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Ukraine bans all wheat exports starting Nov. 15, an illustration, if it were still needed, of the shift in market focus from East to West. At first on the EU, it’s now on the ever more competitive Americas.

On Friday, the Ukrainian government announced that it would ban wheat exports as of Nov. 15. Another meeting will be held soon to determine the precise rules of this ban and its reach over already contracted shipments passed this date.

For some weeks already, the market had shifted its focus from Eastern Europe/Black Sea to the EU. Domestic subsidies in Russia were pushing FOB prices up, resulting in de facto export restrictions through uncompetitiveness. Business out of the region was down and actors in the markets focused on executing contracts.

Meanwhile, the EU was the most competitive origin and took its share of the market in Third Countries demand. However, growing concerns over UK wheat quality (very low test weights) and a steadily rising domestic demand for milling wheat are now impeding EU’s competitiveness. Regional supplies of milling wheat might not be sufficient to cover the whole demand; perhaps we’ll import from Canada.

Canadian wheat has recently been sold to China. We also saw Argie wheat being bought at a GASC tender and last week it was also Argie wheat for the Algerian tender. American origins are back in the game at a moment when we realise world supplies might be tighter than we had thought for a moment.

Kazakhstan lowered their exports from 10Mmt to 8Mmt; the conditions are too wet in Argentina and still too dry in Australia as they are about to  enter the harvest, and too dry in the US for the winter planting.

Add to this tightening a steady world demand, as illustrated by the better than expected US weekly exports and EU export licenses, and you have all the reasons to be friendly to the wheat. Who will steal the game is another question, but it seems that if one were looking for a winner, West would be the place to go to.

www.AgriNews.ch, Switzerland

Contrary to trade expectations, US corn yield and acreage adjustments weren’t the focal point of last Thursday’s USDA report, which nonetheless reconfirmed strong fundamentals. As the market finalizes its global footprint for the 2012/13 crop, funds continue to distort it.

US Corn yield was lowered from 122.8 bpa to 122 bpa and acreage increased from 87.4 Mha to 87.7 Mha; leading to a corn crop of 10.796 Bbu. US exports were revised down by 100 Mbu.

It was corn stocks estimations that pushed Chicago up after the report’s release. For 2012/13, the US and Brazil carry-in were decreased by 5 MMT each whilst US and world carry out were decreased by 3 MMT and 7 MMT. One is left to wonder what new element in September 2012 justify such adjustments. Whatever the reason, world stocks were reduced by 7MMT, with world stocks/use ratio reaching lowest level since 1965/66. Other notable data in the USDA’s report: Argentinian and FSU corn production were left unchanged. Brazilian exports were increased by 4.5 MMT whilst EU imports increase from 2 MMT to 5 MMT, the latter being seen as too light despite upcoming feed wheat abundance from Northern Europe.

The gains following the sharp increase in the CBOT on Thursday were erased on Friday when various news surprised market participants: US export sales figures (14 kt) far below trade expectations (300 kt – 400 kt), additional South American imports into the US, continued signs that US interior basis is improving. Floor brokers mentioned that a London-based hedge fund sharply reduced its exposure to ags markets.

For how long can South America and the FSU sustain their export pace? At some point during this winter the global exporters will have to re-shift their attention to the US. Moreover, with such tight stocks, as US cash market availability returns to a state of normalcy after a extremely rapid harvest, the market is at the mercy of south american weather deterioration. Also notice must be given to the fact that low world corn stocks are in practice even scarcer when China holds 51.5% of them.

www.AgriNews.ch, Geneva Switzerland

With the US harvest now in advanced territory, the USDA report due for release this Thursday will provide direction to a market that has been in a conflicting state since the release of the bullish US stocks report on 28th September and the ensuing market rebound. Amidst a lack of fundamental news since then, US Corn futures have slightly declined but on the whole held up reasonably well in the face of weak performance in wheat and beans.

Two successive crop reports FC Stone (3 Oct) and Informa (5 Oct) went against the various trade sub- 120 bpa yield estimates, leading many to believe that the USDA’s September figures might not have been off-mark. FC Stone put the corn yield at 123.9 bpa and stocks at 637 Mbu. Informa pegged the yield at 127 bpa with 88 mA – 11.1 Bbu crop- and stocks above 1 Bbu.

