27 February 2015 | Online since 2003



US wheat is still being priced out going forward


Soycomplex

Beans finished sharply lower, on anticipated strong progress with US plantings this past week under good sowing conditions. Talk of China cancelling Brazilian soybean purchases added to the negative tone following the long weekend. Brazilian exporters are still said to be having problems with Letters of Credit out of China. The trend that's developed over the last few years of the usage of soybean cargoes as collateral to raise finance (frequently for all manner of business activities totally unrelated to agriculture) in China is surely a dangerous one, the eventual implosion of which is almost as inevitable as it is also likely to be catastrophic for prices. The sub-prime of soybeans if you like, but when will it happen tomorrow, next month, next year? As with the sub-prime collapse this situation has been around so long now that maybe the market is getting complacent about it. That could make the results of a collapse in Chinese demand even more spectacular.


Recall that China is expected to account for two thirds of global trade in soybeans in 2014/15. Shanhai's JC Intelligence reported that soybean stocks at major Chinese ports are at 6.8 MMT, up from 4 MMT at the start of the year and close to the all-time high of 7 MMT. Argentina's record 2013/14 soybean crop is also said to be one of the lowest quality in at least 17 years, with average protein levels of 37.2%. Oil levels are also at historically low levels, just 21.6% after a largely wet and cloudy growing season. Argentine growers are said to be only 29% forward sold, partly due to the late harvest, but also as a hedge against inflation and currency devaluation.

The USDA reported that US 2014 soybean plantings had jumped from 33% to 59% done in a week, that was in line with trade expectations of 55-60% complete. The 5-year average is 56% done, and plantings were only 41% complete this time last year. It's generally northern states that are behind schedule. Emergence was 25% against 27% on average and 12% a year ago. Dr Cordonnier has the US 2014 soybean yield estimated at 44.5 bu/acre, unchanged from his previous estimate. Weekly US soybean export inspections came in at 89,269 MT versus 175,814 MT last week. Jul 14 Soybeans closed at $14.88 3/4, down 26 3/4 cents; Aug 14 Soybeans closed at $14.18 3/4, down 26 3/4 cents; Jul 14 Soybean Meal closed at $494.20, down $8.40; Jul 14 Soybean Oil closed at 39.94, down 44 points.

Corn

The corn market ended around 6 to 8 cents lower. Good planting progress was also expected with the US 2014 crop in the past week, and so it proved. The USDA said that 88% of the crop was now in the ground, up from 73% a week ago. That's exactly in line with the 5-year average and 4 points ahead of this time a year ago. Again it's the cooler/wetter northern states, such as Wisconsin, Michigan and North Dakota that are notably behind. Crop emergence was pegged at 60%, up from 34% a week ago and versus the 5-year average of 64% and 49% a year ago. "Producers (in these states) may substitute short-cycle, lowering yielding, corn for the full-season varieties due to the late date.


Planting soybeans is another alternative, as seeding may continue up to early June without a yield penalty," said Martell Crop Projections. "Abundant sunshine and summer-like warmth are predicted in the Midwest this week, ideal for advancing planting. Warm temperatures are expected to persist for at least another week in the Midwest, encouraging rapid germination and strong development in corn and soybeans. Highs would reach low-mid 80s F. Nights would continue cool with mid 50s- mid 60s F," they added. Dr Cordonnier has the 2014 US corn yield estimated at 162.0 bu/acre, unchanged from his previous estimate and up from 158.8 bu/acre a year ago. He also pegged the 2013/14 Brazilian corn crop at 74.5 MMT versus a previous estimate of 73.5 MMT. He kept Argentina unchanged at 24 MMT. FO Licht estimated the EU 2014/15 corn crop at 66.4 MMT versus last year's crop of 64.3 MMT.

They forecast Hungary at 7.6 MMT versus 6.7 MMT a year ago, with Romania at 9.5 MMT versus last year's record 10.6 MMT. CEC estimated South Africa’s 2014/15 corn crop at 13.548 MMT versus a previous estimate of 13.029 MMT. IKAR said that Russian corn plantings are 93% complete on 2.4 million hectares. Ukraine estimated that growers there have planted 96% of this year's corn crop on 4.7 million hectares. Ukraine said that it had exported a record 19.673 MMT of corn so far this season. China are said to be preparing to auction up to 3.5 MMT of government owned corn stocks on Thursday. Weekly US export inspections were 1,160,147 MT, compared to 1,063,857 MT the week before. Jul 14 Corn closed at $4.69 3/4, down 8 1/4 cents; Sep 14 Corn closed at $4.66 1/4, down 9 1/4 cents.

Wheat

The market closed lower across the 3 exchanges, with Chicago wheat taking the biggest hit. Weekly export inspections of 507,888 MT were down from the 592,059 MT inspected the previous week. That takes the total inspected for export to 30.7 MMT versus a USDA estimate for the marketing year that finishes on May 31 of 31.5 MMT. The USDA reported winter wheat at 70% headed, up from 57% a week ago and in line with 69% for the 5-year average. Winter wheat rated good/excellent rose one point on last week to a still poor 30%. Spring wheat plantings made good progress, up from 49% a week ago to 74% done, but still behind the 5-year average of 82% complete.


Emergence is 43% against 57% normally at this time. US wheat is still being priced out going forward, with Indonesia buying 125 TMT of Russian 12% milling wheat at around $290-295 C&F for mid Jul to mid Aug shipment. New crop 12.5% milling wheat is said to be buyable around $258-262 FOB the Black Sea. The Philippines are said to be tendering for 95,850 MT of feed wheat from the Black Sea, EU, Australia, and or India for July–August shipment. Safras e Mercado estimated the Brazilian 2014 wheat crop at 6.37 MMT versus 5.6 MMT a year ago. Russia's IKAR said that the spring wheat crop there was 71% planted on 9.3 million hectares, up from 6.6 million this time last year. The Kazakhstan Ag Ministry estimated their 2014 spring grain area at 15.9 million hectares, including 12.8 million ha of wheat. They said that spring crops were planted on 9.4 million ha so far.

Egypt said that it has bought about 3.0 MMT of local wheat so far this season. Toepfer estimated the EU-28 2014 soft wheat crop at 139.15 MMT versus 136.0 MMT last year. Algeria are in the market for 50,000 MT of optional origin milling wheat for August shipment. France is their usual preferred supplier. Algeria are said to have imported 2.2 MMT of wheat in Q1 of 2014, up 28% from a year ago. The market has now come down a long way from the recent highs. "Wheat futures continue into oversold territory, which could trigger a modest recovery. However, momentum studies don’t offer much hope of the trade being able to sustain a rally and point to lower prices before finding support," said Benson Quinn Commodities. The US 2014 winter wheat harvest is now underway in Texas, which might add a bit more negative sentiment, even if yields prove not to be that great. The spectre of a large European and FSU crop waiting in the wings is also a bearish influence. Jul 14 CBOT Wheat closed at $6.41, down 11 1/2 cents; Jul 14 KCBT Wheat closed at $7.38 1/4, down 6 3/4 cents; Jul 14 MGEX Wheat closed at $7.18 1/2, down 7 cents.

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