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Grainexx Market Report 51/2011

Once again it was a quite fatal week for the stock exchanges as well as for the financial markets in general. The rating agencies continue their tricky and dirty play against some selected countries or the Euro zone as a whole. Even the safe haven gold lost 9%, the Euro came under huge pressure and was end of last week hitting an 11-months low trading at below 1,30. Stock markets in general were basically the whole week in the red zone.
This morning only a slight recovery of the stock markets by about 1%, the dollar trading around the 1,30 level, but quite some activity on the overnight exchanges in Chicago, and also a firmer tendency of about 3 Euro/ton on the MATIF wheat contract.

We believe that especially in the first quarter of 2012 financial markets as well as the political debate will be dominated by the Euro crisis. Only if the stability union will be possible and the ECB will continue to play its important role, markets can regain confidence. A recession in the first half of 2012 may be likely in some countries such as Greece, Italy or Spain. It is important to watch how the emerging markets will develop in this economic turmoil.

International/European grain news:

Weather: Dry conditions helped harvest in South America, but rain again caused again problems for the wheat and barley harvest in Australia.
But also in South America the critical focus is now more on corn and soybean harvest, and fact is that it is too dry in Brazil and maybe crop figures have to be lowered considerably.

Credit Agricole decided to get out of commodities, a fact which is considered to be responsible for last week´s drop of 15 cent/bushel on the Chicago Board of Trade.

Egypt´s GASC was buying again, this time they have bought 180.000 tons wheat for beginning of March shipment. The origins were equally spread of 60.000 tons each Russian and Argentinian wheat, and surprisingly (thanks to the weak Euro) 60.000 tons French this time.

As a comparison the following figures: In the last fiscal year ending on 30th June 2011 GASC purchased 5,58 mio. tons – no Black Sea origin last year.

Until now they have purchased 3,8 mio. tons, thereof 3 mio. tons Russian wheat, 300.000 tons Ukrainian wheat, 120.000 tons Kazakh wheat and since the start of the new harvest 240.000 tons Argentinian wheat.
We believe that Argentinian wheat exports towards Egypt will stay on the agenda during the first half of 2012.


Interesting to note that the prices were 6 USD/ton higher than in the last tender.
This confirms our opinion that at least temporarily the bottom of the wheat market is reached.

Discussions are still around on how big the Argentinian wheat crop really is. Figures are ranging from 12 mio. tons from the Agricultural Ministry on the low side via 13,6 mio. tons from the Buenos Aires Grain Exchange up to the highest one the USDA figure of 14,5 mio. tons published a week ago.

Black Sea farmers are now pulling out of the market and entering their holiday period which will last till mid-January.

Huge discussions going on surrounding the Canadian Wheat Board (CWB), where the government has now reached all parliamentary decisions to end the 68-year old grain marketing monopoly. This is heavily criticized by some farmer unions as well as local politicians who are trying to reach a court decision to open the matter for renegotiation. However, the government is quite optimistic that already from crop 2012 onwards there will be a free market and traders can act like they want.
We believe that this is very important to follow as Canada is the world´s biggest exporter of spring wheat, durum and malting barley, which so far was falling mostly under the Board´s monopoly. The CBW currently markets about 21 mio. tons of grain to customers in 70 countries.

China may hold corn imports until the second half of the year 2012 because of a record harvest: This good harvest and easy food inflation show little sign that China, the world´s second largest corn consumer after the United States will resume imports from global markets at the moment. The country´s corn harvest is estimated at 191,75 mio. tons which would be an increase of 8,2% on year.

Freight prices on the Rhine and on the Danube are not quite back to normal levels. This means that the Rhine and Danube ships are much more widely disbursed than normal, and it would take some time before a normal vessel positioning and loading pattern are back.

In November Ukraine exported 1,78 mio. tons of maize. This is a historical maximum. The main destination of the corn shipments were Egypt (32%), Spain (16%), Algeria and Iran (9% each). About half a mio. ton of wheat was exported as well, interesting to note that with 3% only Spain was a EU- based buyer for Ukrainian wheat. With these results Ukraine joins the world´s top three grain exporters this year.

