Afternoon Comments 1st August 2011

Egypt has confirmed Russia as the supplier for a 240kt wheat tender held late last week. Values appear to be roughly $230 FOB Black Sea, this is a very low number and would roughly equate to values closer to $150ish ex farm Liverpool Plains equivalent but it is almost impossible to do an accurate simple comparison as grade comparability, ocean rates, handling costs and many more unknowns can only be assumed.

The crux of it is that Russia continue to cover the middle east with ease and at values well below US or European offers, although their values have moved US$10 higher in recent tenders.

According to those on the ground W.A is looking pretty good, one consultant has actually described some locations around Geraldton as brilliant. There are a couple of average spots but it appears the majority of the Western Australian wheat fields are doing ok.

When we see a dry spell hit the east coast we often see the price of east coast grain move higher, often it's first cap is the cost of grain bought around from WA. Looking at new crop values from (let's pick) Viterra today one can see that new crop Esperance APW is bid at $264 on a multigrade contract while the bid for the same grain by the same buyer from the Newcastle port zone is only $244, so one might assume there is little to no "drought premium" factored into new crop wheat at the moment.

The AUD continues to be strong but did trade as low as 1.098 before heading back into the mid 1.10's this morning. Local prices are a bit of a mixed bag but track feed grain, apart from sorghum, does appear to be closing the spread to higher grades a little.

E session CBOT corn and wheat are a little firmer but with the charts so overbought it would be hard to even see technical support sustained.

Morning Comments 27th July 2011

Well the dollar is back up to 1.095 this morning, it appears just a matter of time before it trades above the May 3rd record of 1.1011 as US officials seem incapable of reaching a decision on US borrowing. To lift the cap above the 14.3 trillion USD ceiling is the question, then what do they do in a few months, lift it again, then again, this train wreck is going to stop somewhere just don't be near the tracks when it does.

The question to ask ourselves is how do we benefit from a US failure. Overnight US and European grain futures closed higher.

Chicago wheat was in the red mid session but found support from the row crops and poor yield estimates from the spring wheat tour participants, you can follow the tour on http://twitter.com/#!/hedgeit.

The crop condition reports fuelled corn futures higher as expected but heat is also playing a role this week. European grains were all firmer with Paris rapeseed and ICE canola both putting on a few dollars in the Nov 11 contract.

Malt barley futures continue to carry around a $100 premium over Paris milling wheat futures which could lead you to think there maybe some upside potential in new crop bids here.

The upside in futures flies against the global cash market, it is almost like the fund managers are not even acknowledging the fundamentals that exist outside of the US......(have they ever)....

Russia has picked up another 120kt wheat sale into Egypt making it a clean sweep of the last month of tenders. Obama basically signed the ethanol blenders credit death warrant in his last speech by insinuating this is one of the places US savings can be made.

There is a big fan spinning with the USA wrote on it, lets see what hits it on August 2nd.

Although futures were higher look for a bearish day with many traders rejecting the higher US futures.

Morning Comments July 26th

US corn and wheat futures eased a couple of dollars a tonne overnight, European grains were also weaker across the board.

Canola and rapeseed futures were the hardest hit with Paris rapeseed back E10.50 and ICE canola shedding C$9.00 on the Novemeber contracts.

The oilseed complex was lower on the back of softer soybean futures at Chicago and reports of better than expected yields across the UK, initial reports suggest many fields are producing around 20% better yields than 2010 with many giving 4t/ha a nudge.

In the US the weekend saw rain across the corn belt and today's forecast is a little cooler than previously thought with the bulk of the heat restricted to Texas and Oklahoma, we do see temperatures still in the mid to high 30s in NW North Dakota later in the week though. With 65% of the corn crop flowering and around 90% of the corn in Texas flowering we may even see a furtehr reduction in the crop rating next week.

The crop progress report that came out after the US markets closed is bullish corn after reducing the good to excellent rating 4% to 62%, this maybe the shot in the arm this market needs, remember we are likely to see a change lower in USDA acreage come August too.

The two biggest corn states Illinois and Iowa are a mixed bag with Illinois corn rated at only 59% good to excellent while Iowa is much stronger at 80%. Spring wheat crop ratings were actually up a point but with 80% of the crop in the Dakota's in head this heat has come at the wrong time, although is is probably welcome from a desease control perspective.

Look for another sideways day on sorghum with new crop wheat coming under pressure but don't be surprised if the afternoon see's prices firm as the US get their head around the crop progress report data.

The weak trough line that triggered a couple of showers yesterday is now along the NSW coast. A high over western NSW will move east through the balance of the week keeping conditions cool and dry. A strong front will push through WA on Thursday and is worth watching as it moves across the continent into eastern Australia late on the weekend but models do suggest rain in Vic / SA only.

