• CBOT corn and wheat closed lower with the soybean closing a touch higher today. Movement was limited in fairly subdued trade ahead of Friday’s report. Once again we saw Dec ’13 corn making fresh lows as it grinds ever so slowly lower as harvest progresses.

• Egypt announced that it had secured another 60,000 mt of wheat, once again from Romania, interestingly its decision to “pass” on their last tender on 10 October because prices were “too high” did not pay off. They paid almost $7.00/mt more than was offered in their last tender, which just goes to prove that we can all make incorrect trading decisions!

• Lanworth, the Reuters forecasting arm, today released its latest estimates of corn and soybean output. Global corn production for 2013/14 was estimated at 958 million mt, an increase of 3 million mt month on month whilst global soybean production was 2 million mt higher at 290 million mt. US figures were forecast at 13.95 billion bu for corn which translates to a yield of 157.5 bu/acre, and soybean output was 3.293 billion bu and 42.8 bu/acre.

• There is little in the way of fresh news and we continue to interpret the longer term market direction as lower in the light of potentially favourable global crop conditions and prospects which point towards higher stock figures. We would be delighted to have our opinion confirmed by the USDA on Friday!

• It has been a day of losses both sides of the “pond” as buyers failed to put in an appearance today! Maybe yesterday’s corn low, its lowest in some 38 months, in front of a potentially huge US corn crop and the prospect of growing end stocks has finally hit home and the buyers have put up the “closed for business sign! We think not and suspect that some short covering rally will materialise before Friday’s report.

• In soybeans despite strong demand, particularly from China, it is difficult to argue against bearish fundamentals. We could be facing an increase of some 2 to 4 million mt in the US crop over the September USDA report, which was 85.7 million mt. Also, in S America the soybean outlook is certainly favourable right now with the possibility that early suggestions of a 10 million mt increase over the 2013 crop are likely to be exceeded if conditions do not deteriorate.

• Technical indicators are also looking far from bullish right now with some chartists becoming quite excited over the prospect for lower prices. Friday’s report, if it runs the way people are talking, I.e. bigger crops, it could be sufficient to trigger further technical selling.

• US corn was reported to be 73% harvested, above the trade estimate of 71% and up from 59% week on week. Soybeans were reported to be 86% harvested, close to the estimated 87%, and up from last week’s 77%.

• Egypt’s GASC issued a tender to purchase wheat for early Dec ’13 shipment, as expected, and results should be known by later tomorrow.

• CBOT grains (corn and wheat) as we approach the close are trading a touch lower today whilst the soybean complex is making some gains although the front month premium is somewhat lower than has been the case in recent days.

• We are in the week of “the report”, having had a two month gap since September’s release, and trying to peg where the market believes yield will be reported is not easy. Soybeans at 43 bu/acre and corn at 162 bu/acre seem to be somewhere close to trade consensus and variation by the USDA higher or lower is likely to provide some interesting price reaction on Friday. Regrettably, once again, Europe will be in the pub with a well earned gin and tonic by the time the report is published at 5pm (UK time) and we will have the whole weekend to digest the data before (possibly) playing catch-up with the US.

• Given the extent of US soybean demand, both domestic and export, it will be important for soybean yield to reach the 43 bu/acre mark otherwise we will be staring at a demand rationing price rally, possibly of some magnitude. China remains a keen buyer of US soybeans as their crush margins remain positive and US quality is high.

• The weekend saw Saudi Arabia purchase 720,000 mt of wheat from the EU, US, S America and Australia for delivery Jan – Mar ’14. Quality specification called for a minimum 12.5% protein content. It is believed that Egypt will return to the tender market prior to the USDA report on Friday. It has been interesting today that this wheat information has not created more support to the market.

To download the weekly update as a PDF file please click on the link below:

Weekly Update 1 November 2013

• An early update tonight, so apologies if I omit any “late” market action!

• The latest fund positions (as at 15 October) show an increased net fund short in corn, the largest since we have been collating data (since Jan ’12). We all know the dangers that lie therein, if the funds decide to cover some or all of their short, the exit door will look mighty narrow and we could see a spectacular price reaction. That said, the fundamentals and technicals do look negative right now, but we have the USDA report on 8th November and that has sprung surprises in the past.

• US export data for the last three weeks was as follows:

Wheat: 1,308,800 mt which was below estimates of 1,500,000-2,000,000 mt.
Corn: 5,293,400 mt which was above estimates of 1,900,000-2,500,000 mt.
Soybeans: 4,742,000 mt which was above estimates of 2,400,000-3,000,000 mt.
Soybean meal: 804,800 mt which was within estimates of 800,000-1,100,000 mt.
Soybean oil: 14,500 mt which was below estimates of 40,000-160,000 mt.

