• Midday comments:

• The run in to the Labor Day long weekend in the US coupled with increased tensions in Ukraine have lifted markets in early trade today. The Labor Day holiday is, in our view, a short-term distraction to the market, and will all be over in a few days. However, the Ukraine/Russian issue seems to be becoming more of an “on again, off again” affair which has dragged on, and on. Today’s news has included a statement from Ukrainian President Poroshenko to the effect that Russian forces, including tanks, had entered the east of the country. A request has been made to call an emergency meeting of the UN Security Council and also the European Council to respond to the situation. The Kremlin has continued to deny that their forces are fighting in the country. The Russian Rouble hit lows not seen since last March on the back of the news, and it is somewhat ironic that this may in fact aid their grain export programme by making them more competitive in an already competitive marketplace. CBOT, Paris and London wheat markets have (predictably) all added protection on the latest news.

• Corn prices rose on both the forthcoming holiday weekend in the US and gains in wheat, although the price gains don’t feel terribly compelling right now. There are some serious questions being asked about the outlook for corn export demand and this is becoming more talked about than previously. Demand is good, before anyone questions our last statement, however the potential for growth from the USDA’s latest export number of 1.725 billion bu looks questionable particularly as China has not relaxed corn import restrictions, and indeed appear to be clamping down on other feed grains including DDG’s, sorghum and even alfalfa. In addition, corn export potential from Ukraine together with the abundance of feed wheat supplies in Europe, France in particular, will doubtless appear tempting to buyers, including SE Asia, and will potentially displace more traditional US corn exports.

• Soybean markets also found support from Labor Day and Ukraine news. SDS (Sudden Death Syndrome) and flooding talk is also coming forward as the bulls, at last, find something to (almost) latch onto and turn into a story. The potential for flooding and associated damage is most likely to be fully offset by improved outlook for the rest of the Midwest. The September ’14 soybean contract is, at last, unwinding open interest and the impact of the final old crop contract is reducing, leaving the new crop fundamentals to determine market direction.

• Evening update:

• CBOT and European markets are all trading in positive territory at the time of writing, the reasons have been previously stated above. Other news includes a report from the Russian Grain Union that their grain can now be sold to Brazil, which has the potential to displace US supplies, particularly in view of current price disparities. Clearly for this to happen, it will require weather and supply to become an issue in S America again this year. The CBOT Dec ’14 corn and wheat differential has risen to $2.07/bu (again at the time of writing) and highlights the potential difficulty that US wheat will face in achieving a competitive status in export markets. Whilst this level is nowhere near the “highs”, it will make the life of US wheat difficult. The likely overstatement of EU corn imports by the USDA and growth in feed what supply in the EU, following rain affected harvests, particularly in France, will all conspire to adversely impact US corn exports still further.

• Early US harvest yield data from the Delta and southern states is “impressive” according to reports. The range of yield for soybeans is 65-85 bu/acre and corn 170-230 bu/acre. Bear in mind that the USDA’s latest figures were 45.4 and 167.4 respectively. Also bear in mind that much of the southern acreage will have benefitted from irrigation, which is not the norm across the whole US crop. Regardless, there is little doubt that the early yields, which are huge, will reassure the bears and spark nervousness amongst the bulls, and it will be interesting to see their reaction post the Labor Day holiday, and also what the USDA’s September report brings.

• Weekly US export data was released as follows:

Wheat; 403,600 mt which is within estimates of 300,000-500,000 mt.
Corn; 662,900 mt which is within estimates of 350,000-850,000 mt.
Soybeans; 1,228,000 mt which is above estimates of 600,000-1,100,000 mt.
Soybean meal; 77,200 mt which is below estimates of 125,000-300,000 mt.
Soybean oil; minus 11,300 mt which is below estimates of 10,000-40,000 mt.

• Brussels granted wheat export licences for the week totalling 684,920 mt bringing the season to date total up to 3.99 million mt. This is 136,749 mt (3.3%) behind last years same time figure. Corn imports for the week were 29,151 mt, their lowest in some while, bringing the season up to 1.876 million mt. This figure suggests that the “annualised rate” stands at a lowly 1.5 million mt and compares with our current estimate of 4 million mt, last year’s 14.509 million mt and the USDA’s latest estimate of 11 million mt (vs. 13 million mt in the July report). Clearly someone is going to be very wrong at this rate!

• To close, on a lighter note, we hear that Putin has suggested his troops are “on holiday” in Ukraine, aiding their “cultural cousins”. Whether this turns out to be the now normal weekly “invasion” story or not remains to be seen, but the market has taken this one more seriously than in previous weeks as evidenced by today’s more persistent, and bigger, price move.