The market will now gear up until Thursday. It seems fair to expect a stable yield estimate and a decline in harvested acres. But once again, we can always be surprised given the large range in trade estimates.

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Another GASC tender that saw the return of Argentina at very competitive price levels and the absence of Russian/Ukrainian offers GASC was back in the market last week with French wheat taking 75% of the tender and Argentina the remainder. Argentina is back in the GASC tender business, and its return was made on rather aggressive terms, with offered FOB prices at a discount from nominal price. Add to this the advantageous freight rates from South America, and you have the recipe for good pricing.

The EU has found a substitute competitor for the tender business now that Russia and Ukraine seem clearly out of it (there was no offer at the tender from these origins) and considering that US wheat still is $15 too high though the spread is narrowing.  The tender for Dec 11/20 went as follows:
– 180kt FR @ $342.5-$345.3
– 60 ARG @ $333.68

The week saw a clear fund liquidation, pushing all futures markets down, more so the US ones (~-5%). The previous Friday’s USDA report might have been a wee bit overbought and Monday’s drop would tend to prove this point. Wheat futures might also be following beans down. EU futures markets were down too following the US ones, notwithstanding a competitive international position and steady exports to traditional buyers (Algeria, Morocco, West Africa).

Would it be too much to say that it was a week without clear news in any direction? Bulls need to be fed and the lack of fresh news did not help to provide support to the markets Let’s see what this week USDA report brings us!

AgriNews Oct 7, 2012

After a low week, a surprise USDA report sends markets up.

Tighter than expected wheat stocks in the quarterly USDA report sent markets up on Friday following a week-long downward move. Panamax index hits all-time low at 418.  GASC was back in the market last week with a tender won by EUorigins (only one Russian offer, $20 off and no Ukrainian offers). The tender for Dec 1/10 shipment went as follows:
– 180kt Fr @$346.93 – $347.36
– 120kt Ro @$349.93

Russian and Ukrainian prices might have been competitive through to November, but they are clearly off for Dec onwards. They now have a tight execution/logistics programme to execute until the end of Nov, likely to run into Dec. The Russian government is firm on its position that it will not impose export restrictions, but through subsidising domestic processors and therefore pushing domestic prices up, they are effectively making their exports uncompetitive. Backdoor restrictions, if you will!

The week was low, with little  fundamental support and a clear fund liquidation trend on broad economic concerns. Friday’s USDA report brought some surprise, sending US futures up ~5% in a day. The stocks for September were lower than exected @2,104Bbu (compared to est. @2.278, -7.6%). Since the markets also see end stocks at lower levels (due to dry Winter wheat planting conditions in North hemisphere + smaller South hemisphere crops), there is a strong case for tighter supplies.

Also reported, Iran could have bought recently up to 1Mmt of optional wheat. India continues to export wheat and delegation going to Iran to discuss 2/3Mmt exports. In both cases (Iran imports, Indian exports), execution is going to be tricky.

AgriNews, Oct 1st, 2012

It is not often that the USDA issues more conservative estimates than the trade. Yet, this is exactly what happened on Friday, when the US Stocks report estimate was 200 Mbu below estimates, taking the trade by surprise and prompting a market bounce on Friday in Chicago (+5.6%/ limit up) and Paris (+3.9%) amidst massive trading activity and position re-adjustments (highest traded volume in MATIF since 25 July 2012).

The market had begun the week expecting a bearing Stocks report by USDA. The return of global markets to “Eurozone crisis alarm” mode after several weeks of “Central Bank action fueled optimism” mood pushed funds to liquidate their positions across commodities throughout the week. The pace of the US harvest remained rapid, continuing to produce cash market supplies. Ethanol continued to run above USDA estimates. Poor US weekly export sales (net zero) inspired some level of confidence regarding rationing.

South Korea’s massive buying, nearly 1 MMT of mostly optional corn, underlined the fact that non-US origins are taking US’ Asian export business. The USDA Stocks report took everyone by surprise as most were expecting that estimates would be high in a context of old/new crop intermingling. USDA estimated stocks as of Sep 1st were at 0.988 Bill Bus (trade estimate 1.113) compared to USDA Jun 1st at 3.149 Bill Bus, USDA Sep 12th at 1.181 Bill Bus and Sep 1st 2011 at 1.128 Bill Bus.

