock position has little room for additional exports and current low (in relative terms) prices continue to fail to convince consumers that there is a potential supply issue.
- Stratégie Grains this week reduced their outlook for EU soft wheat output by 600,000 mt with a revised estimate at 131.6 million mt largely as a result of the poor UK crop prospects. The UK’s 2013 harvest is predicted at 12.108 million mt, down from 12.417 million mt a month ago. On the other hand barley output for the UK is estimated at 1.1 million mt higher, largely as a result of increased spring plantings following the wet autumn planting season which saw large acreages unplanted. Rains left an estimated 25% of the planned acreage unplanted, this is a figure that approaches record levels. On-going cold conditions have left the crop in a delayed state with the possibility that harvest may similarly be delayed. We are starting to see early indications of new crop barley discounts making an appearance at what appear to be attractive levels in comparison to wheat.
- Finally, Brussels granted a further 564,000 mt of wheat export licences, which brings the season to date total up to 15.779 million mt. This is 3.854 million mt ahead of last season at the same time; or in percentage terms, 32.3% ahead of last season. We continue to have concerns over the end of season stocks levels, and if we have any harvest delays extending the period of old crop consumption, the tightness will be exacerbated with potentially serious consequences.