Morning Comments: July 20th 2011

As expected both e session and day session bids at Chicago were sharply higher for corn futures. Corn futures were higher from the open and came within a few cents of the daily limit before slipping back to almost unchanged by the close, with Dec 11 up only 10.25c/bu.

There appears to be a lot of resistance around 700c/bu for corn on the nearby contracts while support is suggested to be as high as 680c, so without further bullish or bearish news US corn appears to be range bound for the short term at least.

CBOT wheat futures followed corn higher but also traded on the back of the heat wave having an impact on spring wheat, the lateness of the spring wheat crop in the US would mean the heat is coming at a crucial growth stage but it may also assist with quality. Kansas and Minneapolis once again managed better gains than the Chicago contracts and highlight the focus is on premium wheats at present.

European grain futures were higher across the board with Paris milling wheat posting stronger gains than the London feed wheat contract. Interesting to note that ICE canola was softer whilst Paris rapeseed was a similar amount firmer. To say that US wheat prices are reflecting the global market would be a gross exaggeration of prices, all of the major tenders of the last few weeks have gone the way of Russia and with the recent inclusion of Ukraine on the list of Egyptian buyers would suggest there is less chance of global values moving higher to meet the current US values. In saying this it would also confirm Paris milling wheat futures are also high, they reflecting about a $20 premium over US prices but this is more than likely the natural freight advantage. With better weather expected across the US next week it is hard to see upside, in US futures at least.Probably a bit of a carbon copy of yesterday for today, the low is now situated just off the central NSW coast and should push cloud up the Hunter and onto the Plains today. The low is expected to intensify as it moves east so expect winds to pick up along the coast and east of the ranges. Falls along the coast should clear to the NE by Monday leaving another dry week ahead.

Afternoon Comments:

Prices for old crop are higher across the board this afternoon. Realisation that the east coast wheat belt is sitting at the cusp of a drought may have a few buyers spooked. Subsoil moisture is greatly depleted across most of NSW and rain is needed across most of the major growing districts in the next 3 - 4 weeks to ensure the crop makes it past tillering.

Old crop wheat on the track is up $7 to $10 while sorghum has struggled to put on much today.

Delivered Newcastle or Tamworth sorghum prices remain soft and under seller trigger values but track bids moved up $3 to $218 less rail in the Newcastle zone, still a few dollars under most sellers ideas or starting price but it has attracted small parcels from the softer sellers throughout the day.

As I write the dollar is flat and just over 1.07c while both wheat and corn futures on the Chicago e session are up a little, the ASX milling wheat contract has changed hands at $260 but is currently bid at $256 against a $258 offer to sell, all up about 12kt has traded in the Jan 12 contract so far today.

I read a market report that suggested if US corn yields drop below 155bu/ac than the bearish June report data from the USDA would become irrelevant as supply would see the ending stocks to use ratio drop to below 4%.

I use a theory that predicts US corn yield according to the weekly good to excellent rating on the crop. Currently the good to excellent rating is 66%, which is conducive to an average yield of roughly 161bu/ac, in order to see yields fall to sub 155bu/ac the avg rating will need to fall by as much as 9% in the next few weeks, a big ask really.

Morning Comments: 19th July 2011

Corn futures were under pressure for the entire session, the overnight grains were much softer on outside market pressure but the day session values held on well with weather problems in the US providing the fundamental support.

Chicago, Kansas and Minneapolis wheat futures all saw some downside but recovered well late in the session to finish much closer to unchanged than many had expected. All the major punters still tell me wheat has more downside potential than upside potential at the moment, larger world stocks and cheap Black Sea exports being the major bearish factors. It was good to see the premium wheat that is traded at Kansas and Minneapolis widen their spread to the soft wheat futures at Chicago.

US crop condition ratings came out after the close and had few surprises, although most had expected to see a 2% decline in US corn condition rating, a 3% decline in the report may raise a few eyebrows. The lateness of the US corn crop is probably the one thing that is helping it during this heat wave. Usually there would be up to 20% more corn silking than there is currently, the last thing grower want to see at silking is a heat wave, well US growers anyway.

Looking at the charts wheat is pretty much over bought so we should see some technical sellers hit the floor this week. European markets were all lower with corn and milling wheat at Paris leading the way, rapeseed was also lower but not as low as ICE canola which shed C$7.20 on the nearby contract. Crop conditions in the canola region of Canada are not too bad and with oilseed prices looking to take a hit after China revised soy imports lower we may well see some more downside in canola in the short term.

Look for a softer day with little interest from the buyer.

A low over the NSW central tablelands will drag in SE air over the region keeping temperatures and low and rainfall levels even lower. We could see a shower as the low cell moves off the coast tomorrow and pushes some rain up the hunter and onto the bottom of the plains. Winds will be strong to the east and persist until the weekend. Ten day model looks mainly dry, think 1972 or 1997.