• The US has reported its weekly exports as follows:

Wheat; 618,100 mt which is above estimates of 375,000-475,000 mt.
Corn; 982,800 mt which is above estimates of 750,000-950,000 mt.
Soybeans; 1,376,400 mt which is above estimates of 650,000-850,000 mt.
Soybean meal; 116,000 mt which is below estimates of 200,000-350,000 mt.
Soybean oil; 95,800 mt which is above estimates of  30,000-80,000 mt.

• The higher than anticipated exports have left CBOT markets pretty much in positive territory today.

• S American weather continues favourable particularly in Brazil where rainfall is close to normal with temperatures near to below normal. These conditions combine to provide what has been described as almost perfect weather for corn pollination and soybean development. This, with Argentina’s soil moisture described as adequate to surplus, leaves us feeling very comfortable with the potential which exists in the continent.

• In Australia both the grain and oilseed crops have suffered a setback with less than favourable conditions and reported disease issues. Western Australian wheat has received unseasonable rains whilst eastern regions have had frosts to contend with. As a result there have been concerns over both yield and quality which will take time to unfold. Western Australia’s canola (rapeseed) crop is also reported to have heavy sclerotinia infection which can impact yields, possibly as much as 0.5 mt/ha.

• Brussels has again issued another big week of wheat export licences with 638,353 mt granted. The cumulative total now stands at 11.176 million mt, which is 3.55 million mt (46.6%) ahead of last year’s total.

• MATIF wheat in front month positions managed to peak at close to six month highs as farmer selling slowed to a crawl. Forthcoming aid payments to French farmers and their locally held view that they are the only holder of wheat left in the world has strengthened the feeling that there is little pressure for them to sell in the near term, hence today’s peaking prices.

• Markets have been relatively quiet today with CBOT trading either side of unchanged with losses in wheat, corn and soybean meal at the close. MATIF wheat rose on the back of € weakness despite a weaker cash market in the aftermath of yesterdays Egyptian tender and statements to the effect that France was “too expensive”.

• S America continues to look good from a weather perspective, with Brazilian rains at or above normal in the coming week or so and the next two weeks looks dry in Argentina with rains forecast to follow.

• The Reuters forecasting arm, Lanworth, released (another) updated forecast which suggested that 2013/14 global soybean output would be 1 million mt below their last figures at 289 million mt, and global corn output for 2013/14 would be 5 million mt higher at 963 million mt. In the same release China’s 2014/15 corn output was viewed at 220 million mt.

• There appears to be little in the way of fresh news.

• Overnight news saw US crop conditions reported with winter wheat rated as good/excellent dropping 2% to 63%, which is well above last year’s 34%. The fully planted crop was reported to be 89% emerged, again better than the five year average of 85%. Soybeans are 95% harvested and corn 91%, both figures at, or very close to, trade expectations.

• Across Europe bio-ethanol producers are “making hay” whilst the sun shines, or more properly, taking advantage of lower grain prices and the imposition earlier this year by the EU of anti-dumping duties on imports of US bioethanol to boost output and make good margins – for now. Their outlook for the future is less rosy as ethanol prices look set to decline into the winter period. One tangible sign that things have improved is the announcement by Ensus of their restart ing production (once again). Quite how the future for EU bioethanol will pan out will be interesting to monitor as production capacity turns on and off, and blended ethanols are imported in an effort to bypass duties. In addition Brazil’s exports to the US market may well look to the EU in the wake of last week’s EPA announcements.

• Egypt’s GASC has once again made a wheat tender for mid-December shipment with Russia securing the 120,000 mt award in what many are suggesting may be their last. This was their first sale since September. The successful sale prices was a touch higher than that of last week’s trades. There were no offers from either Ukraine or Romania, and French offers (for the specification) were some $6 to $10 higher than last week. Many assumed that France would be the origin of choice this time around, but clearly this was not the case.

• India’s recent sale of wheat would appear to have achieved better than their recently lowered floor price might have suggested with 340,000 mt sold at an average price reputed to be $284/mt. There is an expectation that another tender is to be announced before long.

• In S America Argentina’s AgMin have reported their soybean plantings to be 26% complete, 4% behind last year and Brazil is 2% ahead of last year at 69% complete. Reports that Brazilian farmers are considering switching their traditional safrinha, or second, crop away from corn to soybeans have been confirmed to us today. Clearly this would provide further soybean output and a reduction in corn production, but is not without problems, the most significant being potential for disease build-up as soybeans follow soybeans rather than the more traditional corn following soybeans.

• CBOT soybeans and meal closed lower tonight whilst the grains, corn and soybeans made gains to close higher. Soybean prices are approaching key support levels, which if breached will likely pave the way for further selling pressure particularly in the face of the current growing conditions in S America. The grains held in positive territory on near term cash buying which lent support but this, we continue to believe, will be short lived in the face of globally growing supplies.

