• CBOT wheat, at a $2.10 premium to corn (basis Dec ’13) seems a bit strong to us, but that is where it closed tonight as corn closed lower and wheat, along with soybeans and meal, closed a touch higher. The overnight crop ratings, which showed corn gaining 2% in the good/excellent category (to 55%) and soybeans remained unchanged at 50%. Add the crop rating to encouraging yield data and we see selling pressure although the 13 August low $4.45¾ (again basis Dec ’13 contract) has still not been breached – yet!

• Corn harvest in the US is close to 10% and gathering pace, and soybean harvest is only just getting going but is expected to pick up speed this week if weather remains favourable.

• Other news is thin on the ground again, it is expected that Russia will begin its intervention purchasing, supporting domestic values and potentially taking them out of their competitive export position.

• In the latest wheat tender, this time by Iraq, offers were in a massive range; from $310 (Ukraine) to $395 (US) on a C&F basis. This range highlights the competitive (or not!) nature of global trade today.

• Monday dawned with markets showing marginal declines in what can only be described as lacklustre trade. As the day has worn on some short covering has allowed levels to rise, but marginally. CBOT corn (Dec ’13 contract) has had a bash at testing its recent lows set in the middle of August but has not quite pulled it off (yet).

• The next “trigger” which may move prices could be next Monday’s September stock report and the following USDA October crop report on 11 October. In the absence of any new news, it will be actual yield data which will drive price direction in coming days.

• We make little apology for our brevity, which is driven by lack of real news.

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

Weekly Update 20 Sep 2013

Our weekly fund position charts can be downloaded by clicking on the link below:

Fund positions

• The anticipated end to US QE3 has failed to materialise and the ensuing drop in the US$ led to a sharp short covering rally which has pushed equities, metals and energies higher along with ags. The dollar induced rally will be, we expect, short lived as the US harvest looms large and the US export market look uncompetitive in the global context.

• Early US harvest data is providing good news as yield data is exceeding expectations in both corn and soybeans. Whether this trend will continue as harvest moves north remains to be seen.

• The USDA has today released its weekly export figures as detailed below:

Wheat: 701,900 mt, which is above estimates of 500,000-650,000 mt.
Corn: 437,400 mt, which is below estimates of 450,000-650,000 mt.
Soybeans: 923,300 mt, which is above estimates of 650,000-750,000 mt.
Soybean Meal: 46,600 mt, which is below estimates of 100,000-230,000 mt.
Soybean Oil: 20,600 mt, which is above estimates of 5,000-15,000 mt.

• Stratégie Grains today reduced their estimate for UK bioethanol output based upon the slow startup of the Hull based Vivergo plant. Consequently, their estimate for domestic wheat consumption in bioethanol production is similarly reduced (by 75,000 mt) to 870,000 mt in the 2013/14 season.

• Brussels granted wheat export licences totalling 589,335 mt bringing the season total to close to 6 million mt. This is 2.7 million mt ahead of last year’s total (82.9%).

• Late news saw Reuters reporting a cut in Argentina’s 2013/14 wheat acreage to 3.4 million ha, from 3.9 million ha previously, as a result of dry conditions. Corn acreage was also anticipated to be reduced, by nearly 7% year on year, at 5.7 million ha.

• CBOT closing prices saw soybeans and meal lower and the grains closing higher, unwinding of spread trades would seem the likely cause.

• Today has once again been interesting with the US soybean market again giving little credence to what at first appeared to be bullish news, the first “real” news in some time, and placed more importance upon the more bearish fundamentals. It seems that the looming harvest and availability of physical supplies is having more of an impact upon prices than the FSA’s reported increase in abandoned spring plantings caused by the wet weather. The implied knock on effect is one of a reduced harvested acreage and lower output. Offsetting this is the latest, wetter, weather which has created mixed opinion on whether or not here will be any benefit to soon to be harvested crops.

• It remains our view that soybean prices are overpriced, particularly in relation to corn and other oilseeds (sunflower seed especially). There is a supply pressure particularly from Eastern European farmers who have a significantly reduced storage capacity when compared to their S American and US soybean farming counterparts, which ensures that their crop reaches market early in the season. Prices for rapeseed (and canola) still appear to be looking for a bottom and with news that the Canadian crop could yet exceed earlier estimates of output potentially adds to downward price pressure.

• Yesterday Informa Economics reduced their forecast for 3013 US corn output to 13.8 billion bu from 14.013 last. They also lowered their estimate for the US soybean crop to 3.22 billion bu from 3.239 last estimated some 11 days earlier. The reduced forecasts were attributed to acreage adjustments following release of the FSA data together with their update on yield.

• Reuters commodity forecasting arm, Lanworth, today raised its US corn output estimate slightly to 13.843 billion bu with a yield of 152.9 bu/acre. They attributed better projected yields in some states to their upgrade. For comparison the USDA’s latest estimates are 13.843 billion bu for corn and 3.149 billion bu for soybeans.

• Of interest is the news that Brazil has purchased (unconfirmed) two cargoes of wheat from Poland. The logic of ongoing purchases of US wheat at significant premium prices has been questioned by us in the past, and the obvious question is, “how much volume can this become for EU exporters before prices align across the Atlantic?”

• UK wheat imports to start the 2013/14 season were at their fastest pace for over 20 years with 328,500 mt imported in July. Early purchases amid poor crop prospects and a delayed harvest were probably the principle cause of the increased tonnage. In addition it is likely that millers decided to secure quality supplies to ensure suitable grists were available pending confirmation of domestic quality. Questions are being raised as to the possibility (???) that the UK will ultimately be an exporter of low grade milling wheats later in the season.

