It was a fairly lackluster week in regard to any fresh bullish news, with profit taking selling continuing to trim further gains. Our colleagues at Pro Farmer US staged their annual crop tour, and the market reacted to every twist and turn coming out of these paddocks in the Midwest. And with corn and beans at historic highs, fresh bullish news and momentum is needed to sustain this rally. This may come from wheat (which is still some way off historic highs), and with tightening global and domestic stocks leading into the new marketing year, may provide the ‘fresh’ impetus the market’s needs. Over the last week CBOT wheat declined 7¢ (-47¢ in Aug), which will be the first monthly decline since March. Corn gained 3.75¢ (+18¢ Aug), this is on the back of previous strong gains of 285¢ in July/June. Soybeans rallied 67¢ (+70¢ in Aug). This is on the back of strong rallies of +337¢ over the previous two months.
Domestically new crop prices continue to follow the whims of the international market, with 12/13 prices in WA hitting contract highs, as the Aussie crop enters the crunch time of the year in regard to yield potential. The latest forecast from the BoM doesn’t hold much hope either with a dry spring forecast for SE Australia. Some scattered rain throughout NSW, which will help crops tick along. However with August and GSR running at a high deficit, timely rain is needed if any yield is going to be maintained leading in the spring crunch time. One grower recently commented, after driving 3000km, along East Coast I only saw 30km of good crops!
US Pro Farmer released their final crop tour yield at 120.2bpa (266mmt), which compares to the USDA of 123.4bpa. However they have only made a slight adjustment to the harvested area, which is at 89.5%. Keep in mind that most of the corn yield estimates are pulled from the most ‘blue ribbon’ farming areas of the Midwest. With the yield damage found during the tour, one can easily assume the risk is the final crop size could end up lower than estimated. Soybean final yields at 34.8bpa (70.7mmt), this compares to the previous USDA of 74.6bpa (73.2mmt). The drop in western Corn Belt pod counts may have been the most surprising piece of data collected during the Tour. There’s the potential for an even bigger bean crop disaster without rain into mid-September.
While some rainfall falling over the southern US winter wheat regions has also added some bearish sentiment, with sowing ramping up later next month. Rainfall up to 50 -75mm has fallen over the last couple of days, and is idle timing after the previous three – four months of drought like conditions. In what has been a further sign of an El Nino weather event, Argentina growing regions continue to be soaked. Up to 150 – 250mm has fallen over the last month on the maturing crop.
STATSCAN, released latest forecast for the Canadian wheat crop, production is expected to reach 27mmt (+7% from 11/12), which will be the biggest crop since in four years. With Canadian wheat exports lagging all year, it’ll be interesting to see the increased volumes being exported once harvest kicks into gear especially with the market deregulated. Spring wheat harvest is progressing within the seasonal norms across the Canadian Prairies, with harvest at 10% (durum 19%) in Saskatchewan. Quality will be excellent which looks like minimal premiums for any protein grades.
The IGC cut its forecast for global corn production by 26mmt (838mmt), which is 11mmt lower than the USDA estimate. The IGC pegged world new crop soybean production at 255mmt, however compared to the USDA they had more conservative estimates for Brazil at 76mmt (5mmt less than the USDA). Nonetheless it will still be a record and +10mmt from this year’s drought reduced crop.
With the lull in prices, Egypt has purchased a further 180kt of wheat (120kt Russian @ $320 & 60kt Romanian @$323). French wheat was at a $18 premium, while no Aussie origin was offered. However the fact remains that most EU, Nth American and Aussie wheat offers remain uncompetitive. But it should be only a matter of time when the cheaper Black Sea (trading around $30 discount) selling tsunami becomes a mere trickle. And consumers will need to come back to the traditional exports to fill their needs.