• The week has started with us digesting Friday’s late news from the US EPA (Environmental Protection Agency) that the new bio-fuel mandate proposal is to change. The change encompasses a reduced mandate for al bio-fuels to 15 to 15.2 billion gallons, around 16% less than the 2007 US energy legislation agreed volume of 18.15 billion gallons. Probably the biggest single item was the reduction from the agreed 3.75 billion gallon advanced bio-fuel blend in 2014 to a much reduced 2.0-2.5 billion gallon blend volume. Whilst not formally agreed, it appears that spring time will mark enactment, and the US bio-fuel industry has reached maturity.

• Outside of the advanced bio-fuel mandated range, the balance which is traditional corn based ethanol, will range from 12.7 to 13.2 billion gallons, compares with previous targets of 14.4 billion gallons – an 8.3 to 11.8% reduction! The outlook for corn prices in 2014 and planting prospects will become extremely interesting to say the least.

• In late trading corn prices declined over 2% to new lows (basis front month contracts) after a gap lower opening. The technical picture for corn looks far from bullish right now. Added to Friday’s news, reports from Reuters that China has rejected a cargo of corn because of unapproved GMO contamination, has done little to bolster prices. Further suggestions that the seemingly incessant demand for both corn and soybeans from China may have peaked has also spooked the market.

• S American weather conditions continue to be seen as broadly favourable, although there is a long way to go before crops can be considered as safe, and this is also weighing on price sentiment.

• On a slightly contrary tone, results from the latest Indian wheat tender would appear to indicate trade willingness to pay over and above the $260.00/mt floor price although final results are still awaited.

• Finally, the UK’s London wheat futures market has seen tenders submitted against 1,229 contracts against the November contract. This is the highest number seen in recent years, most in the East and South West and the only conclusion which can be logically drawn is that the futures market represent the best market. Friday 22 November marks the end of the Nov ’13 contract and its tender period.

• The week has come to a close with CBOT markets all closing lower, sharply so for soybeans and meal – at last say some! Front month (Jan ’14) soybeans are back below $13/bu and Dec ’13 soybean meal back below last Friday’s closing prices. Dec corn saw its fourth consecutive lower close, again closing below last Friday’s level. Dec ’13 wheat again closed lower reaching levels not seen since mid-September.

• US weekly export sales were reported as follows:

Wheat; 288,800 mt which was below estimates of 350,000-550,000 mt.
Corn: 1,202,800 mt which was above estimates of 800,000-1,000,000 mt.
Soybeans; 909,100 mt which was within estimates of 900,000-1,200,000 mt.
Soybean meal; 283,200 mt which was within estimates of 200,000-350,000 mt.
Soybean oil; 7.200 mt which was below estimates of 25,000-50,000 mt.

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Weekly Update 15 November 2013

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Fund positions

• We have seen another lacklustre day punctuated by news from Egypt that GASC has once again secured further wheat supplies, this time for first half Dec ’13 shipment. The tender was awarded to Romania (again) for 60,000 mt, and France (for the first time this season) managed to secure 180,000 mt. This latest foray into the market brings the Egyptian purchases by GASC to just over 2.5 million mt, which is around half of their projected total. Egypt as a whole is expected to purchase about 10 million mt, GASC account for half (or a touch over) of this amount.

• The Egyptian news was sufficient to provide some support to the wheat market as both corn and soybean prices looked to be suffering from a post WASDE hangover! The short covering spree, which provided immediate support following release of the USDA’s latest report, appears to be done and the market is now seeking direction.

• We are aware of the imminent release of the result of India’s first wheat export tender after the $40 reduction in floor price to $260/mt. Observers will watch with interest to see whether, or not, this will mark a new and serious exporter with substantial stocks to move prior to next harvest (Mar ’14) – the market impact will no doubt follow swiftly.

• Brussels maintained the export pace with export certificates totalling 663,609 mt granted this week. The season total now stands at 10.538 million mt, which is 3.323 million mt (46.1%) ahead of last year. We are 20 weeks into the season, and a simple mathematical projection to 52 weeks would show an annual export total of 27.4 million mt if the pace so far was maintained.

• Looking back, maybe today wasn’t as lacklustre as we firs thought! As we approach the close in Chicago wheat, corn and soybean markets are (just) tipping into negative territory.

• Today has seen another relatively quiet trading session with little in the way of fresh information to spark activity. CBOT grains and soybean complex have traded either side of unchanged.

• The US corn crop is 84%harvested vs. 73% last week and above the five year average of 79%. Soybeans are 91% harvested vs. 86% last week and just below the five year average of 92%. The US winter wheat crop is rated 65% good/excellent vs. 63% last week and is reported as 95% planted vs. 91% last week and 2% above the five year average. The wheat crop is moving towards its dormancy period in the best condition seen for about five years giving hope for an excellent harvest next year.

• Stratégie Grains have issued their latest EU grains update in which they project the 2014/15 soft wheat acreage to increase by close to 1 million ha to 24.1 million ha, principally driven by the attractive gross margin compared with other crops. Barley acres are also forecast to fall by as much as 0.5 million ha due to reduced spring plantings. 2013/14 total grains output for the EU 28 was forecast a touch lower than last month’s estimate at 301.5 million mt. This compare with 278.5 million mt in 2012/13. The EU soft wheat figure for 2013/14 was revised down vs. last month at 134.9 million mt and com pares with 125.5 million mt in 2012/13. The report also drew attention to the growing attractiveness, based on cost, of maize in animal feed diets.

