Early Call On Chicago
13/12/10 -- The overnight grains were higher, it seems largely on the news that the Chinese didn't raise interest rates over the weekend. The did up lenders' reserve requirements again however, and also reported food price inflation running at 11.7% in November.
Beans finished the overnight Globex session up 10-12c, with corn up 4-5c and wheat 5-6c higher.
Argentina got some better than forecast rains over the weekend, with northern and central areas getting 1-2 inches over the past 72 hours, according to QT Weather. It's still too dry however in the south and the east.
There is talk of eastern Australia finally getting some dryness to help speed up harvesting and dry some of that soaked wheat.
Snow and freezing temperatures continue to hamper grain movement in the upper US. "A ferocious winter storm hit the Upper Midwest on the weekend causing high winds and heavy snow," say Martell Crop Projections.
Crude oil is back up above USD89/barrel as the cold snap in the US and Europe looks set to continue/resume later in the week. The dollar is also a bit weaker.
Early calls for this afternoon's CBOT session: Beans up 10-12 cents, corn up 3-5 cents, wheat up 4-6 cents.
Pakistan To Export 3.5 MMT Of Wheat
13/12/10 -- Clearly finding soaring global wheat prices too difficult to resist and never one to miss the opportunity to make a bit of extra cash on the side, the Pakistan government have said that they will permit 3.5 MMT of their domestic wheat reserves to be exported.
When asked "what about the people left starving and homeless by the floods?" a Pakistani minister said "who?"
Red Light Spells Danger
13/12/10 -- In the words of Billy Ocean (and I quote):
"Ooooaahhhhaaah mmmm
eh eh mmmm
(Red light) Red Light
(Spells Danger)"
So there we have it, Mr Ocean was ahead of his time in 1977 when he correctly predicted that Prince William would marry Kate Middleton, Alan Pardew would manage Newcastle United and wheat would go to GBP200/tonne twice in the space of a couple of years.
And as Billy went on to point out at great length:
"(Cos red light) Oh Feel the red light
(Means warning) Oh it's a danger warning
(Can't hold out) Oh I can't hold out
(I'm burning) No no no no no!!!"
That final chorus is a clear reference to the fact that none of the above events will last forever. The only question we need to ask now is which one will be the first to get shot down in flames.
I was dismayed, but not entirely surprised, on a weekend trip to Morrisons to again have to search high and low to find British ham on sale. There were oodles of cheap and sizable Danish hams on offer, but very little British meat.
The Danes, and the Dutch too, it would seem are continuing to offload their stuff onto us at prices that the supermarkets are finding harder to resist than a suspender-clad Julia Bradbury carrying a tray of hot (British) pork pies.
How much longer can our livestock industry survive against a background of soaring feed and fuel prices (with a VAT increase around the corner too) and at best static meat prices?
As Billy reiterates:
"Can't hold out (Can't hold out) Much longer"
Of course, it's not just us that's in trouble. The very reason that all this foreign ham is flooding into the UK in the first place is that the livestock industry on the continent is hurting badly too. Slaughterings are up in the EU and the UK as the cost of production outstrips the price of the end product.
The average cost of pig meat production in the UK is currently 18p per kg higher than the DAPP, according to the BPEX.
Meanwhile pigmeat production in the EU could fall by almost 3 million tonnes over the next three years as producers exit the industry, according to the National Pig Association. Producers on the continent must convert away from stalls to loose-housing in the next two years before an EU-wide ban on stalls is introduced in January 2013.
Take it away Billy:
"Wheat, back to GBP100/tonne before the end of 2012, Ooooaahhhhaaah"
EU Rapemeal Prices
13/12/10 -- Latest guide prices for EU rapemeal.
Basis FOB Lower Rhine in euros/metric tonne, with change from previous trading day:
| Dec10 | 216.00 | unch |
| Jan11 | 216.00 | unch |
| Feb/Apr11 | 216.00 | unch |
| May/FH Jul11 | 215.00 | -1.00 |
| Aug/Oct11 | 184.00 | -2.00 |
| Nov11/Jan12 | 189.00 | -2.00 |
The Early Vibe And A Card Trick
13/12/10 -- Fresh news is a bit thin on the ground this morning. Chinese data out over the weekend reports strong economic growth is continuing, but inflation also remains rising - up to 5.1% in November. For now they seem content to attempt to tackle inflation by continuing to tighten lending, rather than raising interest rates again.
The market seems to quite like that approach with beans up 12/14c on the overnights.
The Australian wheat harvest is back up and running, with GrainCorp reporting that they took delivery of just over 5 MMT during the course of the past week spread over the eastern states of Queensland, NSW and Victoria following "the return of drying conditions". Grades received continue to me "mixed" they cagily say.
Reports appear to be treating last week's ABARE wheat crop production estimate of 26.8 MMT with varying degrees of bemusement to downright old fashioned Aussie profanity. Only time will tell who's right. It now seems to be becoming accepted that "at least" half of the region's wheat crop will only be feed grade.
