• In the wake of yesterday’s USDA report there is not a huge amount of fresh news and markets feel somewhat lacklustre as a consequence.

• A number of crop estimates have emanated from various countries including the following:

Australia’s ABARES – 2013/14 wheat up 800,000 mt to 27 million mt, the second largest on record. USDA yesterday estimated the crop at 26.5 million mt. Barley too was increased by 925,000 mt to 8.55 million mt and canola (rapeseed) was increased to 3.55 million mt, an increase of 138,000 mt.

Brazil’s CONAB – 2013/14 soybean crop 90.01 million mt, down from 90.33 million mt estimated last month, still a record output. USDA’s figure 90 million mt. Corn for 2013.14 75.47 million mt, down from 78.97 month on month compared with the USDA’s estimated 70 million mt. Brazilian wheat output was estimated at 5.8 million mt, 300,000 mt up from last month.

• Further stories circulate on numerous soybean cargoes for sale by Chinese importers who are returning from their Lunar New Year holidays. The nearby positions appear difficult to resell given that vessels are already in place to ship, unless there is another Chinese buyer looking for beans, and that does not seem the case. The rapidly building Brazilian export corridor is starting to look more attractive and the desire to switch is high although practicality is tough nearby. The developing situation could well place a strong cap on any further rallies, and we may well have seen a “top” in the market and potentially ease the US old crop prices.

At first glance today’s USDA report data data looks neutral to a touch bearish for beans and mildly bullish for corn and wheat, and the market reacted accordingly upon data release. However, initial market moves soon retraced and the market in soybeans, soybean meal and corn ended down whilst wheat closed higher.

In other news, which is largely overshadowed by today’s USDA report, includes (as yet unconfirmed) Chinese cancellation of soybeans and soybean oil, which if correct will not be supportive to prices.

The market will continue to digest the report over the next day or two, as will we, and our overall conclusion is that there was little in the way of long term supportive or bullish news.

To download a copy of our report recap please click on the link below.

USDA Feb 14 Recap

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

Weekly Update 7 February 2014

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

Fund positions

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

Wheat: 733,600 mt which is within estimates of 500,000-750,000 mt.
Corn: 1,700,000 which is above estimates of 900,000-1,200,000 mt.
Soybeans: 796,500 mt which is within estimates of 550,000-850,000 mt.
Soybean Meal: 408,700 mt which is above estimates of 100,000-200,000 mt.
Soybean Oil: 26,000 mt which is within estimates of 0-30,000 mt.

• Obviously the key number in the array above is the corn export figure at 1.7 million mt, which is a full ½ million mt above expectation. It has been reported today that China has cancelled 220,000 mt of corn for 2013/14. Overall, the sales of both corn and soybean meal, which were above estimates, have added a degree of support to prices once again today. Monday’s looming USDA report has the potential to spark markets, one way or another, with adjustments to exports, consumption, etc on the cards. We will report on the figures in due course on Monday.

• Continuing with the exports theme, Brussels has issued another big week of wheat export certificates, this week’s volume reaching 926,495 mt (the biggest weekly total this season), which brings the season total to 19.108 million mt. This is 6.32 million mt (49.4%) ahead of last season’s total. We are fast approaching last season’s export total, which reached 20.9 million mt, and we are 32 weeks into the season. A mathematical projection, using the average exports to date, would bring this year’s total to a mind boggling 31 million mt; now there are those who may scoff at such fanciful projections, but the pace of exports has been rising once again since mid-December. The eventual outcome will be an interesting figure indeed.

• Finally, we note that the soybean harvest in Brazil is progressing, and a figure of 6% complete or 5 million mt is being discussed (effective end Jan ’14). Forecast weather conditions suggest that wetter conditions may create some harvest delays although it will benefit the upcoming corn crop. Dry conditions across northeastern Brazil will allow crop shipments to proceed unhindered although further south may see some port work disruption due to rains. Argentine weather is forecast to turn dryer which will be seen as a benefit following recent good rains.

• The next week, including the USDA update is going to be very important in terms of market direction, and our view remains unchanged despite recent moves to the upside.

• We were looking for today to be a “turnaround Wednesday” in the aftermath of the last few sessions’ gains. However, this has not proved to be entirely the case in choppy trade both sides of unchanged. Soybean meal has been the biggest loser, following its gains yesterday. Producer selling has remained a feature, particularly at the higher levels although consumers have been noticeably absent.

• The return of China to the market (at lest in part) following their Lunar New Year holiday may well add some fun and games with the potential for switching and/or cancelation of soybeans, which will no doubt have a degree of influence on market direction going forward.

• In the UK has been reported that ForFarmers, the Dutch Group that owns Hendrix and BOCM, has acquired Crewe based HST Feeds for a price reported to be based upon an enterprise value of €15 million. HST manufactures and sells about 140,000 mt of ruminant and poultry feed, principally in the North West of the UK.

• According to the UK’s DEFRA, the UK 2013/14 wheat balance sheet is more finely balanced than many would have us believe. The price relationship between various grains, including maize and barley, is a key determinant of value and consumption going forward. Additionally a stronger £Stg, particularly vs. the € as UK economic recovery outpaces that of continental Europe reduces the UK’s export competitiveness and makes imported grains relatively better value, potentially bearish for UK grains.

• Today has been another “up” day with prices rising both here and in the US, sharply so in some instances. Technical levels have been breached triggering further upside as spec buying pushed markets higher. Sellers have been active too, taking advantage of higher levels at which to secure additional cash sales with prices being viewed as attractive. End users are notably absent and appear unwilling to add purchases at these higher levels. China remains on holiday, celebrating the Lunar New Year in an extended break, and it will be interesting to see what slant they add when they return in force next week.