• Key news today has been another week of significant soybean exports with the reported volume reaching 80 million bu bringing the season total to 418 million bu. This is slightly lower than last season’s same date total but has triggered further upside in CBOT soybeans which have closed above the 50 day moving average (basis Jan ’14) and fund buyers have latched onto this as a potential buy signal. Time will tell as to whether this will create further follow through buying.

• There has been a suggestion that the huge flotilla of soybean cargoes heading towards China, due to arrive within around four weeks, will overwhelm and spark some cancellations, renegotiation or wash-outs, which will have a negative impact on the market. This will be a significant event, should it materialise and we will be keeping a close eye on any signs of it happening.

• Today has seen Goldman reduce its forecast for corn and soybean prices for the 2014/15 season. Corn price forecasts were cut $0.25/bu to $3.75, and soybeans forecasts were reduced to $9.50/bu; corn stocks were seen close to 2 billion bu and record soybean acres were expected. Record S American soybean production was also taken into account. The  current rally in corn prices was expected to be short lived according to the release and near term soybean tightness was expected to provide support.

• Stratégie Grains today anticipated additional EU maize imports driven largely by competitive pricing, particularly from Ukraine. Third country imports for 2013/14 were forecast 400,000 mt higher at 10 million mt, which compares with 11.4 million mt a year ago.

• A number of commentators share our view of forthcoming price downside and suggestions that a price “top” is forming which will only be negated by adverse S American weather conditions. Given the outlook for global stock rebuild which is in progress the downside looks greater than any upside risk right now.

• Monday dawned and closed in a post-WASDE lethargy with volumes low in Paris and London and little in the way of fresh input to spark things into activity.

• Chicago saw both soybeans and corn continue Friday’s positive tone, corn being triggered by short covering and soybeans by profit taking. The slight rally has triggered some farmer selling and it appears that consumers have been dipping into the market “just in case” we have made seasonal lows.

• It remains our view that the current rise in prices will create a selling opportunity and over time we will see lower levels.

• At last the day has dawned, the USDA will unveil “Super WASDE” at 5pm UK time today, the first such report since September – hence the title. The big question is, “what will it contain?” If trade this week is anything to go by, it seems that the trade is expecting a large US corn crop as the market has made a succession of new contract lows (basis Dec ’13 contract). To counter this, the net fund short position can only be described as huge, and, as we have mentioned previously, anything other than confirmation of trade expectations could well see an upward hike in prices. On the other hand if the report confirms the trade view, we are unlikely to see a further big move downward as the crop size is already priced in.

• Soybeans this week (basis Jan ’14 contract) hit their lowest level since mid-August, coming close to filling an open chart gap, before rallying Thursday making some strong gains as shorts took cover ahead of the report and in the midst of further strong US weekly export sales data. The strong pace of both domestic crush demand as well as exports, which will potentially limit closing stock levels, tempers anticipation of a larger soybean crop. S American soybean output potential continues to improve with another record crop in prospect, which is weighing on deferred prices.

• In wheat, US prices have continued to be pressured as global weather conditions continue to be viewed as beneficial. Concerns that previously existed over weather-delayed plantings in Ukraine and Russia have all but disappeared as Ukraine this week reported winter plantings to be complete and Russia not far behind. The outlook for global wheat supplies in the coming season would appear to be pretty good.

• In terms of other news this week, the US Food & Drug Administration (FDA) proposed a ban on artificial trans-fats in processed food products. Their decision was based upon such fats being considered responsible for unnecessary deaths from heart disease. The market reacted to the news with soybean oil prices dipping sharply before recovering some of their losses. The timing of implementation of such a ban, if approved, is not known at this time.

• Egypt returned to the tender market once again as anticipated, and purchased 60,000 mt from Romania for early Dec ’13 delivery. Their decision on 10 October to “pass” on any purchases, as prices were “too high” has clearly backfired somewhat as their most recent purchase this week has cost close to $7.00/mt more than the earlier offers. It is gratifying to see that it is not only ourselves who make poor trading positions, but we are pleased ours are not quite as public as GASC’s!

• Brussels continued the trend of large weekly export licences with 494,286 mt bringing the season total so far to 9.874 million mt. This is 3.404 million mt (52.6%) ahead of the same time last year.

• In front of the USDA’s figures later today, we have seen Brazil’s CONAB estimating their 2013/14 corn crop higher at 78.5 to 79.8 million mt, an increase from 78.4 to 79.6 million mt last month. The soybean crop was also forecast higher at 87.9 to 90.2 million mt, which was up from last month’s 87.6 to 89.7 million mt. Private forecaster Michael Cordonnier has also estimated Brazil’s soybean crop at 90 million mt.

• In summary, the market is anticipating this afternoon’s report perhaps with something of a more optimistic frame of mind as the current evidence would suggest that global stock building is actually under way – at last!