August 16, 2010

Russia halts grain exports

Russia has suspended grain exports from August 15 through the end of year.

There are also additional concerns about the weather's impact on crops across Eastern Europe, along with Australia and Canada. Russian traders will be allowed to export 120,000 tonnes of grain ahead of the drop dead date and some exporters have already had to declare force majeure with at least four million tonnes of wheat exports yet to be shipped.

The chairman of Egypt's Grain Chamber called the increased Russian prices "dangerous" but added Egypt has six months worth of wheat on hand. A South Korea purchase of 110,000 tonnes of Ukrainian feed wheat has been switched to US origin and the Philippines cancelled a purchase of 40,000 to 50,000 tonnes of Ukrainian feed wheat, both due to supply concerns.

Rabobank sees 2010/11 world wheat output at 644.2 million tonnes, down 2.4% from the June projection. France's Ag Statistics Agency has soft wheat production at 35.2 million tonnes. CONAB has Brazil's 2009/10 crop at five million tonnes, down 14.6 from 2008/09. According to the United Kingdom's Home Grown Cereals Authority, 5% of the UK's wheat crop is harvested, with yields below last year's levels.

Unknown destinations bought 110,000 tonnes of US hard red winter wheat. Japan picked up 124,469 tonnes of US food wheat (68,238 tonnes dark northern spring, 33,758 tonnes western red spring and 22,473 tonnes western white), while Taiwan passed on 54,000 tonnes of US wheat, citing high prices.

Soy were modestly higher on light speculative buying and spillover from wheat. Demand continues to look strong with China and unknown destinations both buying large amounts of new crop ahead of the open; China picked up 455,000 tonnes and unnamed bought 111,500 tonnes, while Taiwan's Breakfast Soybean Procurement Association purchased 60,000 tonnes from Brazil.

Also, there are continued concerns over hot, dry conditions in sections of the Southern Midwest and Delta, but there is some rain in the forecast for that region this weekend. Soy meal was higher on expectations for stronger feed demand while soyoil was lower on profit taking. Brazil's National Commodity Supply Corp., or CONAB, pegs 2009/10 Brazilian bean production at 68.5 million tonnes, which was down slightly from June but up 19.8% from 2008/09's total. 2010/11 crop planting in Brazil gets underway in September.

Corn was mixed, mostly higher on speculative buying and spillover from wheat. Corn continues to be a follower to wheat as both are used for feed and corn is currently at a much lower price, so trade sentiment is that corn can at least keep or even maybe exceed its share of the feed market.

Past that, weather's considered non-threatening and the near term fundamentals remain negative, so most contracts pulled back from the early highs and some far off deferreds were lower after hitting seven month highs. Ethanol futures were higher. Taiwan's Maize Industry Procurement Association bought 50,000 tonnes of Brazilian corn from Bunge.