WHEAT
- USDA report corn plantings 87% complete, 71% last week and 66% average. Spring wheat plantings 94% complete, 84% last week and 64% average.
- UK wheat exports slowed in March to 125,000mt, bringing the season-to-date figure to 2.11mln t.
- Kazakhstan cuts rail costs to boost exports - should allow the country to export an additional 2.5mln t.
- Ukraine’s grain stocks could reach record 12mln t due to the slow pace of exports, exports for July-May estimated at 18.5mln t.
- China’s 2012 corn output seen 3% higher at 197.5mln t, imports seen up at 6mln t. Wheat output set to rise 2% to 120.3mln t.
- Indian May 1st wheat stocks reported at 38.2mln t, almost 10 times official target for the quarter ending June 30th.
- Russian grain analyst reports spring drought conditions in southern area have already inflicted ’irreversible’ damage on some of the crop.
- USDA report winter wheat crop ratings down 3% on the week to 60% good/excellent - Kansas sees biggest reduction, down 8% on the week.
- Strategie Grains cuts EU 2012/13 soft wheat production by 4.2mln t to 122.7mln t, citing increased estimates of winterkill in Germany, France and Poland. This is significantly below all other trade house estimates and therefore must be treated with caution.
- Weather concerns mount in the main Southern grain area of Russia and the Ukraine as hot, dry conditions continue with some rain expected in some areas – but not all.
Summary
The euphoria of the USDA crop numbers last week, and the Crop Tour talking of potential ’record yields’ and an early Kansas wheat harvest, appears to be short-lived as dry weather concerns in the US plains turned chart signals, which encouraged investors to cover short positions especially at the Kansas exchange.
Crop ratings fell 3% over the past week, mainly due to the state of the Kansas crop. Spring wheat plantings should be complete by the end of this week well ahead of the average planting pace.
In the EU, grain markets are overshadowed by increasing financial woes. The ECB said that it has stopped providing liquidity to some Greek banks, further fuelling worries over Greece’s place in the euro zone, sending the euro lower and lifting the US$ to a four month high.
While the euro debacle will continue to rumble on, fresh fundamental support became apparent with increasing concerns over the current weather conditions in the Black Sea region and the sharp reduction in the EU-27 wheat crop projection.
At present the recent bearish tone appears to have been replaced by caution, although the USDA numbers would still point to adequate availabilities of both wheat and corn for the 2012/13 season.
Oilseed Trader
- Soybeans prices remain at the top end of their recent range at $14.30, although a number of long holders are keen to take some profits and reduce their exposure. The soybean complex fundamentally remains strong, which was confirmed by the USDA report last week.
The announcement by the Chinese that they will release 2.5mln t of soybean reserves on to the market could be perceived as negative in the short term, but positive in the long term, as these stocks will need to be replaced.
- Canola will have a greater impact for the oilseeds market in the coming season with the potential for Canada and Australia to produce record crops.
If the European rapeseed crop comes in at 17.5mln t as forecast by a number of analysts, we will be heavily reliant on imports from Australia to meet our crush demand.
- Rapeseed prices have continued their decline in line with the oilseeds sector. Old crop rapeseed farm sales have slowed in recent weeks and crush demand remains weak due to continued poor crush margins.
Rapeseed exports from the UK remain excellent with the March figure coming in at 135,000 tonnes, this takes the seasonal exports to 770,000 tonnes to the end of March.
- Matif rapeseed prices continue to trade on an inverted basis with Aug 12 trading at a €15 premium to May 13. If crush margins are so poor, you have to ask the question why traders want to own the most expensive rapeseed of the season!
Summary
Greece continues to be the focus of attention after unsuccessful elections and mounting fears gripping the country. Commentators are starting to report the opinion that the austerity measures being asked of Greece and other European countries are too much and it is not possible to grow their economies out of recession.
This softening approach to struggling European countries is being seen by some as preparation for a large round of quantitative easing by the ECB, although a number of analysts feel this will be required whether Greece stay in the Euro, or if Greece leave the Euro.
Either way it looks like the printing presses will start shortly which in turn will support commodities once more.
