Jonathan Lane, Gleadell’s trading manager, comments on grain markets …

WHEAT 

• USDA report winter wheat harvest 97% complete – spring wheat harvest 79% complete, well ahead of average.

• Statscan reports Canadian 2012/13 all-wheat production will climb to 27.0mln t, up from 25.3mln t last year – second biggest crop since 1996.

• Russian Ag Ministry rules out export ban – but says it might use ‘pinpoint intervention sales to contain domestic prices’.

•  USDA reports US corn crop in good/excellent condition at 23%, unchanged on week – harvest commences – with the market eyeing the crop tour.

• US crop tour gives Indiana corn yield down 21%, Nebraska down 14% - crops hurt by extreme heat and dryness.  Dryness fears shift to the southern plains as wheat sowings near – rainfall across Great Plains which has boosted soil moisture.

• Russian Ag Ministry cuts its 2012/13 grain crop forecast to 75mln t, down from 75-80mln t previously with Russian grain stocks, as of 1^st August, reported at 27.7mln t, down 15% than a year earlier.

• Argentine government reduces its outlook for 2012/13 wheat area to 3.7mln hectares from a previous estimate of 3.82mln – 4.63mln planted in 2011/12.

• Dryness threatens Western Australia’s wheat crop – needs significant rains – wheat at risk of 2010 style decline.

Summary

In the UK we are seeing all types of qualities with harvest around 30 - 35pct completed nationally, but with the south and east much further on than elsewhere. Specific weights are the main problem, with much of the market trying to assess what they can use and at what price. Domestic consumers will take time to adapt to what is available, whilst the export market is in a state of flux and confusion as all forward business has been transacted on min 72kg or, in some cases, min 74kg specification. Milling premiums have remained supported in the short term as millers look to cover their requirements.

With the US corn harvest just commencing, and the current US crop tour reporting yields well down on last year, analysts already have factored in another drop in yield (121.5bu/acre) and production (10.5billion bushels), compared with the current USDA of 123.4 and 10.779billion bushels. The expected drop in yield and production would point to another bout of ‘demand rationing’ within the US and, with the likelihood of a change in the US mandate regarding ethanol unlikely prior to the US elections, the options remain very limited. 

Wheat markets, gaining strength from firmer corn prices, also have eyes and ears fixed on Russia. Declining crop estimates, and therefore lower export projections, still point to a level of Government intervention to secure domestic needs. Elsewhere, the news of higher Canadian production provided little relief, as lower planted Argentine area and a potential 2010-style crop problem in western Australia would negate any increase.

In summary, it’s all about US corn and Russian politics – higher corn prices to lower demand will push US wheat level higher and there remains little bearish news regarding the wheat complex. The only bearish news is that the market and his wife is bullish, and we are already at very high prices!   

Willie Wright, Gleadell's Oilseed Trader, comments on the markets ...

OILSEEDS

• Soybeans have rallied back to near contract highs at $17.35 basis November, there is no dispute that the US crop will be small, although there are questions as to how small it will eventually turn out. This is one of the tightest US soybean supply situations on record, which has been fuelled by the sharp decline in the South American soybean crop in between two poor US soybean harvest years. Export sales are still running at the top end of the range with little sign of demand rationing at this stage. 

• The UK rapeseed harvest is moving its way north with patchy weather continuing to interrupt any harvest flow, as a result there has been no real harvest pressure. Quality and yield reports remain mixed, but mostly at the lower end of expectations -  although ex farm prices remain firm, with August trading around £387 ex farm and November £397 at the time of writing. On the continent, we have seen improved crop reports coming from France and Germany which should lift the European crop to around 19mln t. This is still some way short of the 21.5mln t required for the European market place for the 2012/13 season.   

• Macro-economic issues are rising to the surface once again with Greece being the immediate problem. The country, which is weighed down with debt, is failing to comply with the austerity measure’s they have signed up to and are requesting more time and money. Many Europeans cannot see any positives in Greece staying the Euro, and that this is only the European politicians stalling for time to allow them to come up with a solution to Italy and Spain’s problems. The UK also reported sharply higher government borrowing figures this week, when we should have seen a surplus.