• It’s been another “green” day as far as prices are concerned as CBOT markets close in positive territory as do EU grains. Key factors appear to have been short covering in advance of tomorrow’s export report and concerns exist over larger than expected numbers. Today has seen reports of soybean sales to Russia which have come as something of a surprise to the market, although to be fair this has been highlighted as Russian feed demand grows to feed the increased demand for pork and poultry meat.

• Corn consumption for ethanol production, according to latest figures, is high as profit margins are sufficiently high to encourage production. Reductions in corn price are only likely to add to demand for corn used for ethanol production.

• The looming 8th November USDA crop report has probably more significance than usual given the omission of the October report and the data vacuum which that has created. To put this into perspective we would expect position sizes to be reduced, and a combination of short covering and reduction in longs will no doubt be a feature in coming days.

• Australian weather has become more newsworthy in recent days with the dry conditions, intense heat and wildfires combining to create headlines. Eastern Australia has experienced worsening drought with the added pressure of above average temperatures, which has elevated crop moisture stresses. The last three months have yielded just 40% of normal precipitation. Concern has grown over national wheat output with the latest ABARES forecast in September reduced to 24.5 million mt which is a little more than 3% down on their earlier June output figure.

• EU winter crop conditions are generally favourable with both planting and early development benefitting from what can only be described as almost ideal conditions across the region. Eastern Ukraine and southern Russian conditions have improved markedly following early snowfall and the concern which that raised over plantings. Soil moisture levels have received a benefit from snow melt, and temperatures have risen to levels allowing good germination and development of recently sown crops. The Volga and Black Earth regions of Russia however have experienced more serious planting delays as a result of wet conditions with some 150-200% of average rainfall. Freezing night time temperatures and low daytime temperatures have also been far from beneficial for wheat crop development. Anecdotally, less than the fully planned winter wheat area has been planted which will adversely impact final output.

• The Reuters forecasting arm, Lanworth, has elevated its latest 2013/14 global wheat crop forecast to 707 million mt from 706 million mt. Their corn output number is also increased to 955 million mt fro 952 million mt a month ago. Global soybean output is forecast higher too at 288 million mt from 286 million mt last month.

• Once again, fresh news is thin on the ground. US crop data, now emerging as the government return to work pushes through the system shows inter wheat planting as 79% done bang on the five year average and some 53% emerged, one point below the five year average. Corn is 39% harvested, unsurprisingly below the five year figure of 53% whilst soybeans are 63% harvested, six points behind the five year average. Weather conditions appear to remain favourable for harvest to progress at a good pace.

• Trade today has been mixed with soybeans and corn looking for lower levels whilst wheat has just kept in positive territory reputedly on the back of stronger Black Sea levels. These firmer levels are a consequence of farmers focusing upon fieldwork as they complete corn harvest and concentrate on planting wheat whilst there is a favourable weather window, rather than selling their crops. The likely timeframe for a resumption of farmer selling is within the next two weeks – look for a break in prices if this is the case!

• During the course of the US “shutdown” it is believed that China has purchased 1.2 million mt of corn and 3 million mt of soybeans from the US. We cynically suggested some while ago that a “stealth” tactic could have been adopted by China whilst publicity could be avoided, and the data fits our theory quite nicely!

• Dry conditions persist in Argentina where the last three months have shown sharply below average rains. It is suggested that as much as 100mm is required as a matter of urgency across the soybean belt although the likelihood of this occurring is only around 25% probability. The planting delays in corn and sunflower as a result of the dry conditions may also roll into soybeans if rain does not materialise soon, and early crop development could well be adversely impacted.

• In marked contrast, there is an expectation for significant rains in southern Brazil potentially delaying corn and soybean planting as well as harvesting of wheat but central regions (Mato Grosso) are forecast drier, which will assist soybean planting progress now estimated at 27% (to 17 Oct) but this is at the expense of soil moisture levels.

• EU wheat prices today have elevated the Paris milling contract to Sterling equivalent premiums over London which have not been seen for some time, Nov ’13 Paris reached close to £8/mt premium (on a Sterling basis) and looks to be reflecting the potential tightness in milling quality grains compared with feed qualities.

• Today’s biggest news item has probably been the announcement by Argentina that their 8.8 million mt estimated wheat harvest figure, released only last Thursday, was an error and did not fully reflect the entire crop. They expect to release an updated estimate in coming days. Regrettably the lowballed figure created some upside momentum in wheat futures around the world, and today has seen some downside correction on the news. 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.

• The US harvest continues with cool and dry conditions forecast for the next week to ten days and only limited rainfall predicted.

