Nogger's Blog

11/04/12 -- The overnight grains are narrowly mixed, mostly a cent or two higher. Outside markets aren't lending too much support to the grains sector, WTI crude closed at it's lowest level since Valentines Day last night - USD101.02/barrel.

We have an interesting tug-of-war developing, with the outlook for soybeans remaining bullish, yet we have a bearish slant for corn and wheat, plus whatever outside influences might thrust at us.

World stocks tanked yesterday, which will have weighed on the grains. The FTSE 100 index slumped to its lowest levels of the year, amid signs that the recovery in US employment is running out of steam. Spainish concerns also hang over the market.

If we look at how the three main protagonists have farerd so far this year we see that Chicago corn finished 2011 at USD6.46 1/2, so it has dropped 11 3/4 cents to where we closed last night. Chicago wheat closed 2011 at USD6.52 3/4, so that has fallen 27 cents since then. Soybeans on the other hand are USD2.27 higher than on the last trading day of 2011.

Can they continue to go in opposite directions? Beans appear to have done a pretty good job of paddling their own canoe so far in 2012 although they struggled to do so last night, despite a bullish USDA report for them, eventually succumbing and ending lower.

China, it would seem, will continue to buy soybeans with relish whatever the price. We have their March imports up 38% year-on-year and their 2012 Q1 imports up 22% on last year at 13.33 MMT. And of course they helped themselves to a further 165,000 MT of new crop US soybeans just yesterday.

It's clear that 73.9 million acres isn't enough this year. It's pretty likely I'd say that the eventual US planted area will grow to closer the 75 million mark that everybody was expecting a few weeks ago.

The question is will that be enough, taking into account what the weather may throw at us across the summer? The answer to that is probably 75 million will be adequate IF it is lucky enough to be combined with almost ideal growing conditions. If not, who can tell?

Going forward, Brazilian and Argentine farmers are already talking about planting more beans for next season, and who can blame them with prices where they are? We have a very long wait though until those crops get harvested.

Meanwhile the 2012/13 European rapeseed crop looks like it may now struggle to match last season's total of 19.1 MMT, putting us in a deficit situation once again. Indeed, we have to go back to 2004/05 to find a year in which EU production was higher than domestic consumption. It's unfortunate then that Ukraine's rapeseed crop looks set to disappoint in 2012.

Australia will plant more for the coming season. In fact a report just out from the NSW Department of Primary Industries says that rapeseed plantings in the state are seen "at an all time high of 548,350 ha, in response to good soil moisture profiles and solid oilseed prices." That represents an increase of 39% on last year's harvested area, they say. Once again though, this crop is a very long way off hitting the market.

The oilseed supply and demand situation looks set to remain tight for the rest of the year it would appear.