• The corn and soybean sales for the last three weeks can only be described as “huge” and created something of a rally, which proved to be short lived as the market turned lower with front month (Dec ’13) corn hitting new lows once again. (Note this is being written pre-close)

• Brussels continued with another big week of wheat export licences, the weekly total being 583,494 mt bringing the season total to 9.38 million mt, which is 3.382 million mt (56.4%) ahead of last year.

• The IGC (International Grains Council) today issued its latest estimate of global corn output at 948 million mt, which is 5 million mt ahead of their last month’s figure. They also increased their estimate of global wheat output to 696 million mt, which is a 3 million mt increase from last month. Both FC Stone and Informa Economics are scheduled to release US output estimates tomorrow.

• The market continues to have a bearish feel to it, S American weather continues to look favourable and there is little in the way of bullish news right now.

• Chicago grains closed lower whilst soybeans saw modest gains and soybean meal closed either side of unchanged.

• The biggest news today has probably been the reduction in floor price for Indian wheat exports to $260/mt (plus taxes) making Indian wheat competitive in the global market place. Price aside, the only other issue is one of which destination will accept wheat from India, but that is an ongoing issue and is unlikely to change in the short term. CBOT prices closed as much as 1% lower on, or close to today’s session lows. Prices have not seen these levels for the last month (basis Dec ’13 contract).

• Brazil, just to temper the bears, added a further 600,000 mt of non-Mercosur imports – tariff-free – bringing the total to over 3 million mt and placing likely origin as US or Canada.

• In other global wheat news today, we saw the reuters forecasting arm report their estimate for Australian 2013/14 output at 25.29 million mt, an increase from 24.82 million mt a month ago. New South Wales’ reduced yield and output were said to be offset by improved prospects in S Australian Victoria and W Australia.

• Tomorrow’s US export sales numbers, which are anticipated to be large and will include updates covering the period of US government shutdown, are the immediate focus for many, which is possibly why we have not seen much in the way of significant price moves. Should the export figures surprise to the upside and the market rally, we would agree with others that this will provide a further selling opportunity ahead of the 8th November crop report which we would expect to reflect the better than anticipated yields being reported on both soybean and corn.

• Clearly we continue to live in an extremely dynamic and interesting world, seemingly hell-bent on challenging us poor traders and analysts!

• US winter wheat is now 86% planted, up from 79% a week ago, and ahead of the five year average of 85%; emergence looks good at 65%, again just one point ahead of the five year average figure. The corn crop rated at good/excellent is 2% up from a week ago at 62% and is 59% harvested, a massive jump from last week’s 39%. Soybeans are 77% harvested, up from 63% a week ago and on par with the five year average.

• S American rainfall in the coming week looks to be favourable for Argentina and also Brazil. The forecast Argentine precipitation should go a long way towards eradicating some of the drought problems – hopefully improving crop prospects.

• CBOT markets have been mixed with neither the bulls or the bears gaining the upper hand, and interestingly the “turnaround Tuesday” phenomenon not materialising with any significance. Cash markets appear to be remaining firm in the US with limited producer selling and consumers having to pay up if they need supplies. In the absence of any “new” news it would appear to be something of a struggle for prices to either decline or make gains with anything  approaching conviction ahead of the upcoming USDA report. The content of the report could well spark strong moves, particularly if favourable yield numbers and overall output are confirmed.

• In Argentina it has been suggested that import licences are about to be granted in an effort to subdue rapidly rising prices, which are approaching $700/mt – the world’s highest. Import logistics will, no doubt, present some issues and the imminent harvest will present a volume cap. All in all, the prospect of imports could well be considered as something of a “red herring” and of little material effect – as always, time will tell.

• The week has started with CBOT and European markets settling lower, sharply so in the case of corn, soybeans and soybean meal where losses exceeded 2% in some months, and wheat followed suit although losses were confined to (only) around 1.5% in Chicago. It will be interesting to see whether tomorrow springs a not uncommon “turnaround” day and claws back today’s losses. Also of interest has been the return of some volume to the market compared with some of last week’s lighter volume days.

• What has happened to trigger today’s selling? Argentine weather has been somewhat more favourable to corn and wheat planting in recent days despite suggestions that there has been some damage classed as “irreversible” in northern wheat regions. Brazilian plantings are also progressing well. Also, we hear that Egypt is once again claiming adequate stock levels through to mid-February and their next tender is expected in the coming 2 to 4 weeks, as sceptics we wonder if this “news” will be confirmed by their actions in coming weeks. US harvest pressure is also considered to have been a factor in today’s price moves.

• Interestingly farmer selling in the US has not been a feature, storage appears to be the favoured strategy right now. It remains our belief that if this remains a feature for any significant period of time, we will ultimately see significant price declines in a late rush to sell formerly stored crops ahead of S American harvests.

• As the day has progressed selling appears to have turned to a more technical feature with some support levels being breached and (notably) Dec ’13 corn making new contract lows in Chicago.