•  Today’s firmer opening prices gave way to lower levels this afternoon as the soybean complex led markets down. Markets would appear to have had difficulty in digesting FSA data and how the USDA’a NASS (National Agricultural Statistics Service) is likely to interpret the data.

• The 2013 prevented corn planting figure was reported as 3.573 million acres with overall plantings including failed acreage at 91.428 million. Soybean 2013 prevented planting acres were reported at 1.687 million acres with overall planting including failed acre at 74.659 million acres. Initial reactions suggested that a bullish soybean market could see the $14/bu price level being retested although this has not followed through in today’s market.

• US weather has seen more rain falling and forecast, which is splitting opinion as to whether it is too late or whether it will benefit the soybean (and corn) crop given the late development and harvest. If nothing else, the “gap lower” on yesterday’s opening prices has been followed through in today’s market. It appears that the bulls have little in the way of fresh news to feed them and, as we all know, an unfed bull tends to lead to declining prices!

• In other news today, Oil World reported their forecast for record global rapeseed output at 70 million mt based upon higher Canadian and EU production. Global sunflower seed is also forecast higher at 40.2 million mt, a 13% increase year on year, with Russian and Ukraine output accounting for 18.6 million mt. Global palm oil production was forecast to grow to 58.85 million mt, an increase of nearly 2.8 million mt. Finally, Brazilian soybean plantings are slower in Mato Grosso as farmers await rains but a record area is still forecast and farmers want to plant as soon as possible in order to get the follow on corn crop into the ground.

• The week has started lower with some evidence of spread trades being unwound which has given support to the grains. Tomorrow’s FSA report and the attached concern that it may show significant acreage reduction, particularly in corn is also lending a degree of support. Weekend rainfall and more in the forecast, albeit probably too late to have a significant impact, has given the bears some comfort.

• Today has seen news that Indian monsoon conditions look set to support their soybean output and help to achieve the highest soybean meal exports in six years. India is the largest supplier in Asia, and looks to have the potential to reaching excess of 4 million mt in the year starting October. Whilst far removed from CBOT markets, this tonnage is sufficient to have some impact on futures prices in coming months. The export potential is also assisted by the weakening Rupee, which has lost 13% vs. US$ this year.

• We await tomorrow’s report and would not be surprised to see “fireworks” in immediate post publication trading.

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

Weekly Update 13 Sep 2013

Our weekly fund position charts can be downloaded by clicking on the link below:

Fund positions

To download our PDF summary of today’s USDA report please click on the links below:

USDA Soybeans 12 Sep 2013

USDA Corn 12 Sep 2013

USDA Wheat 12 Sep 2013

• Still digesting USDA numbers, grains currently down and soybean complex higher, and will update later but meanwhile today’s headline data is as follows:

World 13/14 wheat ending stocks: 176.28 million mt, above  estimate of 172.76, and 172.99 month on month.
US 13/14 wheat ending stocks: 561 million bu, above estimates of 551 and 551 month on month.
World 12/13 corn ending stocks: 122.59 million mt, below estimates of 122.798, and 123.11 month on month.
World 13/14 corn ending stocks: 151.42 million mt, above estimates of 146.927and 150.17 month on month.
US 12/13 corn ending stocks: 661 million bu, below estimates of 718 and 719 month on month.
US 13/14 corn ending stocks: 1.855 billion bu, above estimates of 1.732, and 1.837 month on month.
US 13/14 corn production: 13.843 billion bu, with 155.3 bu/acre, on 89.1 million harvested acres, above estimates of 13.62/153.69/88.559 and above 13.763/154.4/89.1 month on month and up from 10.78/123.4/87.4 year on year.
World 12/13 soy ending stocks: 61.55 million mt, below estimates of 61.73, and 62.22 month on month.
World 13/14 soy ending stocks: 71.54 million mt, above estimates of 71.167 and below 72.27 month on month.
US 12/13 soy ending stocks: 125 million bu, above estimates of 123 and unchanged month on month.
US 13/14 soy ending stocks: 150 million bu, below estimates of 165 and 220 month on month.
US 13/14 soy production: 3.149 billion bu, with 41.2 bu/acre, on 76.378 million harvested acres, above estimates of 3.14/41.172/76.248 and below 3.255/42.6/76.4 month on month and up from 3.015/39.6/76.1 year on year.

• The USDA has today released its weekly export figures as detailed below:

Wheat: 551,900 mt, which is within estimates of 450,000-650,000 mt.
Corn: 332,600 mt, which is below estimates of 400,000-500,000 mt.
Soybeans: 478,100 mt, which is below estimates of 650,000-800,000 mt.
Soybean Meal: 128,700 mt, which is within estimates of 70,000-230,000 mt.
Soybean Oil: 6,200 mt, which is below estimates of 10,000-20,000 mt.

• Brussels this week has granted wheat export licences totalling 724,008 mt, which brings the season total up to 5,409,530 mt. This is nearly 2.6 million mt ahead of this time last season (92% ahead).

• One last news item from Reuters suggests that the EU will cap fuels from food crops (wheat and rapeseed) as fears for rising food prices and climate damage continue to grow. The suggested 6% ceiling on inclusions fall some way short of the 10% target set in 2009. EU biofuel producers will no doubt feel hard done by with any expansion prospects effectively curtailed. From a personal perspective it is pleasing to see the EU agreeing with our long held view on the folly of bio-fuels; we have long held the opinion that they are not energy neutral! In 2007 EU ethanol production was around 2.7 billion gallons, today around twice that. According to latest estimates, the EU wastes around 5 billion gallons of car fuel each year due to ……….. (would you believe) ……. Incorrect tyre pressures. Maybe they should legislate on that instead!