• After the close yesterday Egypt’s GASC tendered for wheat, for mid March shipment,in the wake of its rejection of US supplies earlier in the day. It became clear that they were prepared to accept French grain at 13.5% moisture and continue to do so for another six months, which came as something of a surprise. Jumping forward, the result was that France was awarded 180,000 mt and Romania secured 60,000 mt at an average price of $240.25 basis C&F, which compares with yesterday’s US offers that ranged from $287 to $336 including freight. Little wonder yesterday saw Egypt “pass” on the US offered levels!

• Today has seen the USDA’s Outlook Conference release its new crop acreage projections, and a bullish surprise comes from the soybean seeding forecast of 83.5 million acres, half a million below December’s baseline numbers. Corn was put at 89 million acres, 1 million up from December. The lower than expected soybean acres saw markets jump 15-17 cents with corn following 3-4 cents and wheat tagging along for the ride. Trend following funds jumped on the bandwagon as soybean prices pushed through both 50 and 100 day moving averages. It is probably fait to suggest that Outlook numbers with actuals, last year Outlook put soybean plantings at 79.5 million acres, below intentions of 81.5 and final acres at 83.7. Tomorrow will see more data including balance sheets and it is quite possible that we will see a price reversal – again.

• Brussels granted weekly wheat export licences totalling 930,377 mt, which brings the season total to 21.094 million mt. This is 776,391 (3.82%) ahead of last year. Prices lifted in Paris on the news. The Russian “news machine” is either long new crop futures or needs a hedge against an, as yet, undefined problem with talk of a “more than 40% drop in this year’s winter crop”. The Soviet propaganda engine is clearly not yet dead unlike many in the eastern regions of Ukraine!

• The big picture suggests that in corn we have a marked lack of weather issues in S America coupled with steady demand, which is keeping the market two sided and choppy. There is a lack of direction and uncertainty over US acres (we are now talking the “real”world not Outlook). The big risk sits with fund liquidation as the funds continue to hold a long position. Wheat however appears to offer little short term risk to the bears, demand news could probably not get worse for the US who were humiliated on the global market yesterday with Egypt’s rejection of all offers despite the lure of a credit facility (which we believe is tempting – but not at any price). Soybean prices continue to have the Sword of Damocles hanging over them in the form of the fundamental oversupply position despite today’s Outlook projections offering some short term support. The market has to decide which is the greater long term driver of price direction.

• Chicago markets turned lower when it became clear that Egypt’s GASC was unamused with today’s US wheat offers in response to yesterday’s tender for mid April wheat shipment. The tender was pointed at US supplies and it was expected that Egypt would take advantage of the $100 million credit line offered by the US. Prices rose in early trade on the back of the tender announcement, but fell when it was announced that Egypt was going to “pass” prices which were some $50 to $100/mt over the last European levels purchased two weeks ago. In the wake of Chicago prices shedding as much as $0.10 (recovering a touch into the close) Matif followed with a €2 decline as more “long liquidation” was reported in the Black Sea. Shortly after the Russian AgMin proved (yet again) its mastery of the art of diplomacy by stating “it may review the export tax” once it has February export data!

• Soybean prices eased as Brazilian producers returned to the selling arena post Carnival, and this is expected to continue to weigh heavy as harvest progresses. It should not be forgotten that with the Brazilian Real at 2.83 vs US$, yesterday’s price uplift must have made farmers in Brazil think it was more like Christmas than Carnival! Soybean prices calculate at an equivalent of $13.40-$13.50.bu and with yields still being reported at record levels at farm level these sort of price levels are well above last year.

• Tomorrow sees the start of the USDA’s Outlook Forum conference and it is expected that new crop acreage and yield data will be available post keynote speeches. Initial ideas suggest soybean acres at 84-85 million and corn at 88-89 million.

• The reopening of markets following the US Presidents’ Day weekend holiday saw an early rally which quickly uncovered cash selling in wheat, corn and soybeans that saw prices lower by midsession. Volumes have been unspectacular and soybean meal has been the mainstay of higher levels in the face of EU buying/pricing trade.

• NOPA’s latest US crush data saw the January crash rate at 162.67 million bu, slightly below expectations but the fourth largest monthly total on record, and the largest ever January figure. The crush has clearly been fuelled by ample supplies from the recent large harvest and strong export demand. Being below expectation the number was viewed as being on the bearish side.

• The S American weather forecast contains little change and holds a favourable mix of sunshine and rain in the next couple of weeks. N and C Brazil will see enough dry weather to allow harvest to expand at a rapid pace whilst S Brazil and Argentine crops will see enough rain to allow crops to mature. Despite some recent pessimism over S American soybean output, Oil World’s latest estimate stands at 91-92 million mt for Brazil, and we still anticipate record yields in both Argentina and Brazil in the wake of one of the best growing seasons in a decade.

• Today’s fund buying in soybeans has seen an uplift in prices as they target the 100 day moving average (basis Mar ’15 contract). Given the supply side fundamentals we see this as a selling opportunity rather than a rally to be chased, and cash seller emergence would tend to support this view.

• France’s AgriMer has reported the French soft wheat crop to be 92% good/excellent, which compares with last year’s figure of 74%. We have heard that the Russian government has managed to buy a very limited volume for intervention and given the likelihood of end stocks there rising to 10 million mt, of which 1 million mt may be government held, harvest time is beginning to look potentially messy. Perhaps the aggressive stance taken by France in recent weeks will pay off for them in the longer term!