• StatsCan’s latest estimates surprised the market, adding impetus to the bulls, 31 Dec ’13 wheat stocks were reported at 28.38 million mt below estimates of close to 29 million mt although still well above last year’s 20.61 million mt. Canola (rapeseed) stocks were put at 12.6 million mt, above estimates of 12.3 million mt, and up from 8.1 million mt last year. The latest figure would represent a new record high. Unfortunately logistical constraints appear to be continuing to deprive the world of material, wheat is flowing across the border into the US but canola shipments are struggling, and as a consequence Australia is seeing additional demand for their current crop.

• Weather concerns have been growing in some southern and eastern Brazilian states as lack of rains and higher temperatures weigh on opinion. This could well be one of the triggers for the current rally in prices. In addition, Argentine farmer selling policy remains an unknown, which is supportive from a price perspective, particularly for soybean meal, Argentina being the world’s largest exporter. Recent Peso depreciation has had little impact so far as farmers continue to hold stocks as a “store of value”. Market conditions currently provide elite in the way of incentive to stimulate large scale farmer selling. However, income requirements and storage space for the new crop will undoubtedly become an issue in the not too distant future. The Argentine government is reported to be suggesting that fines may be levied upon farmers who don’t sell in accordance with their obligations – clearly life in Argentina is currently less than a bed of roses!

• On the other hand, Mato Grosso is currently harvesting soybeans at record yields according to a Reuters report. Some farmers are reporting yields as much as 30% above estimates made as recently as last month. AgroConsult are confident that the Brazilian harvest will exceed that of the USA (89.5 million mt).

• As ever, there are two sides to pretty much every story, and that is what makes markets! However, we remain of the opinion that the S American soybean harvest will be gathered, and when viewed in the cold hard light of day it will be big by almost any standards. To that end, we continue to look at price rallies, such as we see right now, as selling opportunities, and would not recumbent consumers to chase prices higher, particularly in deferred positions.

• It has been a positive day to start the new month with front month soybeans (Mar ’14) flirting with the the $13.00/bu level, although not hitting the level (at the time of writing that is). Mar ’14 corn has also tested resistance at $4.39/bu, again not breaching the level as this is written. Equity markets looked weaker as fears grew over some economies (think Argentina and Turkey), which may stall the progress made in developed countries (think UK and US). The slowdown of growth in China, which has been in evidence for some months now, does not add confidence either. As money exits equities we always look to see if it is heading into commodities, but at present there is little, if any, evidence of this happening.

• As prices rallied producer selling has been in clear evidence, particularly corn and soybeans, which is limiting or even capping gains. Some consumers are adding to purchases, particularly nearby, on fears of further advances in the short term.

• In S America, the weather forecast in south and central Brazil over the next couple of weeks is wetter, Argentina is forecast to receive soaking rains. Generally speaking the conditions do not look as if they will adversely affect output where a record Brazilian soybean crop is expected, It is possible that the crop may be 90 million mt rather than 91 million mt, either way it is big!

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

Weekly Update 31 January 2014

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

Fund positions

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

Wheat: 796,900 mt which is above estimates of 300,000-500,000 mt.
Corn: 1,943,600 mt which is above estimates of 550,000-750,000 mt.
Soybeans: 865,800 mt which is within estimates of 750,000-1,050,000 mt.
Soybean Meal: 188,300 mt which is within estimates of 100,000-200,000 mt.
Soybean Oil: 6,600 mt which is within estimates of 0-30,000 mt.

• Probably worthy of note is the level of corn exports, significantly ahead of expectations (almost twice anticipated levels). This has added a firmer tone to the market today and a watchful eye is now being kept on key resistance levels, particularly in the front month contract. A close above $3.36 could well spark some speculative buying although producer selling and the longer term global outlook would seem well able to limit upside.

• In line with other estimates from a variety of sources, the International Grains Council have released their latest update for 2013/14 global wheat output at 707 million mt, which is a month on month increase of 9 million mt. The global wheat crop for 2014/15 is estimated slightly lower at 697 million mt. Similarly, the 2013/14 global corn crop is estimated 9 million mt higher at 959 million mt compared with last month’s estimated figure.

• Brussels has granted wheat export certificates for the week totalling 648,085 mt, which brings the season total to 18.182 million mt. This is 5.832 million mt (47.2%) ahead of the same time last year.

• Following yesterday’s wheat purchase by Egypt it seems the French, who were left out in the cold by the tighter moisture specification, are a bit miffed! They plan to lobby the Egyptian authorities and stress how important French wheat is to them and their import programme. The French plan to tell Egypt that it is not in their best interests to reduce contractual moisture levels, not because they traditionally grow to 13.5% in France and it would cost an additional €1 to dry down, but because non-French sellers would look for higher prices if French wheat was not physically able to be shipped to Egypt. It sounds a bit like “throwing toys out of the pram” to us, but it will be interesting to see how Egypt reacts and if they do anything about it in their next tender.

• Today has been a big down day both sides of the pond with fallout from Egypt’s latest tender, which effectively leaves France out in the cold potentially with surplus supplies in need of a home. US wheat hit lows not seen for some years and the tone has been undeniably weak. Soybeans have tested their recent harvest time lows and corn has been the passenger, willingly or otherwise.

• Soybean cancellations by China are a feature of the rumour mill albeit there is no confirmation (yet) of such rumours. However, the widespread nature of the rumours suggest there may be “no smoke without fire”. Again, such talk adds to the overall negative tone in today’s marketplace.

• Added to the above, soybean cargoes are loading in Brazil, and the pace of loading is suggested to be brisk. With the Far Eastern Lunar New Year holiday approaching this weekend and the holiday period it will create, it is difficult to become too friendly to market upside right now.