Ukraine winter wheat is still a big concern with only 27% of the emerged area rated as good. We are getting quite pessimistic for the Ukrainian grain outlook 2012 .

The French meteorologist office reports that the period between 1.9.2011 to 30.11.2011 is the second warmest since 1900.

Stratégie Grains is giving for the first time 2012 production forecast wheat 133,5 mio. tons (versus 129,3 mio. tons this year), barley 54,5 mio. tons instead of 52,1 mio. tons. All cereals combined 290 mio. tons (versus 284 mio. tons this year).

This is very much premature, but at least gives us something to think about and compare during the course of the year….

Australia with its record harvest in wheat and its very good harvest in barley is regaining market shares in the international market. Feed barley in Saudi Arabia reported to be traded at 268 USD/ton and then down at 265 USD/ton CIF Saudi Port. The barley markets in Saudi Arabia will be definitely aggressively divided between Argentinian and Australian feed barley!

Overall, the whole grain picture looks continuously slightly bearish, especially due to the ample supply of wheat this year.
It will be crucial to see the USDA report early January 2012 and the corn export and Ethanol figures they will give, as well as their final yield estimation in order to determine what the world biggest feed/energy grain will do…

Malting barley news:

The real Big Bang and the Big Hammer came from our friends in Denmark! The committee decided to prolong the dormancy period until 15th January 2012! We first thought it was a big joke… then is proved to be reality. This leaves the market in a complete uncertain situation. No contractual security for this origin is possible anymore. With these decisions Scandinavians are losing a lot of credibility. Given execution shows that some material from Denmark is around 95% germination (94 to 96%). And we do believe and are told by laboratories that this is not a question of dormancy anymore… and that germination energy will further decrease as the year goes by!

Unfortunately, this action confirms our pessimistic attitude towards Danish/Swedish origin this year. Some executions definitely have to be switched around to, maybe UK or Argentinian origin!

About 50% of the Argentinian harvest is done. We continue to hear quite positive reports. First shipments will still take place in December for an early January arrival despite the not yet clear license situation (first bidding day 6th January 2012). We also hear more and more activities on the IMEX front. Given the actual feed barley prices a big chunk of the 307.000 tons which can be imported at zero duty will be malting barley.

But one should not ignore the ongoing coaster business from the Black Sea to Greece and Spain for feed barley.

Wherever there is execution in France, be it in Creil or now on a FOB Mosel position, execution is “very contractual”… meaning that people give a close look to price differences and written quality requirements. The number of wash-outs will definitely increase after the seasons holidays, especially on FOB Mosel position.

Overall, the malting barley markets are very quiet,not only for the actual crop, but also for the following crops 2012 and 2013. We still believe that we have a major problem with the supply and demand for the ongoing campaign, and that even including Argentinian origin (which only fills a deep gap, but not adding to the quantity), we are not having enough good quality malting barley in the EU.

In our opinion, the situation will continue to keep the prices on a firm level during the coming month.

Spring barley
E 11 Price Comment
FOB Creil Basis July 255 € traded
FOB Mosel Basis July 259 € nominal
FOB DK Basis January 229 € nominal
FOB UK Basis January 250 € nominal

E 12 Price Comment
Basis July 225 € nominal
Basis July 230 € seller
Basis October 216 € nominal
Basis October 218 € traded


Winter barley 6 row
Esterel/Azurel E 11 Price Comment
FOB Creil Basis July 215 € nominal
FOB Mosel Basis July 223 € traded
Cervoise
FOB Creil Basis July 190 € nominal
FOB Mosel Basis July 200 € nominal

E 12 Price Comment
Basis July 200 € nominal
Basis July 205 € nominal

Basis July 180 € nominal
Basis July 188 € nominal

Enjoy the last week of hard work before we all get some hopefully quiet days

Link: http://www.grainexx.com

written by Grainexx Getreidehandels GmbH on 19.12.2011 um 20:53.

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