Weekly overview:

• This week ends with a massive “hurrah” as the US debt debacle is finally resolved: or is it?

• The US has agreed to raise the federal debt limit taking “brinkmanship” to its extreme, as national default loomed large and the 11th hour passed by almost unnoticed. The US has raised its $16.7 trillion debt limit and (to coin a phrase used many times) kicked the tin along the road until early February when many believe the same issue will rear its head once again. Regardless, we are now back on a more even keel, data will begin to flow once again and we will no longer be complaining about “flying blind” – apart from the fact that the USDA’s October report is now formally not going to be published, but we already expected that one, and this week’s CFTC fund position reports will also not be published.

• It seems that President Obama’s healthcare bill has emerged relatively unscathed and the Republican House Speaker is claimed to have said, “We fought the good fight, we just didn’t win.” Senator John McCain, the 2008 Republican Presidential nominee stated that (this was), “one of the more shameful chapters I have seen in the years I have spent here in the Senate.”

• Turning back to more market related news almost seems an anticlimax, as fresh news is limited. US harvesting of soybean and corn is progressing with soybeans approaching the halfway mark and corn about a third harvested. The good news is that yields on both crops continue to impress to the upside, and early suggestions that poorer results would be found as the harvest moved north have not (yet) proven correct.

• The weather also appears to have cooperated with frost risk absent to date, although producers continue to focus on gathering soybeans which could be at a greater weather risk than corn should conditions deteriorate. The late summer “flash drought”, as it has been dubbed, appears to have less of an impact on soybean yield than first thought. West of the Mississippi River was hit particularly hard in August, the key period for soybean development, yet yield is being reported at around 5 bu/acre better than expected according to a Reuters report late this week. Corn yields too are bringing some smiles to the faces of producers. There appears to be an east west divide, with the east being the better yielding region. East of the Mississippi River is reported to have consistently better than expected yields whilst to the west the results are more mixed. One thing does appear to be certain, and that is that there are good and not so good yield reports, and it will only be when harvest is complete that we will see the full story.

• There are reports of sharply colder conditions and the first hard freeze of the season developing into the weekend across northern Iowa, Wisconsin, Minnesota and the Dakotas. Late planted crops have had an extended warm period in which to advance and September rains have allowed soybean pod filling to progress, albeit at a slower pace than previously. It remains to be seen whether or not this will have had a positive impact upon yields. The impact of any freeze upon corn is expected to be limited, as the crop is now believed to be sufficiently mature to withstand some frost conditions.

• Looking further afield, good news emanated from Ukraine this week as their AgMin reported that winter planting losses would be “only” 0.5 million ha rather that the formerly suggested 1.5 million ha, they also added that any crop shortfalls would be in barley rather than wheat. Our information suggests that spring plantings in both Russia and Ukraine will favour corn and sunflower rather than wheat or barley. Somewhat less optimistically, there are suggestions that some quality issues are present in Black Sea wheat supplies, and this could become something of an issue for shippers as they load export vessels in fulfillment of their early sales commitments. The impact has been seen upon prices in the region, which have been creeping upwards in recent weeks, lessening their extreme competitive position and making mainland EU prices look more attractive.

• This news did not trigger much activity in Brussels this week as we saw weekly export licences markedly reduced, for the first time this year, with 295,469 mt bringing the season total to 8.39 million mt which is 3.179 million mt ahead of last season (61%). Interestingly, EU corn imports are higher than expected at more than 400,000 mt due to the discount which Black Sea corn commands in relation to mainland EU wheat. Evidentially, we see May/Aug ’14 corn purchases being made by UK feed producers as corn is trading at an attractive discount to wheat on a delivered basis.

• Reuters published a story this week (and we choose this description as opposed to “report”) that China’s COFCO (China’s largest food processing, manufacturer and trader) estimates wheat imports to be no more than 5 million mt in the 2013/14 season. In the aftermath of what is believed to be some substantial early season crop damage, many analysts believe some 10 million mt will be a more realistic import figure, and if we add up US, Australian and French sales commitments to date we arrive at a figure in excess of 6 million mt – hence our opener to this paragraph! Somewhat cynically we wonder if the COFCO story is another example of a “plant” to help move the market in their favour!

• In conclusion, we do not see major weather threats impacting crops or supplies, specifically in the northern hemisphere, and remain of the view that price rallies provide selling opportunities. Our preferred stance is for buyers to maintain a patient profile and look for lower levels at which to take further cover.