• The likely trend in coming days is (in our view) unlikely to remain so strongly bearish in advance of the USDA report on 8th November.

• This week has proved difficult to interpret as we see a gradual return to normality within the US government and data flows improve our formerly blind condition. In general terms we have seen a stronger soybean and soybean meal market whilst the grains, corn and wheat, have seen more of a sideways direction to trade.

• For the first time in some months it feels as if there has been more influence being applied by “technical” market considerations than the fundamentals, which have been somewhat lacking in forcefulness. This could well be a consequence of the recent dearth of official data. We anticipate data tonight from the CFTC to confirm the fund positions, which should provide some further clues to market direction, and has been sorely missed given the influence they exercise over our markets.

• We, like the rest of the trade, are looking forward to the USDA report scheduled for release on 8^th November; the big question we want to see answered is whether or not the reports of better than expected yield in corn and soybeans will be reflected in the report’s numbers. Until publication, it seems as if trade is rangebound and almost scared of stepping out of line for fear of getting it wrong. Consumers appear to continue with a hand to mouth policy of purchasing, which does little to break the price inverse seen in cash markets.

• Turning back to the facts, US export data for week ending 3 October showed wheat sales of 24 million bu bringing the season total to 705 million bu, which is an increase of some 45% over last year. Soybean exports at 34 million bu took the year to 1.01 billion bu, 15% ahead of last year whilst soybean meal sales exceeded expectations at 850,000 tons (three times trade estimates) and total season commitments stand at a record 3.9 million tons. Corn sales of 52.8 million bu brought the season total to 629 million bu, up 53% on a year ago.

• Demand for wheat by Brazil continues to underpin the market although it has once again been rumoured (strongly this week) that India may well consider dropping its export floor price by $40/mt to $260 FOB in which case it will become the world’s cheapest export parity. Having said that, there are suggestions that little will happen until mid-November, which in global wheat trade terms is close to a lifetime.

• The announcement by Argentina on Monday that their 8.8 million mt estimated wheat harvest figure, released only last week, was an “error” and did not fully reflect the entire crop, left some room for downside in prices. An updated estimate of output is expected to be released in coming days. Estimates for the crop range widely with Argentina’s BAGE (Buenos Aires Grain Exchange) at 10.35 million mt, the IGC (International Grains Council) at 11 million mt and the USDA’s latest estimate at 12 million mt.

• Stratégie Grains this week published their first forecast of UK 2014/15 cereal acreages. Unsurprisingly, following the poor planting conditions of autumn 2012, their acreage estimates are increased year on year. 2013 planting conditions have been significantly better and fields we have seen show excellent seedbed preparation, good germination and early weed control; all of which bode well (at this time) for significant improvements in overall output. In summary 2014 wheat acres were estimated at 2.016 million ha, up from 1.626 million ha last year, 2014 total barley was estimated at 949,000 ha compared with the prior season’s 1.215 million ha, which was boosted by an increased spring acreage to fill land unplanted to wheat.

• Brussels resumed their sprightly wheat export pace again this week, having drawn breath last week, with weekly certificates amounting to 406,473 mt bringing the year to 8.797 million mt. This total is now 3.275 million mt or 59.3% ahead of this time last year. The rate of export may well be reflecting some of the concerns emanating from the Black sea region, which was the usual early leader in securing export sales. News that contract execution is presenting some difficulties together with defaults and rising domestic prices as well as FOB offers would suggest that the region could well be finished for the season pushing trade west into mainland Europe as well as the US and Canada.

• In summary, we see the US harvest progressing well with limited weather disruption, limited (if any) freeze damage and yield reports continuing to surprise to the upside. What is necessary is for this information to translate into supply pressure and overtake the demand driven burden, which arose from overly tight US, end stocks. We do not believe that there is much question that this will eventually materialise, however the question is more, “When will it happen and relieve front-end price premiums?”

• Markets took a breather and generally eased off, is this a stalling of the recent rally?

• EU export pace picked up again as Brussels issued weekly wheat licences totalling 406,473 mt bringing the season total to 8.797 million mt, which is 3.276 million mt ahead of last year (59.3%).

• Rumours continue to circulate that India is to reduce its floor price for wheat by $40/mt to $260 although it must be stressed that this is not confirmed. Other sources suggest no change until after the mid-November tenders when the situation will be reconsidered. Should the rumour prove true, it will make Indian wheat the world’s cheapest.

• Black Sea wheat is presenting a medley of physical execution issues, defaults and rising interior and FOB prices with little offered on a forward basis.

• Argentine weather prospects have improved with recent moderate to heavy showers in widespread areas bringing some relief to recent dry conditions.

• US export figures showed better than expected soybean meal figures, corn sales were also robust and wheat was within the expected range although many expect Brazilian demand to remain above previous years.