Quake, Rattle And Roll
12/03/11 -- The devastating Japanese earthquake certainly got the markets rattled on Friday, although beans and corn rebounded from early losses to close around the middle of the day's trading range. Wheat closed close to session lows.
Funds will be closely monitoring the situation in Japan over the weekend, asking themselves are these levels a God given opportunity to roll back into the market, or is this only the start of a return to historically "normal" levels?
As I type this the world media is reporting of a "huge explosion" at an ageing Japanese nuclear power plant at Fukushima (there's probably a joke in there, but I won't attempt to find it right now). Officials are being quick to reassure everyone that the container housing the reactor was not damaged.
The Japanese don't have a great track record in being completely, or even quite, truthful when it comes to incidents of this kind though. What they have said though is that radioactivity has been found in the area, and that they've extended the evacuation zone around the plant to 20km, although the BBC are reporting that one of their reporters was stopped by police 60km from the area.
It seems that the world is now sitting and waiting to discover if one of the plant's four reactors has in fact gone into meltdown.
What we do know and will all have seen on our televisions is the magnitude of the devastation caused by the earthquake and the resultant tsunami. Destruction that will take years and many billions of dollars to put right, in a country already saddled with a large debt problem.
Certainly there are going to be dramatic, and long-term, economic implications. In the short-term there are also the effects of plant closures to major Japanese manufacturers like Sony, Honda, Toyota and Panasonic to consider, and the resultant effect on demand for commodities.
So what are the likely implications for the grain markets then I hear you ponder. One report I read today said "none, people still have to eat". That's true of course, although I suspect that the fund's appetites have been severely damaged by this particular latest dose of indigestion.
Indeed their stomachs may well be in for a further testing next week I suspect once they've digested the weekend news. I'd suggest that Friday's price action was somewhat confused and that nobody could really make their minds up whether the latest developments really were that bearish.
I also suspect that many will have made their minds up on that point over the weekend and come up with the answer: "Bloody hell, they are!" Next week could bring another sea of red across our screens I feel.
Chicago Meltdown
11/03/11 -- The market had already been in turmoil all week, watching the events unfold in the Middle East and North Africa. Throw a massive earthquake and a tsunami into the mix and traders just want to get out. The thing is nobody knows right now what the state of play is going to be on Monday morning, and that is making speculators "revisit" their enthusiasm for being long grains.
We'd already been down all week on long liquidation and concerns that rising oil prices would damage global economic growth. Now we have the cost of Friday's devastation to the world's third largest economy, and the possible implications of at least one of Japan's ageing nuclear reactors going into meltdown over the weekend.
Soybeans: Mar 11 soybeans closed at USD13.26 1/2, down 22 1/4 cents; Mar 11 soybean meal ended at USD346.10, down USD3.00; Mar 11 soybean oil closed at 55.49, down 99 points. Mar beans were down 81 1/4c on the week, with Mar meal falling USD17.70 and Mar oil down 347 points. "Very heavy rain in Mato Grosso - Brazil’s largest soybean state producing nearly 30% of the national crop - boosted pod filling last month. Parana - Brazil's second largest soybean state - is also expecting a bumper crop," say Martell Crop Projections.
Corn: Mar 11 corn closed at USD6.59 1/4, down 17 cents; Dec 11 corn closed at USD5.77 3/4, down 9 1/2 cents. Corn was limit down at one point on the news from Japan - the fifth largest corn consumer in the world and America's top buyer of the grain. On the week as a whole Mar corn was down 62c. A warmer and drier forecast for much of the Midwest next week is welcomed, and although that warmer pattern continues into the following week more unneeded rainfall may come with that, say Martell Crop Projections.
Wheat: Mar 11 CBOT wheat closed at USD6.95, down 19 cents; Mar 11 KCBT wheat closed at USD8.20 1/2, down 18 1/2 cents; Mar 11 MGEX wheat closed at USD8.53 1/4, down 23 cents. Mar CBOT wheat finished last week above USD8/bushel and now closed it under USD7/bushel for a 105 1/2 cent loss on the week. Japan is a regular US wheat consumer, routinely tendering for 100-150 TMT most weeks. It seems like they maybe have an enforced absence from the market for a while.
EU Wheat Down Again
11/03/11 -- EU wheat took another battering to end the week with Mar London wheat ending down GBP3.00 to GBP181.85/tonne and new crop Nov down GBP1.00 at GBP153.50/tonne. New front month May Paris wheat fell EUR3.25 to EUR223.00/tonne, with Nov down EUR2.25 to EUR203.75/tonne.
Mar London wheat finished the week a hefty GBP14.70/tonne lower than it began it, whilst May Paris wheat has how fallen EUR21/tonne since last Friday.
London, Paris and Chicago wheat fell every day this week as spec money poured out of grains leaving longholders bewildered and with their confidence in tatters.
This week we've had an escalation of turmoil in the Middle East, downgrades to Spain and Greece's credit ratings, increases in world and US wheat ending stocks from the USDA and now an earthquake and tsunami in Japan.
We've been on major bull run since the end of June 2010 and the market was overdue a correction and all of those factors have helped to spark one.
In the case of world wheat stocks yesterday's USDA revisions now peg stocks to usage at 27.4% - we've only been higher than that twice in the last ten years - so where's the crisis?
The real crisis may still be six months away when pork chops and fillet steaks are being sold on eBay along with Take That tickets.
