• Markets can easily be described in one word today, and that word is “Dull”, oh – we could also add “boring” – but that would make it two words!. It seems traders are awaiting Thursday’s ECB announcement on QE and its  implications on currencies before making any position change. Any rally attempts have been capped by persisting favourable weather conditions in S America.

• The current favourite ECB rumour is that a €50 billion/month package, or €600 billion in a full year is being considered. This is of course unsubstantiated and we will have to await tomorrow’s announcement.

• EU grains were equally inactive with slow demand and Ukraine remains an aggressive seller of corn as and when enquiry arises.

• It will be interesting to see what tomorrow brings.

• CBOT markets spent much of the day in negative territory but the grains eventually closed a touch higher whilst soybeans and meal remained lower at the close.

• It was announced that China cancelled a further 174,000 mt of 2014/15 US soybeans bringing the total (as far as we can calculate) to 459,000 mt. There is talk that the total will reach 1.5-2 million mt of cancellations/switches in the 2014/15 crop year! Chinese crushers that import more soybeans than they have ability to crush are reported to be experiencing difficulties in opening Letters of Credit, which could force the pace of cancellation/deferral/switch in coming days and weeks, which will further pressure prices.

• It feels that weather premium is being removed from the market place, justifiably in our opinion, as S American patterns turn more favourable. With Mar ’15 soybeans trading and closing well below the $9.91level (which we mentioned last week) the next downside target is $9.50 and with funds as noted sellers today this does not look to be an unreasonable target in the short term.

• Corn’s Mar ’15 target now rests at $3.75 and Mar ’15 wheat has traded at its $5.25 target although it closed 10 cents higher and we would prefer to see a close at or below support to confirm this target has been reached.

• Aside from Chinese soybean cancellations there is little in the way of fresh news. Ukraine is still actively offering corn for sale, specifically to SE Asia and N Africa and our information suggests they still have as much as 4.5 million mt left to sell into the mid-summer period.

• Australia has reduced its El Niño alert and are looking for more normal conditions going forward. This leaves a potential for increased dryness in the S and C Plains in the US and this needs to be watched going forward.

• US wheat and corn exports are lagging behind the pace necessary to reach the USDA’s latest forecast and the impact on end stocks and potentially prices should not be ignored!

• Finally, the Russian Rouble was weaker, Ukrainian Hryvnia nominally unchanged, military tensions resurfaced in Ukraine, crude oil fell, the EU announced no let-up in sanctions against Russia and later in the week we expect to see the ECB’s decision on Quantitative Easing as the €uro awaits its fate.

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

Weekly Update 16 January 2015

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

Fund positions

• France has sold another 240,000mt of wheat to Egypt in its latest tender for late Feb ’15 shipment. Interestingly the range of offers was from France, Romania ($10 too dear) and Argentina (also $10 too dear) with Russia and US notably absent fro the offer lineup. Prices were aggressive, as we expected, some $8 lower that the last tender on 8 Jan. Bear in mind that despite the earlier concern (which included ourselves) over French quality – not an EU issue – we are still looking at a 7 million mt (70%) stock increase even with 30 million mt of exports. With 16 million mt of exports to date (see below) it will be interesting to see where demand comes from for the required 14 million mt to make the season total. There is a potential for an EU/Black sea bloodbath in due course – watch this space!

• Mar ’15 soybeans broke through support at $9.91 but (interestingly) failed to close lower – just! It only feels as if it is a matter of time before we do so and pave the way for lower levels. Fund selling in soybeans and wheat is evident whilst buying in corn has been noted.

• The USDA has today released its weekly export figures as detailed below, interestingly, corn and soybean volumes were above expectations:

Wheat: 377,100 mt, which is within estimates of 250,000-450,000 mt.
Corn: 843,900 mt, which is above estimates of 550,000-750,000 mt.
Soybeans: 1,438,200 mt, which is above estimates of 700,000-900,000 mt.
Soybean Meal: 72,200 mt, which is within estimates of 25,000-150,000 mt.
Soybean Oil: 29,300 mt which is within estimates of 10,000-30,000 mt.

