Weekly summary:

• This week’s big news is probably the partial shutdown of the US Federal Government following Congress’ failure to agree a new budget. The Republican-led House of Representatives insisted on delaying President Barack Obama’s healthcare reform, dubbed “Obamacare”, as a condition for passing a bill. More than 700,000 federal employees face unpaid leave with no guarantee of back pay once the deadlock is over. This is the first shutdown in 17 years and the dollar fell early on Tuesday when the news broke.

• The impact upon markets is less than clear, but one thing is sure, and that is that uncertainty is far from helpful. US export data, scheduled for release Thursday this week was not issued, and there are suggestions that the USDA’s October crop report is far from certain to be released on schedule. Under these circumstances, it is likely that a combination of actual corn and soybean harvest data and trade estimates will become the pillar upon which markets will function in the short term.

• The US soybean harvest is beginning to gather pace as it moves northwards and as we continue to hear of better than anticipated yields, it is difficult to argue against a continued bearish pattern particularly in the context of rising overall oilseed output across the globe as a whole.

• In corn too, harvest is well under way, although there is likely to be a weather interruption for a few days, and the market having dropped to below $4.40/bu, basis Dec ’13 CBOT, is now lacking direction, and feels resigned to sympathise with its cousin, wheat. Global importers continue to source non-US origin supplies from both Brazil and Black Sea, both representing better value to the buyer for the time being.

• Wheat has a somewhat less bearish feel to it right now with three key markets (CBOT, Paris and London) all displaying a potentially bullish “double bottom” chart formation in front month contracts, and CBOT has recently gained in excess of $0.50/bu (around 8.8%) in the Dec ’13 contract from it’s contract lows. Brazil continues to look further afield for wheat supplies due to reduced Argentine availability, and both US and Canada appear to be likely origins. Some relief to the wheat market may appear in the form of a forecast weather window assisting the wet weather hit plantings in Russia and Ukraine where progress is currently well behind average. The delay has raised concerns on overall grain output for 2014 and the potential impact upon export availability in the region.

• Brussels has granted another big week (the largest so far this season) of wheat export licences with 757,832 mt, which brings the season total to 7.228 million mt. This is an increase of 2.945 million mt over the same time last year (68.8%).

• In the UK DEFRA have released their latest update (Sep ’13 compared with May ’13) to 2012/13 grain balance sheets, which whilst academic in the historic sense, have relevance insofar as they impact opening stock levels and therefore the 2013/14 balance sheet. For wheat, commercial end stocks rose by 251,000 mt; this was a result of increased imports (407,000 mt) and a reduction in exports (63,000 mt) offset by increased domestic consumption (219,000 mt). Barley stocks also increased, but only by 43,000 mt leaving a combined additional grain stocks total close to 300,000 mt with which to start to 2013/14 season. Both empirical and anecdotal evidence shows that early season import volumes have remained elevated this season as millers looked to imports to ensure sufficiency of supply, particularly in the early part of the season. In the light of latest UK harvest estimates it would appear that the domestic S&D position is not as tight as was first feared.

• Added to the UK’s “good news”, COCERAL’s latest forecast for the combined EU soft wheat crop is 132.5 million mt, an increase of close to 4.5 million mt from their last estimate. This level of output, if realized, would add credibility to suggestions of overall EU exports this season reaching 26 million mt.

• Wednesday this week saw something of an explosion to the upside in Paris rapeseed, caused by news that there is to be an import tax on Indonesian and Argentine bio-diesel with the resultant EU domestic crush growing. This news was sufficient to raise not only Paris, but also Canadian rapeseed and provide some support into CBOT beans. The close in Paris saw the market give back nearly half of the day’s gain, and the remainder of the week has seen little in the way of change.

• In other news, we have today heard that StatsCan have all but confirmed record wheat and canola (rapeseed) crops as September weather boosted already good looking output. They forecast wheat up 22% on last year to a record 33.02 million mt, and canola up 15.9% to 15.96 million mt. Canada is the world’s number one producer and exporter of canola and the number two exporter of wheat.

• In summary, we continue to look for lower levels, particularly in corn and soybeans as the US harvest gets into full swing, and if these materialize would also expect to see further downward pressure brought to bear upon wheat prices.