The Morning Vibe
12/04/11 -- The overnight grains are sharply lower on the back of a general malaise this morning.
Japan has upped the severity rating of the nuclear crisis to the maximum possible 7, the same level that applied to Chernobyl. Another earthquake, this time measuring 6.0, rocked the region again early this morning.
The hoped-for ceasefire in Libya looks less likely having viewed the images of African Union officials in Benghazi last night on the TV. It looked a bit like putting Bonnie Langford in to referee an old firm Rangers/Celtic derby.
An imminent rise in UK interest rates looks less likely after news that UK Consumer Prices Index (CPI) inflation fell to 4% last month, from 4.4% in February.
Eying America struggling to sort out it's massive budget deficit the IMF have lowered it's US GDP growth forecast from 3% to 2.8%. Growth in the UK was also downgraded from 2% to 1.7%.
UK retail sales for March fell the most since records began in 1996, according to the British Retail Consortium (BRC).
The BRC said that "uncomfortably high inflation and low wage growth have produced the first year-on-year fall in disposable incomes for 30 years".
The pound is down to 1.1250 against the euro, and has fallen from a peak above 1.64 against a similarly weak US dollar to around 1.6250 as the two currencies struggle to fight their way out of a wet paper bag.
Brent crude is up to USD124.35/barrel.
It just can't stop raining in eastern Australia with some parts of Melbourne picking up more than a months worth of rain (average 50mm in April) in less than 24 hours overnight. What they wouldn't give for some of that in Western Australia state.
Chicago Close
11/04/11 -- Soybeans: May soy ended down 23 3/4c to USD13.68 1/2 a bushel; May soymeal dropped USD7.50 at USD349.70; May soyoil slid 95 points to 58.82c/pound. Reports out of China that poor crush margins were leading to a slowdown in soybean imports were met with scepticism in some quarters. "Watch what China do and not what they say," one analyst rightly warned today. Unfortunately what they ARE doing is importing fewer beans, particularly US beans. US weekly export sales have been sluggish now for several weeks, and with China typically accounting for around 75% of all bean sales on a weekly basis, that is having a negative impact on the outlook for US soybean sales for the remainder of the season.
Corn: May corn jumped 8c to USD7.76 a bushel; Dec corn rose 4 1/4c to USD6.57 1/4 a bushel. Corn continues to be the strongest leg of the complex, with overnight levels hitting a fresh all time front month high. The USDA weekly export inspections report of 38.796 million bushels was OK, but below the total needed to attain the USDA's target of 1.95 billion bushels for the 2010/11 marketing year. The USDA came out with their planting progress report after the close pegging the 2011/12 US corn crop at 3% seeded, slightly below the 4% anticipated by the trade.
Wheat: CBOT May wheat rose 3/4c to USD7.98 1/4 a bushel; KCBT May dropped 13 3/4c to USD9.19; MGEX May fell 17 1/2c to USD9.35 3/4. Once again CBOT gained at the expense of better quality wheat on ideas that it and corn would soon reach parity, leading to increased demand for what from the feed sector. After the close the USDA pegged 16% of the US winter wheat crop as very poor, up from 13% a week ago. The poor category increased from 19% to 20%, Good/excellent fell from 37% to 36%. In Texas two thirds of the crop is rated poor/very poor.
EU Grains Close
11/04/11 -- EU grains closed with May London wheat up GBP2.75/tonne to GBP209.50/tonne and with new crop Nov climbing GBP0.50 to GBP170.00/tonne. May Paris wheat rose EUR1.00/tonne to EUR248.25/tonne and Nov was up EUR2.25/tonne at EUR217.25/tonne.
It was interesting to see old crop gain on new in London and the opposite happen in Paris. At home, competition within the feed sector from other raw materials makes UK wheat look very expensive indeed.
Summer (May/Sep) wheatfeed pellets ex Manchester traded today at GBP135.00/tonne, placing them at around GBP140.00/tonne delivered into Cheshire. A comparable price for feed wheat on today's market would be over GBP200.00/tonne, even with a couple of new crop months included. Wheat is clearly pricing itself out of the ration at this sort of money.
Spain and Italy have had much better rains than normal over the early part of 2011, giving them potential to deliver a very decent wheat crop this year. Things have not been so rosy further north, with varying degrees of "drought" in France, Germany and the UK.
"Scattered showers are expected this week, although no heavy rain is in the forecast for very dry areas," according to Martell Crop Projections.
Some rain arrived over the weekend for parched areas of the US HRW wheat belt, although they may have come too late to be of great benefit.
Australian conditions are looking very promising in eastern states. Good post-planting rains in Western Australia could signal a record harvest, unfortunately there is no sign of these in current weather forecasts ahead of sowing commencing in May.
Ample supplies of old crop feed wheat continue to see Australian wheat remain very aggressively priced into Asian markets.
Early Call On Chicago
11/04/11 -- The overnight grains closed mostly lower, with the exception of nearby corn which was 1-2c firmer. Apart from that most other months on corn were around 2-5 lower. Wheat closed around 3-6c easier and beans were down 10c or so.