• EU wheat export pace picked up following the holiday season with Brussels granting weekly wheat export licences for 575,862 mt. This brings the season total to 16.239 million mt which is 425,045 mt (2.5%) behind last season’s record level.

• Informa Economics released their latest report which includes 2015 US planting estimates, corn is forecast at 88.6 million acres, previously 88.01 million acres; soybeans are forecast at 88.03 million acres, previously 88.78 million acres; winter wheat 40.452 million acres, previously 42.278 million acres. Production estimates were also forecast for 2015, corn at 13.5 billion bu with yield at 169.5 bu/acre; soybeans 3.9 billion bu with yield at 44.9 bu/acre; all wheat production at 2.2 billion bu with yield at 45.7 bu/acre.

• Markets have today traded lower for most of the day on fund liquidation amid active volume and as prices fast approached support levels. A clear level to watch is $9.91/bu basis Mar ’15 soybeans, which just held today. Tomorrow is another day and it may well see another day of fund liquidation, in which case support levels may well be tested further.

• US ethanol stocks are growing, and quickly, reaching their highest level since Mar ’13. Ethanol production margins in the US will turn negative in coming weeks and we would strongly suspect corn grind volumes to reduce as a consequence. The industry will have to slow down as US blenders cut back their discretionary blend volumes and this will doubtless impact prices in time.

• Matif wheat fell a further €3 to 4 reaching a one month low and cash premiums remained unchanged leaving FOB values correspondingly lower. The weak €uro and a reduction in French end stocks as reported by AgriMer (reducing by 200,000 mt on account of increased 3rd country exports) was insufficient to provide price support. Russian intervention purchases remain pitiful, at a reported 108,000 mt, the Rouble fell to a one month low, and it is becoming clearer that aside from crop and S&D issues, currency is the biggest single uncertainty and influencing factor in coming months.

• The Rosario Grain Exchange reduced its forecast for 2014/15 soybean production by ½ million mt to 54.5 million mt whilst corn production was seen at 22.4 million mt, which is 900,000 mt above its last estimate. Wheat output was estimated 100,000 mt higher at 12.1 million mt.

• Post USDA report market rationalisation has to agree that the released data confirmed combined stocks of corn, soybeans and wheat will hit record large levels and these form the pillars of global grain and oilseed markets. Soybean end stocks, at more than 90 million mt, showed the largest growth. Global bio fuel demand is now a mature market, we have to see growth in caloric intake to kick start a demand led bull market and this is looking less and less likely right now as China is the only hope of additional soybean demand, and we are not overly optimistic of any significant upside right now. The big picture is that there are simply too many grains and oilseeds, either as stocks or as growing crops, too allow for any sustained price recovery – unless we see significant adverse S American weather, and that is looking less and less likely right now.

• Attempts at a “Turnaround Tuesday” correcting Monday’s declines have proved (with 20 minutes to go) unsustainable as all markets trade in the red. Corn has led the way lower on little in the way of fresh news with funds noted as sellers of corn, soybeans and meal and buyers of wheat and soybean oil. Corn breached the 50 day moving average, which sparked some further selling and eyes are on the weekly close (albeit some way off) which may well confirm season highs have been made. If confirmed, we could well see something of a sharp selloff as long liquidation takes place.

• The report from Reuters that Ukraine’s AgMin has asked traders to limit milling wheat exports has (so far) not impacted markets. The requested cap at 200,000 mt is actually at the upper end of volumes exported in the last three years, and as such not of huge significance – also we understand not mandatory at this time.

• As we approach the close in Chicago the charts looks extremely vulnerable to lower levels, particularly in corn, but also wheat and soybeans, as prices decline. The pattern in the remainder of the week will be key to direction into early spring.

Our USDA recap can be downloaded by clicking on the link below:

USDA Recap 12 1 15

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

Weekly Update 9 January 2015

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

Fund positions

• Egypt’s GASC tendered for wheat again yesterday after the close, this time for mid February shipment, and has awarded 180,000 mt all to France. The three cargoes averaged a C&F price of $263.65/mt, which is some $10.00/mt below their last purchase. Despite the tender invitation specifically including Russian origin supplies because of their “exempt” status from the recently announced export curb it was noticeable that there were no Russian offers. This latest tender brings the season purchase total to 3.085 million mt, by comparison last year’s import purchases reached a total of 5.46 million mt in addition to 3.7 million mt of locally sourced wheat.