• Stratégie Grains today published their first forecast of 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.

Weekly overview:

• This week ends with a massive “hurrah” as the US debt debacle is finally resolved: or is it?

• The US has agreed to raise the federal debt limit taking “brinkmanship” to its extreme, as national default loomed large and the 11th hour passed by almost unnoticed. The US has raised its $16.7 trillion debt limit and (to coin a phrase used many times) kicked the tin along the road until early February when many believe the same issue will rear its head once again. Regardless, we are now back on a more even keel, data will begin to flow once again and we will no longer be complaining about “flying blind” – apart from the fact that the USDA’s October report is now formally not going to be published, but we already expected that one, and this week’s CFTC fund position reports will also not be published.

• It seems that President Obama’s healthcare bill has emerged relatively unscathed and the Republican House Speaker is claimed to have said, “We fought the good fight, we just didn’t win.” Senator John McCain, the 2008 Republican Presidential nominee stated that (this was), “one of the more shameful chapters I have seen in the years I have spent here in the Senate.”

• Turning back to more market related news almost seems an anticlimax, as fresh news is limited. US harvesting of soybean and corn is progressing with soybeans approaching the halfway mark and corn about a third harvested. The good news is that yields on both crops continue to impress to the upside, and early suggestions that poorer results would be found as the harvest moved north have not (yet) proven correct.

• The weather also appears to have cooperated with frost risk absent to date, although producers continue to focus on gathering soybeans which could be at a greater weather risk than corn should conditions deteriorate. The late summer “flash drought”, as it has been dubbed, appears to have less of an impact on soybean yield than first thought. West of the Mississippi River was hit particularly hard in August, the key period for soybean development, yet yield is being reported at around 5 bu/acre better than expected according to a Reuters report late this week. Corn yields too are bringing some smiles to the faces of producers. There appears to be an east west divide, with the east being the better yielding region. East of the Mississippi River is reported to have consistently better than expected yields whilst to the west the results are more mixed. One thing does appear to be certain, and that is that there are good and not so good yield reports, and it will only be when harvest is complete that we will see the full story.

• There are reports of sharply colder conditions and the first hard freeze of the season developing into the weekend across northern Iowa, Wisconsin, Minnesota and the Dakotas. Late planted crops have had an extended warm period in which to advance and September rains have allowed soybean pod filling to progress, albeit at a slower pace than previously. It remains to be seen whether or not this will have had a positive impact upon yields. The impact of any freeze upon corn is expected to be limited, as the crop is now believed to be sufficiently mature to withstand some frost conditions.

• Looking further afield, good news emanated from Ukraine this week as their AgMin reported that winter planting losses would be “only” 0.5 million ha rather that the formerly suggested 1.5 million ha, they also added that any crop shortfalls would be in barley rather than wheat. Our information suggests that spring plantings in both Russia and Ukraine will favour corn and sunflower rather than wheat or barley. Somewhat less optimistically, there are suggestions that some quality issues are present in Black Sea wheat supplies, and this could become something of an issue for shippers as they load export vessels in fulfillment of their early sales commitments. The impact has been seen upon prices in the region, which have been creeping upwards in recent weeks, lessening their extreme competitive position and making mainland EU prices look more attractive.

• This news did not trigger much activity in Brussels this week as we saw weekly export licences markedly reduced, for the first time this year, with 295,469 mt bringing the season total to 8.39 million mt which is 3.179 million mt ahead of last season (61%). Interestingly, EU corn imports are higher than expected at more than 400,000 mt due to the discount which Black Sea corn commands in relation to mainland EU wheat. Evidentially, we see May/Aug ’14 corn purchases being made by UK feed producers as corn is trading at an attractive discount to wheat on a delivered basis.

• Reuters published a story this week (and we choose this description as opposed to “report”) that China’s COFCO (China’s largest food processing, manufacturer and trader) estimates wheat imports to be no more than 5 million mt in the 2013/14 season. In the aftermath of what is believed to be some substantial early season crop damage, many analysts believe some 10 million mt will be a more realistic import figure, and if we add up US, Australian and French sales commitments to date we arrive at a figure in excess of 6 million mt – hence our opener to this paragraph! Somewhat cynically we wonder if the COFCO story is another example of a “plant” to help move the market in their favour!

• In conclusion, we do not see major weather threats impacting crops or supplies, specifically in the northern hemisphere, and remain of the view that price rallies provide selling opportunities. Our preferred stance is for buyers to maintain a patient profile and look for lower levels at which to take further cover.