• With S America effectively closed for carnival celebrations and China and much of Asia beginning Lunar New Year celebrations international markets are likely to be subdued for the remainder of the week .

• With the US closed for business and Europe in lacklustre fashion it only remains for me to wish those who will shortly be celebrating the year of the Goat/Sheep/Ram (various terms for horned ruminating mammals) Kung Hei Fat Choy  and for those about to celebrate Mardi Gras Bom Carnival.

• At a loss for much else, it seems winter weather in Europe is pretty much over whilst in the US our cousins are freezing their extremities off. Eurozone/Greek negotiations look doomed given diametrically opposed positions and the ceasefire in Ukraine is beyond a joke.

• For fresh news we look to the US Outlook Conference at the end of the week.

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

Weekly Update 13 February 2015

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

Fund positions

• Another unexciting day leaving very little to say – so this will be brief!

• Grain markets drift on lack of news whilst soybean futures see some Chinese pricing business, which gives them a little support ahead of the Lunar New Year holiday next week.

• US weekly export sales were larger than expected but insufficient to boost the market. Surprisingly Chinese buying was ahead of expectation despite cheaper S American supplies from March onwards. Statistics for the crop year to date show US wheat exports are 241 million bu off, corn down 512 million bu and 2014/15 soybean sales are up by 115 million bu.

• Brussels granted weekly wheat export licences totalling 729,656 mt, which brings the season to 20.164 million mt. This is 706,043 mt (3.6%) ahead of last year’s record pace.

• Finally, Brazil’s CONAB have estimated the soybean crop at a record large 94.6 million mt which is down 1.3 million mt from their previous estimate. This aligns well with the USDA’s latest 94.5 million mt estimate. The corn crop was estimated at 78.4 million mt, 700,000 mt lower. This is made up of an increased main crop but reduced safrinha (second) crop.

• Today can be best described as “uneventful” with prices trading either side of unchanged in the wake of the USDA’s latest update, which gave little, if anything, to feed the bulls and maybe affirmed the bears’ longer term position.

• In Brazil the Real has fallen to its lowest level since 2004 at a shade under 2.87:1 vs. the US$. This represents a 24% drop since Brazilian farmers started their planting efforts, which probably equates to an exact offset of the CBOT or world soybean price decline across the same time frame. (12 months ago CBOT Mar soybean futures were trading $13.35, today $9.73, around 27% lower). Clearly the outcome is to see Brazilian farmers sell beans off the combine when realising good yields and prices that equate to last year’s levels.

• There are suggestions that Egypt is attempting to negotiate a deal with Russia to assure future wheat supplies free of export tax. They maybe have a couple of tenders to go before domestic supplies become available and if their negotiations are successful this could trigger interest from other world buyers. It is our belief that, unless we see an adverse weather event, it is likely we will see Moscow dropping or even removing their export tax on new crop supplies.

• The Rosario Grain Exchange today reported its 2014/15 estimate of Argentine soybean output at 58 million mt, which is 3.5 million mt above their last figure. They put corn at 23.5 million mt which is also higher by 1.1 million mt.

To download our USDA Recap as a PDF file please click on the link below:

USDA Recap Feb 15

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

WeeklyUpdate 6 February 2015

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

Fund positions

• Today’s news has to be led with the record level of EU wheat this week. Brussels issued weekly wheat export certificates totalling 1,706,940 mt, which brings the season total to 19,433,922 mt. This is 325,699 mt (1.7%) ahead of last year’s record pace. The sheer size of this week’s exports argues in favour of our comments earlier in the week, that total exports could reach 31 or even 32 million mt and that the French (in particular) are cheap sellers looking to offload old crop supplies ahead of the new crop harvest, which does not look threatened at this time.

• Second to EU wheat export is probably the plunging value of the Ukrainian Hryvnia, which fell over 32% this morning as the Central Bank scrapped currency auctions and moved to a freely floating currency! Seemingly the Central Bank was or has run out of US$ to defend the national currency any longer. Consequently, sellers of Ukrainian grain have withdrawn to the sidelines for now, undoubtedly they will re-emerge before long, and aggressively so at that time. Interior grain prices have soared to record levels and farmers are frantically searching for seed to capitalise on windfall high prices. Doubtless the costs of growing the crop will have risen too, but more importantly the selling price has moved to record highs.

• US wheat has also rallied on news that Egypt could purchase as much as six cargoes of US Soft Red Wheat. However, there are question marks over quality and whether the US grain can meet Egyptian specifications (vomitoxin for example).

• The USDA has today released its weekly export figures, which offered little in the way of surprises,  as detailed below:

Wheat: 487,000 mt, which is within estimates of 300,000-500,000 mt.
Corn: 852,000 mt, which is within estimates of 800,000-1,000,000 mt.
Soybeans: 496,700 mt, which is within estimates of 200,000-500,000 mt.
Soybean Meal: 302,300 mt, which is above estimates of 120,000-300,000 mt.
Soybean Oil: 15,100 mt which is within estimates of 5,000-50,000 mt.

• In summary, this week has been a roller coaster of whipsaw action in energies and currencies that has stimulated market volatility. Both bullish and bearish traders are catching their breath after the recent exhausting sessions. As a consequence we have seen uncertainty, and this is one thing that markets hate – with a passion!

• We look forward to a return of calmer days and more certainty – whenever that may be!