South American corn continues to trade at a strong discount the US, while Ukrainian trades well below French corn. Brussels lowered their corn yield to 6.05 tph, considered as too high by the trade. The trade anticipates EU corn imports well above the present 3 MMT USDA figure. This deficit will not be answered from the Balkans, whose corn production estimates by Coceral stand at 7 MMT against 10 MMT last year. Meanwhile, last week saw more decline in the dry bulk market which according to experts is reaching “a very pessimistic bottom”. Rates in the Atlantic Panamax market sank, whilst remaining flat in the Pacific side (market reaching all-time contract low). They softened in the Handymax market too. Only in the Capesize did the market see an increase in activity in both bassins in the week prior to the holiday in Asia.

Friday’s report confirmed that the US market is tight. Higher prices will be required to prompt rationing as low export figures aren’t going to suffice to ration animal feed. Should the USDA reduce the yield and harvested acres estimation in its 11th of October report, and produce a crop figure close to 10 Bbu, the market rally will take place sooner than expected. Brace yourselves for high volatility until then.

AgriNews, Oct 1st, 2012

Anecdotal evidence often seems much more compelling than dry statistics. It is presently difficult to realistically factor in the US rationing challenge when cash market availability suggests otherwise.

AgriNews, September 24, 2012

Global markets vacillate between worries about growth slowdown, sporadic pulses of eurozone crisis alarm and then optimism fueled by rumors of and/or extraordinary measures by central banks.

Last week, the first two took precedence: pledges of central bank support
– rumors of which had propelled rallies across equity and commodity since the early summer
– were outweighed by concerns about global economic growth together with eurozone challenges.
Bulls , as a result, held back on growth sensitive assets. Crude oil fell below $111 as the dollar firmed.

The bull fatigue in the corn market spearheaded by the last USDA report extended to last week with improving sentiment in the US. The rapid pace of the harvest resulting in cash market availability is postponing rationing worries. Discussions about the yield now center around improvements. Sluggish weekly exports of 70k avert fear of supplies moving across oceans. The last USDA, after all, projects a crop
that is 13% smaller than last year and would be the smallest crop since 2006. The 122.8 yield figure if confirmed would amount to the smallest average yield since 2003. Weren’t we discussing 1988 comparisons a few weeks ago?

We reiterate our comments from last week. The corn market has found a certain degree of optimism, supported by factors which are temporary in nature.

After six consecutive weeks of tendering and buying, GASC did not follow its usual pattern and did nothing after the drop on the US futures markets. Meanwhile, origin spreads narrow globally.

AgriNews, Geneva – September 24, 2012

The start of the week saw a massive fund liquidation across all commodities, which translated in a drop
around 6-7% on futures markets between Friday and Tuesday. The announcement of the 3rd round of quantitative easing on September 12th surely helped siphon capitals out of the commodities to the stock markets. The following week saw increased uncertainty regarding economic growth, pushing the trend further.

It was noticeable that, after such a drop on US markets, GASC did not come to the market with a tender, as is their usual buying pattern. The fact that Egypt has already imported a total of around 3.7Mmt of wheat (1.7Mmt of which through GASC), which represents 7 months of supplies, might be sufficient an explanation for this absence. It will now be interesting to see when they will return to the market for a December shipment and where they will buy their wheat from. Having purchased high-quality Russian wheat, it is probably that they will try and blend it with domestic wheat before buying lower quality French wheat.

Globally speaking, this week saw a narrowing of origin spreads. Argentina prices were up on worse than expected yields and there is still no real improvement in Australia. Eastern Europe domestic prices keep on increasing, which slows supplies to export terminals. We are now in a situation where all major origins are competitive (most of the prices within a $20 range). Freight might become the determinant of attractiveness!

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Problem postponed, bulls tired

Wednesday’s USDA report will not trigger the required rationing job. As a result, the US corn market faces a situation which can hardly be reconciled for the present time: tight balance sheet versus stock availability.

September 17, www.AgriNews.com