The US spring battle tussle for acreage is still in play, but at this point looks to have corn out front with other products taking a back seat when planting season comes around. Fundamentally wheat futures lacks much in the way of positive direction, with the existing size of the CBOT short keeping the bulls feed. With no bullish news to focus on, thoughts go back to monster ending stocks and increase in acreage in Northern Hemisphere, and not to mention recent favourable conditions in Australia and Argentina. Although it is early days yet, there somme chatter that the US winter wheat crop may be coming out of dormancy too early, resulting in a higher risk of a late freeze. Also lingering concerns that some winter wheat regions are not seeing enough rain in the forecast helped drag wheat off the lows.
With India sitting on a bumper wheat crop (88.2mmt), it is rumored that they may offload 3mmt to Iran; who have been very active in the market of late. Russia's Ag Ministry says that the country will have exported around 23mmt of grains by the end of the month (June – Feb). As expected shipments should gradually ease over the last three months as the Russki’s approach their ‘intended’ 27mmt limit.
Corn has been firming the last few days on chatter that Chinese corn production may be reduced this year with domestic price there reaching record highs. This type of news is what the bulls rejoice in, with any rumours of Chinese chequebooks being brandish about always exciting the market! Chinese corn production has more or less enjoyed spectacular growth over the last 10 years; with ‘government figures’ showing output has grown from 114mmt in 2001 to 192mmt last year. US corn basis is still relatively strong and grower selling of both old and new crop is building up. The recent lack of Argentinian offers has also helped corn futures, along with ideas that the USDA may ramp up exports forecasts in this weeks WASDE report. Whilst in South America there are reports that early harvest yield results from northern Brazil have been better than expected, which may offset some of the strong losses anticipated in the south of the country. Whilst Argentinean harvest as expected as been well below average.
Ukraine is seen ramming up corn plantings this spring to a record 5m ha (+43% on 2011), setting up the cash strapped country to be aggressive sellers in the Nth Hemisphere autumn. I would err on the side of caution on another huge crop though. An early May 2011 planting extended the growing season with abnormally fine warm conditions, insuring safe maturity before the first autumn cold snaps. This resulted in the last year’s crop, being twice as big as in 2010. Mother nature may not be as kind in granting another ideal warm growing season!
Good weather for harvest in Brazil and talk of the overbought condition of the market helped to pressure the soybean market slightly. But some may say it was about time, the rally (bar a few hiccups on the way) that started in mid Jan has gained 165c. The funds surely would be heavily overbought leaving the market vulnerable to a sudden correction. But the question is when?
After last weeks deluge, southeast Brazilian cropping regions will be dry and although yields will be lower then average the dry conditions will be welcome for bean harvest. Brazilian corn harvest is progressing well at 25% complete; while soybean harvest at 38%, +14% ahead of last year pace. A very wet February in Argentina where rainfall in some regions was 200% above average has brought the bean crop back from the dead in southern regions. However rain is forecast every day this week, and although beans production may be maintained or increased, if this wet weather bias continues there could be talk of conditions being too wet before the main harvest kicks off later this month..!
Winnipeg canola snapped two days of price declines to maintain bullish chart direction on a surge in export demand. Bullish rumors are circulating in Canada, that China may ease restrictions on Canola Imports in the second half of 2012. Previous restrictions have been in place on concern of blackleg infesting key Chinese rapeseed regions. As of the end of January, the Canucks have exported 1.2mmt of canola to China, which compares to 521kt during the same time last year. The Chinese rapeseed crop is relatively small to other crops grown in the Middle Kingdom, with last year’s output at 14mmt. EU rapeseed continues to rally (+€62 in 2012) amidst ongoing concerns on tightening old crop stocks.