- Midday comments:
- US crop conditions showed an improvement in both corn and soybeans week on week with the former at 74% good/excellent (vs. 73% last week) and the latter 72% good/excellent (vs. 70% last week). Spring wheat rated good/excellent fell 3% to 63% and harvest is disappointingly slow at 38% complete compared with 61% last year and the ten year average of 73%.
- However, news that a ceasefire in Ukraine was “agreed” has eased tension and markets have reacted accordingly in early trading. President Putin has suggested that a ceasefire is unnecessary as his troops are not involved in hostilities. He should truly be on the stage!
- Overnight corn markets came very close to contract lows amid Ukraine news and weakness in wheat markets. Suggestions that Russia might be suspended from high-profile international cultural, economic and/or sporting events appears to have pushed a resolution ever closer. Corn fundamentals continue to weigh heavily to the downside and if geopolitical distractions are lessened we may well see the way clear for a true reflection of value in coming weeks.
- Overnight soybean markets remain oversold from a technical perspective yet the fundamentals continue to pressure prices. Short-term support from harvest weather delays may offer some support, although this is likely to be short lived in our opinion. Disease issues continue to be a talking point although there is little evidence, right now, to suggest that this is a widespread issue. The improvement in crop condition is probably more important to price direction than disease discussion.
- Egypt’s GASC has issued a tender for early October shipment wheat, the results will be available for part two of today’s update. Expectation is for Black Sea origins to continue to be competitive.
- Evening update:
- The markets have traded lower into the close with sharp losses across the board. Soybeans shed a touch over 1% whilst the grains gave 3% back to the market. The drivers include Ukrainian peace talks, crop condition reports as well as continued analyst’s reports supporting yield estimates.
- Reuters forecasting arm, Lanworth, has estimated the Brazilian 2014/15 corn crop at 79 million mt, an increase from 78.6 million mt year on year and soybeans at a record 98 million mt, an increase from 85.7 million mt year on year.
- Brokerage and analyst Allendale Inc has pegged the US corn crop at 14.409 billion bu and a yield of 171.9 bu/acre. Their soybean estimates show the crop at 3.884 billion bu and yied at 46.4 bu/acre.
- Intl F C Stone’s latest figures forecast US corn output at 14.595 billion bu, yield at 174.1 bu/acre, soybeans at 4.0 billion bu with yield 47.6 bu/acre.
- The USDA’s August data showed corn at 14.032 billion bu and 167.4 bu/acre, and soybeans at 3.816 billion bu and 45.4 bu/acre.
- In a slightly contrarian move, Lanworth trimmed back its US output estimates for corn to 173.7 bu/acre (down 0.8 bu/acre) with output down 200 million bu to 14.6 billion bu.
- Next week we will receive the USDA’s September report, and many (including ourselves) would expect to see an upward revision in their numbers – time will tell, as always.
- Egypt purchased 120,000 mt of wheat, with France and Romania sharing the deal. This is the first French win since January, and (obviously) the first this season as rain damage during harvest has reduced wheat quality to the point where many were questioning whether any sales would be concluded to Egypt at all this year. Of interest was the sheer volume offered by France, five Panamax size vessels, all at GASC spec, but most importantly $4-$12/mt below the cheapest Russian offer. Moisture allowances will see prices reduced a further $5/mt (plus costs) and our reading of the situation is that France has now woken up and smelled the coffee, realised they are deep in the “doo-doo”, and playing catch up in their export efforts. This may week have a knock on effect by troubling Russia, who will (like us) be shocked by the price levels of today’s business. What price the next tender? Egypt has played a very cute game by picking off the two cheapest offers today, leaving all others out in the cold.
- Closer to home, Stratégie Grains have released their latest oilseeds report which includes an upward revision in EU rapeseed output from a month ago. Their latest output figure stands at 23.2 million mt, a 300,000 mt increase, whilst sunflower seed output is increased 400,000 mt to 8.6 million mt.