Corn set a new high in early overnight trade, and beans and wheat were also showing significant gains at one point before falling away.
Comments by COFCO that Chinese crush margins are poor, and processors there are only running at 40% capacity and may look to cancel/defer existing soybean purchases may have been behind the demise of soybeans. Certainly US export sales have been a bit on the low side recently.
Brazil looks like bringing in a record soybean harvest as bumper yields in the south make up for some rain-induced yield losses further north. Paraguay are also expected to bring in a record 8 MMT crop this year due to higher yields.
Competition for America will also soon start to come from Argentina, where the soybean harvest is 21% done, according to the Ag Ministry there.
Parts of parched Oklahoma got almost 3 in of rain over the weekend, and although rains were lighter in other areas, many saw an inch or so of precious moisture.
A 7.1 on the Richter scale earthquake hit Fukushima again this morning, exactly a month after the original tremor shook global markets.
A ceasefire plan in Libya has supposedly been agreed to by Gaddafi and negotiators from the African Union are said to be on their way to Benghazi to meet with rebel leaders. Crude is a a bit weaker on the back of that.
Early calls for this afternoon's CBOT session: corn up 1-2c, beans down 8-10c, wheat down 2-4c.
All Change
11/04/11 -- In a sharp about turn, from trading sharply higher early in the session the overnight Globex market is now mostly red. What's caused all this then?
Reports of a possible ceasefire deal in Libya might have something to do with it, crude is lower on the back of that, although it's hardly falling out of bed. Brent is down 70c/barrel and NYMEX crude down 34c/barrel.
News that China "only" imported 3.5 MMT of soybeans in March may be a factor, along with COFCO saying that crushers there are only running at 40% of capacity due to poor margins, leading them to cut their 2010/11 soybean import estimate to 53-54 MMT (the USDA currently peg these at 57 MMT).
Last week's surprisingly high USDA corn ending stocks estimate seem to have been dismissed as a load of baloney.
Australian farmers may plant a record wheat area in 2011, in excess of 14 million hectares, according to Rabobank. With excellent subsoil moisture in the east that could potentially bring in a monster 30 MMT crop if production in Western Australia was to come in anything like normal.
With a domestic requirement of only 7 MMT that would leave the cricketing has-beens and wallaby-lovers with more wheat to export than you could shake an excrement-covered boomerang at. Unfortunately though, WA is as dry as a dead dingo's donger right now.
Morning Musings
11/04/11 -- The overnights are firmer, although well off earlier highs. May corn set a new record for a front month in overnight trade, hitting 7.83 3/4c, up 15 3/4c, at one stage before slipping back to currently trade at 7.74 1/2, up 6/12c.
Other grains have also lost early gains. May beans are currently down 1 1/4c at 13.91, having traded as much as 14 1/4c higher at one stage. May CBOT wheat is 1 1/2c firmer at 7.99, having reached 8.09 1/4, up 11 3/4c.
The dollar is weak, with the US having only just averted a federal shutdown on Friday night. The US have been slower to react to cutting their burgeoning budget deficit than the UK and Europe. Obama has the added difficulty of trying to push his cuts through against fierce Republican opposition.
Friday night's "deal" still has to be passed by the Republican controlled House this week, setting up a nervous and potentially choppy week for the US dollar.
Whether the proposals got through or not, it looks like a lose-lose situation for the dollar to me.
Not so for the euro, basking in the glory of a 25 point interest rate increase last week. The single currency is at it's highest against the pound since October this morning, and very close to it's best levels in more than a year. Against the dollar it's at it's highest since January 2010.
The market still seems to be pricing in a UK interest rate rise around May/June as inflation here continues to rise. The problem for the BoE is stagnant growth and low consumer spending as our own austerity measures bite into disposable income.
They might not admit to it, but it may just be that the Government don't mind the idea of a weak pound (especially against the euro) to boost our exports (especially to our near neighbours).
Inflation at well above the target 2% will also reduce the value of the massive public debt.
Maybe the much-anticipated hike in UK interest rates is further away than we might think?
Cutbacks
10/04/11 -- An eleventh hour deal late on Friday night bought US President Obama's Democrats a weeks grace in which to get swingeing budget cuts through Congress.
The Republicans agree that budget cuts must be made, they just don't agree with the Democrats on where. If Friday's late stop-gap deal hadn't gone through then "hundreds of thousands of government employees" might have turned up for work on Monday to find the closed signs hanging up on their office doors, according to media reports.
One of the areas where cuts are likely is within the budget of our very own mates the USDA. The weekly Monday crop progress report may be one of the first things to go, and there is even talk of the June planted acreage report also being cut.
Which gives me an idea. Sponsorship. The USDA's weekly and monthly crop reports could be sponsored by the Muppet Show, with Miss Piggy obviously responsible for the hog reports. I think it's a winner, get me Obama on line two....
Further reading: US Budget Deal Avoids Government Shutdown
Weekly crop reports threatened
