Soycomplex
Beans closed lower on all but the front month which got support from strong nearby demand - the USDA confirmed another sale of 115 TMT of US soybeans to China for 2013/14 shipment. Overnight rain for northern Argentina was seen as bearish going forward, even if the rest of the country remains dry. Argentine soybean conditions good/excellent were said to have declined from 93% to 87% in the past week. Dr Cordonnier reported that early soybean yields in Brazil's leading producing state of Mato Grosso are "very good" for fast maturing varieties following abundant December rains.
The state's harvest will really ramp up mid-January, he said. Almost a quarter of the state's crop was planted in one week in late October, meaning that the majority of this will all reach maturity at the same time, which will lead to frenetic harvest activity by the end of the month, he added. Yield potential further south is not so optimistic however, he noted. The Argentine peso hit an all time black market low against the US dollar. Whilst the official exchange rate is currently fixed at around 6.6 peso's to the dollar, the "real" rate on the black market is closer to 11, which is up sharply from 8 only six months ago.
This will likely further encourage Argentine farmers to hoard beans as a hedge against an unofficial inflation rate of around 25-28%. Monsanto said that profits on soybean seed sales were up 42% in the Sep/Nov quarter, highlighting the growth in plantings in South America in 2013/14. The trade awaits the USDA crop production, demand and quarterly stocks report on Friday. They might raise 2013 US soybean production, but also increase exports, keeping US 2013/14 ending stocks tight. Before that, tomorrow we get the regular weekly export sales report, with another bumper week of around 700-900 TMT expected for beans. Jan 14 Soybeans closed at $13.00 3/4, up 1 1/4 cents; Mar 14 Soybeans closed at $12.69 1/4, down 6 3/4 cents; Jan 14 Soybean Meal closed at $430.60, down $4.00; Jan 14 Soybean Oil closed at 37.43, down 27 points and a new lowest for a front month since July 2010.
Corn
The corn market slumped to new lows. For all the talk of fund rebalancing, and maybe needing to buy up to 100,000 corn contracts, or even more, they were credited with ending up net further sellers of around 14,000 lots on the day. An improved weather outlook in South America put prices under pressure, as too did spillover weakness from wheat. Even so, reports suggest that Argentine corn rated good/excellent is now only 71% from 96% previously. "Very generous rainfall has developed in South Brazil, replenishing dry fields after a period of intense heat and moisture stress. Drought has been virtually resolved in Parana with 138 millimeters of rainfall since Christmas.
Recurring showers in Rio Grande do Sul have also improved corn and soybean conditions with 90 millimeters of rainfall the past 10 days. Recent rainfall was beneficial replenish dry fields. However the rainfall was less abundant than South Brazil leaving some areas of the farm belt dry. On average, Argentina’s grain belt received 100 mm of rainfall in the recent 30 days, compared to 120 mm normally. More rain would be helpful," said Martell Crop Projections. Trade estimates for tomorrow's weekly export sales report for corn are 200-700 TMT. Reuters reported that Shanghai JC Intelligence had cut their forecast for Chinese corn imports by 33% to 4.4 MMT, well below the USDA's current 7 MMT estimate.
The latter of course will issue revised demand numbers on Friday. Reuters did however also report that China was relaxing, or at least speeding up, testing of DDGs for import, and that increasing volumes were now starting to get through customs. A US Grains Council delegation are said to be travelling to China this week in an attempt to resolve the dispute regarding the safety of MIR 162 corn. Asian buyers are still said to be holding off booking US corn in the hope of picking up cheap rejected cargoes. The weekly ethanol production report from the US Energy Dept showed output up 6,000 barrels/day on last week at 919,000 bpd. Production needs to average around 908,000 barrels/day to match the USDA target for the season. Ethanol stocks however rose 500,000 barrels to 16.1 million. The Ukraine Ministry said that the country exported a record 3.6 MMT of corn in both November and December, and that their 2013/14 marketing year to date exports are up 46% at 9.5 MMT. Mar 14 Corn closed at $4.17, down 9 cents; May 14 Corn closed at $4.25 1/4, down 8 1/2 cents.
Wheat
The wheat market crashed to new lows, with Mar 14 CBOT wheat ending at the lowest levels for a front month since Dec 2011. As with corn, the anticipated fund buying as part of their 2014 rebalancing program failed to show up, essentially pulling the rug from under the market. Funds were in fact estimated to have added to their CBOT wheat short position to the tune of around 5,000 contracts at the end of the session. EU exports remain very strong, with a further near 1 MMT of soft wheat cleared by Brussels in the past 2 weeks, but EU wheat isn't US wheat is it? India are actively looking to sell wheat too, picking up a best bid of $282.62 in their tender.
Bangladesh bought optional origin wheat from a Cypriot seller. Jordan declined in their tender. Brazilian millers are said to be asking the government to allow 2.5 MMT of wheat to be allowed into the country duty free (ie from outside the Mercosur trade bloc) in the Mar/Sep period. Discussions between the Brazilians and Argentines are expected to take place at the weekend to see what volume, if any, of the already purchased Argentine wheat that Brazil has got bought will be allowed out of the country. Uruguay are viewing the situation as an opportunity to export some of their estimated wheat surplus (said to be in excess of 1 MMT) to Brazil, having shipped them 150 TMT in December. Brazil's CONAB release their latest crop production and import/export numbers tomorrow.
For wheat they estimated production at 5.36 MMT and imports at 6.7 MMT last month. Brazil are the largest wheat buyer in South America. In Friday's upcoming USDA report, for US Dec 1 wheat stocks the average trade estimate is 1.4 billion bushels, from within a range of estimates of 1.305-1.768 billion. Sep 1, 2013 wheat stocks were 1.855 billion and Dec 1, 2012 wheat stocks were 1.671 billion. The USDA will also report on US winter wheat acres, with the trade expecting a rise of 1-3% on last year. It is also thought that current low corn prices might also stimulate an increase in US spring wheat plantings too. Much warmer weather is on the way for the US this weekend, easing fears of winterkill. Trade estimates for tomorrow's weekly export sales report for wheat are around 350-550 TMT. Mar 14 CBOT Wheat closed at $5.88 3/4, down 13 3/4 cents; Mar 14 KCBT Wheat closed at $6.37, down 8 1/4 cents; Mar 14 MGEX Wheat closed at $6.27, down 3 3/4 cents.
