EU Wheat: Frankenstein's Monster
14/03/11 -- EU wheat fell heavily again today with Mar London wheat ending down GBP3.50 to GBP178.35/tonne and new crop Nov down GBP2.50 to GBP151.00/tonne. May Paris wheat closed EUR6.25 lower at EUR216.75/tonne, with Nov down EUR4.00 closing just below the psychologically important EUR200.00/tonne level at EUR199.75/tonne.
This was the lowest close for a front month on London wheat and the first time that Nov Paris wheat has finished below EUR200.00/tonne since late November.
Paris rapeseed, corn and malting barley also took their by now regular daily beating, with the former down EUR18.00/tonne on the nearby May future at one stage during the day.
May London wheat traded GBP9.00/tonne lower at one stage and had the remaining incredulous bulls almost dancing in the streets at the close of play with a finish of "only" GBP3.50/tonne lower on the day.
The Libyan situation has been consigned to second fiddle in the fallout from the Japanese disaster. They are amongst the largest importers in the world of corn, wheat and soybeans - and are particularly heavy buyers of US grains.
The market remains divided on the implications of the latest developments, although most seem to agree that at least in the short-term Japanese demand for grains will be cut by around 10-20%.
Regardless of what the medium to longer-term affects might be it seems that right at this moment the spec money wants out of the monster that they have created.
Early Call On Chicago
14/03/11 -- The overnight grains closed lower on continued fallout from the devastation in Japan where there's been a second reactor explosion this morning. Beans ended around 10-15c lower, with corn down 5-7c and wheat in the region of 6-8c easier.
Crude is offering no support at around USD2 lower.
Japan is America's largest corn customer, it's second biggest wheat buyer and is third in it's soybean rankings. Some media reports are suggesting that recent events are bullish in the long run. That they may be, but the market is more concerned with the shorter-term right now.
Whilst many newswires are carrying stories that grain shipments to Japan will hardly be affected, and in some cases that they may actually increase to maintain food security, they seem to be ignoring the damage to the local infrastructure and the problems created by power rationing.
The financial implications for the world's third largest economy will be long-term, it could also be argued.
On the global weather front a big warm-up is on the way for the Canadian Prairies, which will be welcomed with spring plantings now only six weeks away. The Midwest Corn Belt is trending warmer too, which is good, although the 6-10 day forecast also includes wetter than normal conditions which will be less welcomed, say Martell Crop Projections.
Signs that La Nina is dying out will also bring welcomed warmer weather for northern and eastern Europe, Russia and the Chinese Manchurian Plain, they say. "The faster that La Nina dies out the better the chances for timely spring planting in northern grain growing areas," they add.
US HRW wheat is still suffering from drought and rainfall this week in the Southern Great Plains "would be generally under 0.30 inch and scattered," they warn.
Elsewhere, Argentina received widespread beneficial rains over the weekend and Brazil's harvest weather outlook finally seems to be improving.
Jordan are tendering for 100,000 MT of wheat and a similar volume of feed barley.
EU grains are all sharply lower.
A lower close tonight for corn would be its seventh in a row, and for wheat it would be a sixth. That's what's being forecast as money continues to flow out of "riskier" assets like the grains.
There will certainly be some thinking that there is a buying opportunity here, but whilst funds continue to take cash off the table the path of least resistance remains lower not higher.
Early calls for this afternoon's CBOT session: Beans down 10-15c, corn 5-7c lower and wheat down 6-8c.
Old Crop London Wheat GBP8.00 Lower
14/03/11 -- May London wheat is GBP8.00/tonne lower in late morning trade at GBP176.50/tonne. Exactly a month ago today it was GBP213.00/tonne, so we've fallen a whopping GBP36.50, or 17%, in just twenty eight days.
That's a pretty spectacular fall from grace by any standards, with the contract now at it's lowest levels since late November. The funny thing is that even more than thirty six quid off the highs it's STILL way too expensive a raw material for the feed sector.
That leaves us with just one buyer in the whole of the country, and they're about to have a shutdown as I recall. So hurry up Vivergo, can't you lads work any faster than that?
