Grain markets - Jonathan Lane, Trading Manager

Wheat

• USDA report corn plantings are 71% complete, 53% last week and 47% average.
• USDA report spring wheat plantings are 84% complete, 74% last week and 49% average.
• Heavy rain is seen boosting EU wheat crop outlook, although may heighten the threat posed by disease.
• French farm office, AgriMer, raises 2011/12 soft wheat stocks to 2.355mln tons, reflecting a cut of 300,000 tons in non-EU exports.
• India is examining the possibility of wheat exports from Government stocks – looking to ‘free-up’ space for projected record crop.
• Canadian all-wheat stocks down to 14.5mln tons, from 15.8mln tons last year – dropping to a 4-year low and below expectations.
• FAO cuts forecast for 2012/13 world wheat crop to 675mln tons, from previous estimate of 690mln tons.
• Argentine farmers will plant less acreage to wheat this year, sowing other crops to avoid government export curbs.
• Spanish rains seen ‘too late to spare hefty grain imports’ – projected to rebound to more than 11mln tons in 2012/13.
• Warmer/dry conditions raising concerns over Black Sea new crop grain prospects, with moisture levels low is rain needed.

 
Summary

Escalating fears of a deepening euro zone debt crisis (Spanish banks) amid political uncertainty in Greece dragged the Euro to a three-month low and pressured equity and commodity markets. US markets followed, as a stronger US$ and risk-aversion ahead of today’s USDA reports led to fund liquidation of long positions.

In the USDA report 2012/13, world wheat production has been estimated at 678 mln tons which is 17 mln tons lower than this year.  Stocks are projected to fall 9 mln tons to 188 mln tons.  Corn production is forecast to increase dramatically to 946 mln tons up 75 mln tons on 2011/12.  Carryout stocks are projected to increase by 25 mln tons to 152 mln tons.  The corn figure was much higher than expected and, as the wheat was much in line with trade expectations, pressure from the corn market should drag wheat prices lower in the short term.

Oilseed markets - Willie Wright, Oilseed Trader

Soybeans are still the main focus in the Ag commodity sector at this time. With the USDA stocks report out this week it has not been surprising to see some profit taking in the market in recent days.
Soybeans touched $15.15 last week, with some forecasters predicting a possible move to $16.00 near term. Weekly export figures for soybeans are strong and production shortfalls in South America continue to be an issue.  

The USDA report this week confirmed sharply lower end stock figures, but threw a lot of the emphasis onto the potential of next season’s soyabean crop.  Global oilseed production for 2012/13 is projected at a record 471.5 mln tons and global oilseeds ending stocks for 2012/13 projected at 65.6 mln tons.  Either way, this report should be regarded as friendly for soybeans in the short term.

Demand for oilseeds in the Industrial and human consumption sector continue to remain strong, which should support the soybeans, although China is reportedly planning to auction off 3 mln tons of soybeans from state reserves.

Rapeseed price drop

Rapeseed has had a sharp correction over the last week with old crop prices dropping by as much as £35 per tonne from the recent highs. Old crop prices in the UK will remain volatile as we enter the last eight weeks of the old crop season, although the general feeling is for strong physical rapeseed demand. The fundamentals for rapeseed are good, but the wider market place has, once again, been spooked by Macro economic activity in Europe and this, in turn, has quelled investor enthusiasm in the short term.

New crop rapeseed production figures in Europe are still being reported around 18.2 million tonnes with Rabobank coming in at 17.5 mln tons. One issue being discussed in the UK market is the poor weather conditions rapeseed has encountered through the pollination period. There are suggestions that sustained wet conditions through rapeseed pollination/ flowering stage are the most detrimental to yields. If weather conditions in the UK don’t change shortly we may fall well short of the potential 3 mln t crop being forecast earlier in the year.

Macro-economic factors have stepped right back into the market place after poor US employment data at the end of last week and various European elections over the weekend. Equities, Crude Oil and gold all fell heavily which, in turn, dragged the general commodity market into the doldrums, or a 'risk off' sentiment. The Euro zone debt crisis is affecting global markets and the world once again will be waiting for the ECB to step in and stabilise the markets once more.