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27/12/14 — We’ll start off with a quick summary of the week, just in case the entire thing passed you by…
Jan 15 Soybeans closed Monday at $10.38 1/4, up 7 3/4 cents; Tuesday $10.38 1/2, up 1/4 cent; Wednesday $10.28 3/4, down 9 3/4 cents; Friday $10.47 1/2, up 18 3/4 cents. Net change for the week is up 17 cents.
Jan 15 Soymeal closed at $368.40, up $4.90; $371.30, up $2.90; $371.40, up 10 cents; $379.70, up $6.30. Net change for the week, up $16.20.
Jan 15 Soybean Oil closed at 32.04, up 7 points; 32.22, up 18 points; 31.93, down 29 points; 32.46, up 53 points. Net change up 49 points.
Mar 15 Corn closed at $4.11 3/4, up 1 1/4 cents; $4.14, up 2 1/4 cents; $4.07 3/4, down 6 1/4 cents; $4.14 3/4, up 7 cents. Net change up 4 1/4 cents.
Mar 15 Wheat closed at $6.25 3/4, down 6 1/2 cents; $6.35 1/2, up 9 3/4 cents; $6.11 1/2, down 24 cents; $6.10 3/4, down 3/4 of a cent. Net change down 21 1/2 cents.
For the record, Mar 15 Kansas wheat finished with a net loss of 21 3/4 cents for the week, and Mar 15 Minneapolis wheat was down 16 3/4 cents.
Weekly export sales from the USDA, usually released on a Thursday, are delayed until Monday due to the holiday. The regular Friday weekly commitment of traders report is also due for release Monday. Fresh news was relatively scarce, and trade was thin, as you might imagine. Beans, and oil all posted decent gains for the week, corn managed modest advances and wheat was lower, courtesy of a Christmas Eve rout. This may have been linked to profit-taking, and was possibly overdone due to the lack of participants. Fund money was given credit for being a net seller of around 2,500 Chicago wheat on the day, a modest volume that wouldn’t normally see a 24 cents collapse. Kansas and Minneapolis wheat saw losses of around 20 cents that day too.
Despite the continued collapse in crude oil values, down more than 4% again last week, weekly US ethanol production came in at a record high 992k barrels/day last week – the fourth record week in the past five. Grain prices are becoming divorced from crude oil, and this appears to be directly linked to the “incentive for the world to use more grain based ethanol to meet inclusion mandates” say the HGCA.
There’s talk of $40/barrel being the level at which Saudi Arabia might reach for the panic button and start choking off excess supply in the market. NYMEX crude closed below $55/barrel on Friday, so we are now only $15/barrel away from being there, and it’s only taken a month to lose that much on the way down to where the market currently stands, so we might get to $40/barrel sooner than the Saudi’s think.
Russia apparently confirmed on Christmas Day that the level set for the much talked about export duty on wheat would be a minimum of EUR35/tonne, which is about USD43/tonne, starting Feb 1. Yet the US wheat markets closed around unchanged on Friday. Was this “buy the rumour, sell the fact” or simply that what few traders were at their desks were unaware of this apparently significant development? Monday’s trade might give us the answer to that one.
Russian news agency TASS says that Russia has agreed to provide Egypt with 120 TMT worth of wheat before the new rules kick in. To me that would appear to suggest, reading between the lines, that it will not be a free-for-all export deluge between now and the end of next month. It looks like the current unofficial “red tape” export restrictions will persist depending on who the buyer is (and maybe even despite who they are).
TASS say that Russia is the third largest wheat supplier to Egypt, accounting for 26% of their imports across the last 6 months. The largest is France (36%) followed by Romania (27%). The EU then certainly look well placed to be the main beneficiary of this new wheat Iron Export Curtain coming down, assuming that they can come up with the quality (France) and/or volume (Romania) required.
The Buenos Aires Grain Exchange said that Argentina’s 2014/15 wheat harvest is now past 75% complete. They estimate production unchanged from previously at 11.5 MMT, which is up nicely on a year ago. Neighbouring Brazil will be in the market for most, if not all, of their surplus though, meaning that not much of it is likely to travel as far afield as North Africa or beyond. Happy New Year France!
EU Market Report
26/12/14 — EU grains finished the holiday shortened week generally higher than they began it, helped by news of an impending Russian export duty on wheat.
Jan 15 London wheat was up GBP1.70/tonne on Monday, a further pound higher on Tuesday and gained another 35 pence on Wednesday, for a GBP3.05/tonne advancement on the week. Paris wheat rose EUR2.50/tonne, EUR1.75/tonne and EUR0.75/tonne respectively, for a three day gain of five euro’s. Corn was up EUR2.50/tonne on Monday, down a euro on Tuesday and up a further EUR3.50/tonne on Wednesday, for a net gain of also five euro’s. Rapeseed was up EUR1.25/tonne, EUR1.50/tonne and another EUR1.50/tonne respectively, for a weekly gain of EUR4.25/tonne.
The Russians announced that they were going to introduce export duties on wheats on Monday, with the details due to be unveiled on Tuesday, although this never happened.
By the time I was waking from my festive slumbers on Boxing Day morning however, the inbox was full of emails saying that the duty will be for 15% of the custom cost, plus EUR7.50/tonne, and with a minimum value of EUR35/tonne. I assume that by “custom cost” they mean the net value of the cargo.
So there we have it, a duty of at least EUR35/tonne on every Russian wheat shipment, commencing Feb 1, 2015.
It’s in the hands of the Russian government how much they are prepared to let through between now and when that particular window gets slammed shut.
The Russian deputy PM has already thrown in the rider that “additional administrative measures” will be used to prevent excessive grain exports, presumably with specific reference to the period between now and the end of January.
How Russian exporters, especially the smaller ones, are going to fund this minimum EUR35/tonne levy is unclear. The introduction of an export tax isn’t grounds for claiming force majuere, and EUR35/tonne is much larger than the average margin that these guys will be working for.
Meanwhile, Russian intervention purchases Tuesday and Wednesday have hardly been met with a flood of offers, with the government picking up less than 20 TMT across the two days, despite increasing the price that they are prepared to pay.
In other news, 40% of winter grains in the Volgograd region of Russia are said to be a cause for concern, following a lack of moisture in the autumn, and a subsequent lack of a protective snow covering.
Across the border in Ukraine (there IS still a border there isn’t there?), 4% of winter grains haven’t yet emerged, and 19% of what has are now said to be in weak/thinned condition. That’s up 3 points on earlier in the week and compared to only 4% this time a year ago.