• The US released weekly export data as follows:

Wheat; 226,300 mt which is within estimates of 200,000-400,000 mt.
Corn; 597,700 mt which is below estimates of 600,000-800,000 mt.
Soybeans; 910,900 mt which is above estimates of 500,000-700,000 mt.
Soybean meal; 37,200 mt which is below estimates of 50,000-200,000 mt.
Soybean oil; 30,200 mt which is above estimates of 5,000-20,000 mt.

• Brussels eased back on the weekly pace of wheat exports for the second week running (both holiday weeks) with certificated granted for 210,339 mt. This brings the season total to 15.663 million mt which is marginally behind last season’s record figures. Weekly corn imports reached a figure of 213,000 mt bringing the Oct-Sep season total to 1.877 million mt, which argues to a season total of close to 8 million mt (at current prices). Interestingly, both US and S American corn prices are cheaper on an FOB basis than Ukrainian offers, and could potentially leave Ukraine with a major stock build going into 2015.

• Despite news of “brutal cold” in the US, fears that next week’s meeting in Kiev between the government and exporters could see a “copy cat” of Russia’s latest export curb, and the sale to Egypt by France, we still saw Matif wheat close sharply lower. The prospect of French stocks set to grow to more than 5 million mt and with early new season crop development and conditions looking favourable, current price levels may well look high in a couple of months time. Today the market has a feel that it doesn’t care if Black Sea closes for business right now! Early season EU concerns over quality appear about to be replaced by late season concerns over a 70% increase in end stocks, and that is despite what may well end up being with 30 million mt of exports!

• Markets are a touch easier with under an hour to go in Chicago as fresh news is limited and the market anticipates fund rebalancing. It is expected that the rebalance will see some selling in wheat and corn and limited movement in the soybean complex. Aside from that, traders are awaiting Brazil’s CONAB data on Friday and, of course, the USDA figures on Monday, and as a consequence there is little else to report.

• The latest weather forecast across Mato Grosso and C Brazil in the coming two weeks is predicting cumulative rains of 2.5″ to 6.0” covering up to 80-85% of the country’s growing region through to Jan 22. This is reportedly sufficient to bring the soybean crop to maturity and crop scouts are continuing to predict excellent yields. The East/N East however (Bahia and Minas Gerais) are forecast to receive only a trace of precipitation and crop stresses are reported to be likely. Losses in these regions are likely to be more than offset by gains in S Brazil. Argentina is also forecast to benefit from substantial rains in coming weeks boosting their output potential.

• Markets have maybe played second fiddle to other news today; Deflation in Europe; the continued fall in the price of Crude Oil and the €uro making nine year lows (again) to pick the major headlines. As a consequence of falling crude prices corn has come under pressure as investors look even more closely at the economics of ethanol production which is under the cosh. West Texas Crude Oil prices tipped below $48/barrel and Brent has dipped below $50, numbers almost unimaginable a year ago! The soaring US$ vs. €uro, which almost breached 1:18 earlier in the day is making US prices look uncompetitive and it will be interesting to see if this is reflected in next week’s USDA estimates.

• In markets, corn is hovering just above the support provided by the 50 day moving average, which if broken will likely pave the way to lower levels particularly if funds decide to either exit longs or add to short positions. Wheat in Chicago is also very close to 50 day moving average support and soybeans are also closing in on the same support trigger. It seems that funds are willing to reduce risk ahead of Monday’s report.

• It is reported that China has managed to auction some of its state corn reserve which could pave the way for maybe 10 cargoes to be imported under licence and it is thought by some that S American or Ukraine origin will be most likely, despite being around $10.mt above US Gulf, due to lingering GMO concerns.

• In Brazil the first export terminal has switched to soybeans from corn as new crop availability grows. Reported yields in Mato Grosso are record large we have heard, no doubt a trend which growers hope will continue!