There is also widespread talk of some wheat being abandoned as not even fit for harvesting, with one report suggesting that this might even amount to 2-3 MMT.
Blimey, it's too dry in the west and too wet in the east and it's just too wet and dry at the same time in the south. And they call us whinging Poms. Get on with it, get your harvest done, stop moaning and fax us the results will you? We don't even get this amount of trouble off the Argies.
Talking of whom, things seem to have improved a bit there last week. Although "while topsoil moisture has increased, the subsoil is still very dry," according to Martell Crop Projections. More moisture is needed, particularly for corn which is about to enter the sensitive pollination stage sometime around Christmas, they add. The Argie bargies are the world's second largest exporter of corn, as you probably already know.
A bit closer to home (Argentina is pretty close to home, we own the Falkland Islands remember - Ed. Ooops sorry Ed so we do, well pointed out). OK even closer to home than Argentina, the USDA inexplicably raised EU-27 wheat ending stocks by a million tonnes on Friday, despite the fact that exports are currently running 37% up on a year ago. It seems that once again they think of the bottom line they want, then work backwards from that.
Talking of home AND the inexplicable, July London wheat closed at GBP199/tonne on Friday, GBP4 up despite not actually trading. It's now a five pound premium to two months earlier May. Do they let kids work out these settlement prices?
Talking of the simply inexplicable. I'm going to do you a little card trick. Look at the image below and pick a card, any card, hold it in your mind (if you can find it) but don't tell me what it is right? OK, keep that card in your mind. DON'T CLICK IT! DID I SAY CLICK IT? DON'T EVEN HOVER YOUR MOUSE OVER IT. Stop mucking about just concentrate for once will you? Right hold that card in you head, then click anywhere on the image below and I will, via my telepathetic powers, remove your card.
There you go. An in depth view of the market AND a card tick and it's not even ten o'clock. Be honest you didn't think I could do that did you? Tomorrow I will attempt to chop MrsN#1 in half using a rusty hacksaw blade and a copy of the Daily Mirror.
Chicago Close - Friday
10/12/10 -- Soybeans
Jan 11 soybeans closed at USD12.73, down 8 1/2 cents; Dec 10 soybean meal closed at USD339.10, down USD0.80; Dec 10 soybean oil closed unchanged at 53.79. Overall beans were down 27 cents for the week. The USDA lowered US soybean ending stocks by 20 million bushels to 165 million, that was in line with trade ideas. Production in Brazil and Argentina was left unchanged, as too were Chinese imports. World ending stocks fell by 1.3 MMT.
Corn
Dec 10 corn closed unchanged at USD5.60 1/4; Mar 11 corn also closed unchanged at USD5.74 1/4. Prices were up a fraction on the week. The USDA increased US corn ending stocks by 5 million bushels to 832 million bushels, contrary to expectations of a small decrease. Despite widespread expectations, the ethanol grind wasn’t increased. World corn ending stocks were also a little higher than last month at 130 MMT. Argentina remains dry in the east as corn there starts to enter the pollination stage.
Wheat
Dec 10 CBOT wheat closed at USD7.35 1/2, down 12 3/4 cents; Dec 10 KCBT wheat closed at USD8.22 1/4, down 12 cents; Dec 10 MGEX wheat closed at USD8.54 1/4, up 1/4 cent. The gap between Chicago and the high protein MGEX contracts continues to widen, reflecting the global tightness in availability of quality wheat. On the week overall CBOT wheat was down 2 cents, but Kansas wheat rose 11 cents and MGEX was up 37 cents. The USDA increased US ending stocks by 10 million bushels, a bit more than expected.
EU Wheat Close
10/12/10 -- EU wheat closed higher Friday with Jan London wheat up GBP2.00 to GBP190.00/tonne, and new crop Nov GBP1.00 higher at GBP158.50/tonne. Jan Paris wheat rose EUR1.75 to EUR242.00/tonne and Nov climbed EUR2.50 to EUR216.00/tonne.
On the week as a whole Jan London wheat rose GBP2.55/tonne, with Jan Paris wheat up by EUR6.75/tonne.
In London July wheat - despite not trading all day - was cited at closing GBP4.00 higher at GBP199.00/tonne, just a pound short of the magical GBP200.00/tonne mark. Meanwhile this was the highest close for a front month contract since 14th March 2008, and within GBP2.50 of the all time high close for a front month.
The gains were all the more impressive considering that the USDA once again appeared to feel duty bound to throw us a curve ball or two. They surprisingly raised world wheat ending stocks by more than 4 MMT to 176.7 MMT, including an extra 1 MMT here in Europe. World corn ending stocks were also increased by a more modest 800,000 MT.
Maybe European exports are slowing, Brussels only issued licences for 127,000 MT of wheat this week, although that still brings the cumulative marketing year to date total to 10.3 MMT, 37% up compared to a year ago.
The USDA also raised Australian and Canadian wheat production, but dropped exports for both - reflecting sharp decreases in quality. Pakistan got it's output raised by 1.3 MMT.