• Well, at last, the US has agreed to raise the federal limit taking “brinkmanship” to its extreme as national default loomed large. The US has raised its $16.7 trillion debt limit and (to coin a phrase used many times today) kicked the tin along the road until early February when many believe the same issue will rear its head once again. Regardless, we are now back on a more even keel, data will begin to flow once again and we will n to be complaining about flying blind – apart from the fact that the USDA’s October report is now formally not going to be published, but we expected that one yesterday.

• It seems that President Obama’s healthcare bill has emerged relatively unscathed and the Republican House Speaker is claimed to have said, “We fought the good fight, we just didn’t win.” Senator John McCain, the 2008 Republican Presidential nominee stated that (this was), “one of the more shameful chapters I have seen in the years I have spent here in the Senate.”

• Away from political commentary, which is not our domain, markets found some support on a weaker US$ in early trade and CBOT markets finally settled in the green with soybeans and meal finding the best gains. Reuters reports continue to supply positive harvest data with soybean harvest approaching the halfway mark and corn around a third complete. The reported yield data on both crops continues to be positive with some very good yields reported, and the trend appears to be one which suggests that the most up to date overall yield will surprise to the upside. We look forward to formal confirmation of this in due course!

• Brussels weekly export licences saw a marked reduction, for the first time this season, with 295,469 mt bringing the season total to 8.39 million mt which is 3.179 million mt ahead of last season (61%). Interestingly, EU corn imports are higher that expected at more than 400,000 mt due to the discount which Black Sea corn has in relation to mainland EU wheat. Evidentially we see May/Aug ’14 corn purchases being made by UK feed producers as corn is trading at a discount to wheat on a delivered basis.

• Some good news emanated from Ukraine today as their AgMin reported that winter planting losses would be only 0.5 million ha rather that the formerly suggested 1.5 million ha, they also added that any crop shortfalls would be in barley rather than wheat.

• In summary, we do not see major threats to supplies and continue to view price rallies as selling opportunities, our stated preference to consumers is not to chase prices higher but to exercise patience and wait for lower levels.

• The good news today is that we have seen reports that the US Senate has reached agreement (at last) to reopen the Federal Government and restore some normality to daily activity. On the other hand it would seem likely that the USDA will cancel (late) publication of the October reports purely because the November report is due to be published on 8th November.

• US weather continues to look dry for the coming fortnight with limited frost whilst in Brazil the next two weeks appear to offer favourable rains which will encourage planting progress, particularly in the north where delays have been reported. The Southern Russia and Ukraine weather is forecast warmer which will aid late planting and early crop development.

• Reuters published a story (and we choose this description as opposed to “report”) that China’s COFCO (China’s largest food processing, manufacturer and trader) estimates wheat imports to be no more than 5 million mt in 2013/14. Following what is believed to be some substantial early season crop damage many analysts believe some 10 million mt will be a more realistic import figure, and if we add up US, Australian and French sales commitments to date we arrive at a figure in excess of 6 million mt – hence our opener to this paragraph!

• Lanworth have updated their 2013/14 crop estimates with global wheat and soybean output unchanged at 706 million mt and 286 million mt respectively. Global corn was estimated 1 million mt lower than a month ago at 952 million mt with the Brazilian contribution 300,000 mt down at 73.8 million mt.

• CBOT soybeans (and meal) and wheat closed in the red whilst corn made some gains today. The key to corn’s contra movement is likely due to some short covering and unwinding of spreads amid positive yield results which continue to materialise. The Reuters report that India could be about to reduce its minimum wheat price to exporters (by up to $40/mt) could well have been a trigger for the drop in Chicago, which was (interestingly) not mirrored in European levels today. If the report proves correct this would allow Indian wheat to be more competitive in global markets and reduce the current level of stocks in India, which are becoming an almost embarrassing issue with reported government holdings in excess of 36 million mt. This level is substantially above the target stockholding of 11 million mt.

• There has been some improved weather news from Russia and Ukraine where dryer conditions have allowed winter plantings to reach 64% and 73% respectively. Wheat and corn prices in the region have continued to rally potentially as farm selling slows due to fieldwork pressures as farmers rush to finish corn harvest and plant wheat. It would appear likely that the total planned wheat acreage will not be fully seeded and as a consequence increased spring plantings of corn and sunflower seed will take up some or all of the area.

• The US harvest is progressing north, and the latest Reuters forecast, in the absence of any other official data, suggests that corn is at 31% complete, up from 20% a week ago, and that soybeans are 45% done, compared with 22% last week. Yield data continues to remain above earlier expectations although we will have to wait for official confirmation in coming months. The US debt issue has (still) not been resolved, and it looks like it will be an 11th hour deal if a default is to be avoided.

