Market Report - 9/3/2012

GRAIN MARKETS - Jonathan Lane, Trading Manager

WHEAT

Russian 2012/13 grain crop seen only 6-8% in poor condition and indicates country could have another large crop.

Russian 2012/13 wheat crop seen at 57mln/t, up from 56.2mln/t this year with grain exports seen falling to 25mln/t.

Weather improving the outlook for summer and winter crops, both in South America and part of Europe/SU.

EU prices slip as renewed concerns about global economic growth triggers a broad-based decline in equities/commodities.


Rain lifts Argentine 2011/12 early seeded soy crops, but showers are too late for early planted corn.

Indian 2012/13 wheat production seen at record 87.5mln/t, exports placed at 1.5 mln/t, USDA.

HGCA announce a 3% increase in plantings by 1 December 2011 at 1.862 ha.

Winter damage to wheat emerges in eastern France - limited impact on crops elsewhere in western Europe.

Ukrainian grain exports fell 25% in February as severe cold weather hampered transportation to port facilities.

Australian 2012/13 wheat output seen down 15% at 25mln/t, exports seen at 21mln/t.

Summary

With the USDA out tomorrow, the main focus of traders will again be on the corn and soy reports. Improving weather in South America may trim losses expected on soybean/corn crop projections, with many analysts expecting little change on the US/Global wheat supply and demand estimates.


Weather has been the driver for markets over the past few weeks and the sign of improving conditions does not bode well for commodity prices. With the severe weather easing, supplies of competitively priced grain from the Black Sea region is starting to re-emerge onto the export markets. The ’sell-off’ this week, linked to fresh global economic growth concerns, again warned the trade how markets can become influenced by the macro-economics, however bullish they appear.

OILSEED MARKETS - Willie Wright, Oilseed Trader

The Soybean complex has been the corner stone in CBOT markets this month with Soybeans rising 10% on continuing fears of production shortfalls in South America. Once again, the markets are looking to the USDA report for guidance but, with European rapeseed production in deficit and problems with Soybean production in South America, the market looks set to trend higher, although possibly overbought currently.

Rapeseed prices have rallied back to excellent levels with farmers achieving ’370 for spot rapeseed and ’350 plus for harvest as available. There has been a flurry of activity in both old and new crop rapeseed with the UK export program continuing apace. New crop rapeseed has come through the winter in good shape and some good rains forecast this week. Defra announced their December planting figures, showing an increase in rapeseed plantings for England & Wales of 6% at 698k hectares.

If the UK farmer can repeat the yield performance of harvest 2011, England & Wales alone could produce 2.75mln/t of rapeseed, add in Scotland at 200k t and we are knocking on a record 3mln/t crop. Europe will have an estimated 2.5mln/t deficit in their rapeseed S&D for 2012/13 and, with Ukraine’s exportable surplus diminishing, the UK will be a key supplier to the German Bio diesel sector for some time to come.

Matif rapeseed futures continue to trade an inverted structure with May 13 trading at a ’14 discount per tonne to August 12, showing no great incentive to hold on to the physical crop.

Political fears (Iran) are keeping crude oil on its toes, with Brent hitting $125 per barrel this week. Crude looks overbought currently and may come under some pressure from the Greek bond deal agreement this week.