EU Rapemeal Prices
14/03/11 -- Rapeseed prices are down sharply today following Friday's soybean losses in Chicago which have been carried over into the overnight Globex session.
Here's the latest guide prices for EU rapemeal, basis FOB Lower Rhine in euros/metric tonne:
| Mar/Apr11 | 186.00 | - |
| May/FH Jul11 | 186.00 | - |
| Aug/Oct11 | 170.00 | - |
| Nov11/Jan12 | 175.00 | - |
| Nov/Apr12 | 177.00 | - |
Two Down, Two To Go
14/03/11 -- Today's explosion at Fukushima reactor 3 following on from Friday's kerfuffle at reactor 1, leaves just reactors 2 & 4 unscathed so far. Apparently now reactor 2 has a problem with its cooling system too, according to this report from the Beeb: Bang.
The report goes on to say that the Japanese government is to throw over GBP100 billion at the economy to help prop it up, without going into detail about exactly where the money is going to come from.
Already heavily laden with debt are they simply going to just print it?
And what does this all mean for the grain markets? A few reports I've read this morning are making out a case for it being bullish longer-term, with regards to demand for biofuel as opposed to nuclear energy.
That may indeed be the case, but I think that longholders are far more interested in the here and now rather than whether to get a bit of 2015 wheat on their books.
Short-term this has to be bearish to my way of thinking. I can't see how Japanese imports aren't going to be affected. With major power outages starting today, and likely to continue for months, manufacturing of everything whether it's compound feed or computers has to be affected.
The knock-on effect of the world's third largest economy taking a hit of this magnitude, and the detrimental medium to longer term damage done by increasing the national debt whilst simultaneously decreasing the national output also looks pretty severe to me.
They are the world's largest importer of corn, the fourth biggest buyer of soybeans and sixth largest of wheat. And the vast majority of all that business is done with America. That has to be sufficient uncertainty to encourage a bit more scrambling for the exit door this week I'd have thought.
Did You Know?
14/03/11 -- Japan is the world's single largest corn importer by some considerable distance, buying around 16 MMT annually. An amount roughly equivalent the corn imports of Mexico AND the entire EU-27 put together.
Despite it's relatively diminutive size Japan is the sixth largest corn consumer in the world. They are also America's single biggest buyer, accounting for around 30% of all US corn exports in 2009/10. They also feature as the third largest buyer of US soybeans.
The Early Vibe
14/03/11 -- The BBC are reporting a second blast at the Fukushima power plant overnight. Japan's Nikkei average index has closed 6.2% lower today in it's biggest one-day drop since December 2008.
Large manufacturers all took a big hit with shares in household names like Toshiba and Hitachi both falling 16%. Tokyo Electric Power fell 24%.
NYMEX crude is down more than two dollars, currently standing a less than USD100/barrel. Brent is down a dollar and a half.
Gold is up on a flight to safety, but copper, platinum and silver are all down.
The overnight markets opened with beans, corn and wheat all trading around 5c lower. Wheat is currently 5c higher, with corn mixed and soybeans all over the shop but mostly lower and with some months posting double digit losses.
All CBOT March contracts expire today. America put it's clocks forward last night so the Globex market shuts at 12.15 GMT and the CBOT daytime session runs from 14.30 GMT to 18.15 GMT for the next two weeks until we catch up.
The pound isn't looking too healthy at 1.1540 against the euro and 1.6050 against the dollar. At one stage sterling hit 1.15 against the single currency, a level not visited since early November. The euro is up after ECB Jean-Claude Trichet late last week hinted at a euro zone rate rise in April.
In theory a weak pound would support UK wheat prices as it would help our export competitiveness. The only problem is that there is no export business to compete for. At home, demand from compounders is slack with many now dragging their heels on taking delivery of existing contracts.
There's plenty of resale raw materials being offered back onto the market therefore, with takers very few and far between.
When asking various people last week "where's the market on rapemeal/soya hulls etc?" the stock reply was pretty much "I've got no idea because there isn't a single bid in the market. Take the shippers price and knock ten or fifteen quid off it for starters."