• There are forecasts calling for colder, and potentially freezing, temperatures later this week in the central US although it seems crop maturity has advanced sufficiently to avoid significant crop damage.

• Internationally, it appears that China is still active in the soybean procurement arena whilst their crush remains profitable, and it is suggested that they have purchased as far foreword as April ’14 amid concerns that the logistical issues which plagued Brazilian exports earlier this year will be repeated in early 2014.

• Black Sea planting progress remains delayed as late harvesting of corn and sunflower creates a knock on delay with wheat planting. Happily, there is a warmer and drier forecast for the coming week or so which will assist although it remains to be seen as to whether or not “normal” progress will be reached before the weather closes in.

Weekly overview:

• We end a second week without the usual data stream from the USDA as the Federal Government continues in its shutdown, which resulted from budgetary disagreement. This state of affairs continues to hamper trade to some extent with many feeling they are “flying blind”, and there has been a reduction in risk appetite by many.

• The good news is that harvest in the US is picking up pace and reported yields continue to surprise to the upside and this is being taken to heart by traders and appears to be capping rallies. Some growers are reporting record or close to record soybean yields and the weather has remained favourable this week with some 50 to 60% of the soybean acreage expected to have been harvested by the weekend. There is, in the absence of USDA figures, much talk of the US soybean crop exceeding 42 bu/acre and corn topping 160 bu/acre, clearly only further time will prove, or disprove, these numbers.

• On the other hand, we are seeing some strong spot demand for both corn and soybeans as new crop supplies become available and this has provided some slight degree of support to nearby futures contracts.

• It has been rumoured that the US corn based ethanol which is blended into gasoline may have its mandated inclusion lowered in 2014 from14.4 billion gallons to 13 billion gallons. The potential impact upon corn grind for ethanol would be to see a decline from of some 500 million bu, and this was sufficient news to trigger some selling in the market.

• Egypt’s GASC returned to the wheat tender market for the first time in a month, only to walk away from any purchases due to “high prices”, which the market is attributing to a lack of quality supplies from Russia. It is widely expected that they will return to the market place as and when prices ease back. Clearly there is no such guarantee that prices will move in their favour and the key question has to be, “Is there sufficient wheat of the required quality in the Black Sea region to meet the needs of Egyptian buyers?” Should the answer be “no”, then it will likely fall to French exporters to fill the gaps.

• Brussels granted another huge week of wheat export licences, maintaining the record pace of exports, with 866,791 mt bringing the season to 8.095 mmt, which is close to 3.4 mmt ahead of last season (72.4%).

• In summary, we continue to look for further price pressure on both soybean and corn prices as the US harvest progresses. In wheat there is less direct pressure, as Egypt have found this week, and it may well be that we need to see significant pressure from corn prices to trigger a downward trend in wheat prices.

• CBOT wheat, soybeans and meal all closed in the red whilst corn bucked the trend by closing marginally higher. Throughout the day markets markets have traded either side of unchanged possibly indicating the state of mind which traders have in the absence of official data and information. There has been only limited farmer selling in the US leading to consumers bidding up and nearby markets have reacted accordingly.

• In the absence of official US data we are pleased to add Brazilian information provided by CONAB to flesh out tonight’s report: the 2013/14 wheat crop is estimated at 4.77 million mt, down from 4.95 million mt last month whilst corn is seen in the range 78.4-79.6 million mt, down from last year’s 81.3 million mt. Soybean output is estimated in the range 87.6-89.7 million mt, a sizeable increase from last year’s 81.5 million mt.

• Additionally we have Lanworth’s latest 2013/14 crop estimates; world soybean output at 286 million mt, a 2 million mt increase month on month, the US accounting for 3.16 billion bu, an increase month on month from 3.112 billion bu. Their global corn estimate comes in at 953 million mt, a 4 million mt increase month on month of which their US figure is 13.708 billion bu, up from13.483 billion bu last month.

• We continue to hear reported US harvest data exceeding earlier expectation which will no doubt cap rallies for the time being. One final snippet comes from Reuters, who report that an Ohio based ethanol plant which has been idle for five years is to restart next week. The Three Rivers Energy owned plant has the capacity to produce 50 million gallons of ethanol from 36 million bu of corn, and is reported to be taking corn delivery from the middle of next week. Is this an example of reduced corn prices stimulating the ethanol industry in the US?

• I will be travelling for the next two days, in the Republic of Ireland, and anticipate limited internet access. Consequently reports and information may well be limited for which I apologise in advance. I will endeavour to catch up upon my return. At least there seems to be no USDA report to comment upon on Friday!