Who Cut The Lift Cables?
11/03/11 -- Pretty it isn't, as nervous longs scramble for the exit doors pushing little old ladies out of the way and biting the heads off children. They told us the only way was up.
May London wheat down GBP4.50 just after 10am this morning, with May Paris wheat down EUR6.50 and May Paris rapeseed down EUR7.00, oh dear, oh dear. Get me my medication.
The pound has slipped below 1.60 against the dollar and 1.16 against the euro and even that doesn't seem to have helped. Nurse!
Early Vibe
11/03/11 -- Having switched the PC on this morning fully expecting a modest corrective bounce, my flabber is gasted to see virtually another entire wall of red.
If corn ends lower again tonight it would be it's sixth straight day of losses. With Mar currently standing at USD6.74 1/4 on the overnights the front month has lost 55 1/2 cents since that run of bad luck started.
Having staged a lone stand last night, beans have lost those modest gains and then some, and are bathed in red again this morning. Mar beans are down 72 3/4c since Friday night's close including this mornings declines. But even that is eclipsed by Mar CBOT wheat's fall from grace - down 86 1/2 cents since the end of last week.
Brent and NYMEX crude are both down a dollar to a dollar and a half this morning.
The US dollar has firmed this week, which hasn't helped US grains, after rating downgrades for Greece and Spain and increasing turmoil in the Middle East prompting a flight to safety.
China's trade deficit announcement yesterday coincided with news that their Feb soybean imports slumped by more than half last month to just 2.32 MMT.
That decline can at least partially be blamed on the Chinese New Year celebrations, although the figure is also down 21% on last February.
I'm out for much of the day today, and as it's been dead all week I don't suppose that I'm going to miss much. As far as London wheat is concerned, I've packed all the 2's away and put them back up in the loft. They're next to my old 28in waist jeans and my "Everton League Champions" flag. I wonder which of those will be the next to see the light of day!
CBOT Close
10/03/11 -- Soybeans: Mar 11 soybeans closed at USD13.48 3/4, up 4 3/4 cents; Mar 11 soybean meal closed at USD349.10, up USD0.60; Mar 11 soybean oil closed at 56.48, down 19 points. Given the weakness in corn and wheat this was quite an impressive performance by soya today. The USDA production numbers were neutral to slightly bearish, with Brazil's crop getting raised 1.5 MMT to a record 70 MMT. US ending stocks were left unchanged at 140 million bushels, although the trade is already dismissing that as too high. Weekly export sales at a combined 470,000 MT were in line compared with estimates of 350-500 TMT.
Corn: Mar 11 corn closed at USD6.76 1/4, down 18 3/4 cents; Dec 11 corn closed at USD5.87 1/4, down 23 cents. The USDA supply demand report was considered only slightly negative. World ending stocks were increased to 123.1 MMT from 122.5 MMT and the 121.6 MMT expected. US ending stocks were seen at 675 million bushels, unchanged from last month and a bit above the 665 million anticipated. Weekly export sales were disappointing though, and the trade already now seems to be focusing on spring plantings. Corn sowings look like increasing significantly at these levels, hence new crop falling more than old crop today.
Wheat: Mar 11 CBOT wheat closed at USD7.14, down 18 1/4 cents; Mar 11 KCBT wheat closed at USD8.39, down 14 1/2 cents; Mar 11 MGEX wheat closed at USD8.76 1/4, down 15 3/4 cents. The USDA's wheat numbers were the most bearish of the trilogy. World wheat ending stocks were pegged at 181.9 MMT vs 177.8 MMT last month and the 177.77 MMT expected by the trade. US ending stocks were also increased, contrary to expectations of a small decrease. Weekly export sales were also under pre-report estimates.
EU Wheat: We're Running Out, Of Buyers Not Stock
10/03/11 -- EU wheat took another pasting today with Mar London wheat ending down GBP4.25 to GBP184.85/tonne and new crop Nov down GBP1.45 at GBP154.50/tonne. Expiring Mar Paris wheat fell EUR4.25 to EUR234.00/tonne, with Nov down EUR2.50 to EUR206.00/tonne.
That might sound bad, but it could have been much worse. May London wheat was down GBP7.75 at one stage and May Paris wheat was EUR12 lower after the USDA upset the apple cart with a few wheat-related surprises mid-afternoon.
They raised Australian and Argentine wheat production for the current season by 1 MMT each, and also upped US and world ending stocks for 2010/11 when the trade had been expecting a modest reduction in each.
"Exporter stocks remain relatively high and are boosted almost 4 MMT this month. In fact, they are estimated to be 55 percent higher than during the price crisis of 2007/08," they said.
The magic number for world wheat ending stocks was just shy of 182 MMT, now only 15 MMT below what everybody was calling the "burdensome" levels of 2009/10, and there have only been two other years in the past twenty when stocks have been higher.
A front month on London wheat hasn't been lower than this since the first day of December, and for Paris wheat it's the 7th December. Spec longholders have suddenly got a severe dose of the jitters.
News that China has just posted its biggest trade deficit in seven years and slumping crude oil, metals and other outside markets did nothing to settle the nerves.
To add insult to injury US weekly export sales were disappointing, and then as Europe was closing, we hear that Brussels only issued soft wheat export licences for a disappointing 249,000 MT for the week ending 8th March.
