Today heralds a “new” item of news with reports that the US Army Corps of Engineers are about to proceed with plans to reduce the flow of water from the upper reaches of the Missouri river reservoirs in an effort to preserve water stocks in a drought related conservation measure. The impact of this measure is to potentially lower the water levels in the Mississippi between St Louis and Cairo, Illinois at a time when water levels are already low following the summer long drought.

The prospect of barge traffic being halted as a result is believed to be very real and the strangle-hold this will place upon grain exports is not to be underestimated. Measures to keep the waterway open for longer, such as dredging and removal of obstructions, are being discussed but concerns are rising. There are ongoing discussions as to the legality of the measure which we will watch with interest.

The USDA’s crop progress report, issued yesterday, is highlighted below:

US SOYBEANS – 96 PCT HARVESTED VS 93 PCT WK AGO VS 93 PCT 5-YR AVG
US WINTER WHEAT CONDITION- 36 PCT GOOD/EXCELLENT, 39 PCT WK AGO, 50 PCT YR AGO
US WINTER WHEAT – 95 PCT PLANTED VS 92 PCT WK AGO VS 94 PCT 5-YR AVG
US WINTER WHEAT – 79 PCT EMERGED VS 73 PCT WK AGO VS 81 PCT 5-YR AVG

The key statistic, to our mind, is the ongoing reduction in wheat condition, good/excellent classification down by 3% wow; at the same time the poor to very poor rating increased to 22%, up from 19% a week ago. We need not remind anyone of the need for global wheat crops to perform in the coming year to make up for this year’s poor showing.

Soybeans have gained ground today following the higher than expected US crush figures for October; these came in at 153.5 million bu well above trade estimates and 12.4 million bu above the same period last year. It is also the third highest October figure on record. The combined Sep/Oct figure is 9% higher than last year which flies in the face of the USDA’s forecast decline this year. Clearly the price rationing needed to allow the crop to last is not yet underway. The potential for explosive upside in prices remains high on our agenda.

We received news today of New Energy Corp, US based ethanol producer of nearly 30 years standing with a capacity of 100 million gallons of ethanol per year, filing for Chapter 11 bankruptcy. Their president blamed drought, poor corn harvest, higher corn prices, high ethanol supply, low ethanol pricing and low gasoline demand for their demise. He added that they were not the only producer facing tough times and a challenging industry situation.

In terms of good news, Strategie Grains estimate the EU 2013 soft wheat crop at 136 million mt, an increase of 10.6% over weather reduced 2012. The increase is attributed to an increased area of 23.6 million ha (up 3.5%), and based upon yields at 5.7 mt/ha compared to 2012 yield which stands at 5.4 mt/ha. Clearly the UK and northern French crops have to be planted, conditions continue to be challenging due to waterlogged fields in many places.