- Midday comments:
- Last night’s US weekly crop condition and progress report showed winter wheat to be 90% harvested, which is ahead of last year (86%) and the five year average (85%). The spring wheat crop is rated 70% good/excellent, better (by 2%) than the five year average. Possibly more importantly, corn rated as good/excellent dropped 2% from last week to 73%, which is better than last year (64%) and the ten year average (60%). Soybean good/excellent ratings were unchanged from last week at 71%, which is better than last year (64%) and the ten year average (58%). The trade was expecting some decline in soybean condition and the added rainfall in forecasts may well see the crop hold condition, or even improve a touch next week. Regardless, the crops are in as good condition as many can recall – long may this continue!
- The latest Brazilian trade data for July was released at the end of last week and unsurprisingly soybean exports are following the normal seasonal volume decline, but remain at record large rate. July was 850,000 mt less than June, but 390,000 mt higher than last season and 1.9 million mt above the five year average at a touch above 6 million mt. The marketing year to date (Feb-July) stands at 37.8 million mt, which is 6 million mt ahead of last year and a record large for this stage of the season. The USDA’s latest forecast of 45.8 million mt for the year now looks woefully light!
- Brazilian offered prices for soybeans remain below the US into late summer and they continue to attract business. Despite this, even with record large exports, it would seem that Brazil is likely to finish the year with a three year high end stock of 3.6 million mt and a stock/use ratio of 4.2%. Such a comfortable stock position is likely to add to price pressure, in particular capping any rallies and potentially adding competition to early season US prices.
- Some concerns of reduced output of quality wheat in Europe and Ukraine together with some short covering by the close to record short market position added support. This is countered by improved US spring wheat condition and better prospects for Russian output as many are reporting and is likely to be reflected in next week’s USDA figures, and may keep a lid on any rally.
- In corn we saw a degree of strength coming from short-term dryness which triggered some short covering as well as pre-USDA report position squaring. That said, global fundamentals seem to have become more bearish even in the space of a week as the French feed grade wheat excess (due to switching from quality output as a result of wet harvest weather) and the possibility that this may also be a feature in Ukraine, becomes more widely discussed. News of Brazil’s proposed 7 million mt corn freight subsidy, which we reported on last night, is also price negative.
- Soybean news continues to revolve around weather and the market reacts rapidly to changes in forecast. Recent wetter weather and further prospects for more rain in the forecasts will, if it materialises, likely see yield forecasts grow higher still.
- Finally, we saw F C Stone issue US crop estimates late on yesterday and they continued the theme of larger crops which has been the trend. Their corn yield was 172.4 bu/acre vs. the latest USDA figure at 165.3 bu/acre. Their output number of 14.455 billion bu compares with the USDA at 13.86 billion bu. The soybean yield was estimated at 46.0 bu/acre vs. USDA at 45.2 bu/acre. Output of 3.865 billion bu is also higher than the USDAS’s latest 3.8 billion bu.
- Evening update:
- Informa Economics have joined in with the crop estimate throng, and their figures are corn yield 168.0 bu/acre with output at 13.988 billion bu (both figures an increase from their last estimates). Their soybean forecast is 44.5 bu/acre with output at 3.7 billion bu both of which are unchanged month on month. Interestingly the Informa estimates are amongst the lowest in the recent spate of forecasts although we should bear in mind that they try not to forecast the crop but to peg where the USDA’s NASS figure will be published.
- Markets in corn and soybeans are heading into the close at lower levels whilst wheat continues to find a degree of support from short covering before next week’s USDA report.
- Russian wheat output remains a key discussion topic as near record crop estimates continue to come forward. The potential for their exports to fill the gap which may be left by the EU, in particular France, is growing. Given the abundance of feed wheat supplies that is staring Europe squarely between the eyes the potential for Ukraine corn imports looks as if it could well be curtailed, leaving Ukraine searching for an outlet.
- It could well be a significant change in fortunes for both Russia and France (EU) in the coming season, last year Russia exported 19 million mt and the EU 30 million mt and we would not be surprised if these figures saw a marked reversal given the potential for Russia to have an exportable surplus of some 30 million mt.
- Finally, meetings are taking place this week to resolve deliverable quality specifications for MATIF wheat.The outcome is far from predictable and the prospect of multiple lawsuits is high if the “wrong” outcome is reached.