UPDATED: Record Brazilian Soybean Crop Coming, But Estimates Starting To Ease

February 5, 2013 12:08 AM

What Traders are Talking About:

* Brazilian soybean crop estimates easing. Recent heat and dryness in Argentina have been well documented and have largely fueled to price recovery in soybean futures. While conditions in Brazil have been better and a record crop is a virtual certainty, the country is not without some minor weather/crop issues and it appears yield potential has topped out. Private Brazilian consulting firms AgRural and Celeres each lowered their Brazilian soybean crop estimates yesterday, citing irregular weather as the reason. AgRural now sees the Brazilian soybean crop at 81.2 MMT, down 1 MMT from its previous estimate. Celeres now forecasts the Brazilian soybean crop at 80.1 MMT compared to its previous estimate of 80.84 MMT.

The long and short of it: Even with a record crop coming, an easing of production potential is somewhat price-supportive. Traders are also intently watching harvest delays in Mato Grosso as that could push back the start of Brazilian exports and push more near-term business to the United States.

* Russia to lift grain import duty. After a government meeting on the grain situation, Russian officials have decided to lift the 5% duty on grain imports until mid-summer, according to Reuters. Russian Prime Minister Dmitry Medvedev also says the country will begin selling government grain intervention stocks in European portions of the country as they seek to ease the supply crunch and rising prices. Russian grain stocks will dwindle to 7.7 MMT as of June 30, according to the country's ag minister.

The long and short of it: Russia's lifting of its grain import duty will not directly increase demand for U.S. wheat, but it would make wheat from Europe more attractive, which could free up some additional global business for U.S. supplies. Russia is already importing duty-free grain from neighboring Kazakhstan.

* India trying to ramp up wheat exports. Since September, India has exported only 1.76 MMT of wheat -- around half of the amount tendered to export. With government reserves of 34.4 MMT more than three times the "required" amount, Indian government officials are actively seeking ways to increase wheat exports.

The long and short of it: Wheat exports from the Black Sea region have virtually halted due to tight supplies, but it appears India is seeking to pick up that slack. U.S. wheat is still largely be on the outside looking in when it comes to wheat exports from a competitive standpoint.


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