Morning Comment – #Wheat #Corn #Soybeans – 19/05/2015

This is pure weather market. However, it should be summer related at this stage. But market is talking about too much rain, increasing the risk of fusarium or worms, or overnight freezing in Canada prairies and in the US plains: ‘winter’ kills fears, slower pace of planting, reseeding,… This is unusual for a month of May and should the ‘real’ summer weather market kick off just after, the summer seasonality might be well on and indeed, we have to admit the past few weeks were the lows and we have to wait for the pressure of the harvest to consider a new bearish wave. And the forecasts aren’t better: the rain will continue to be above the season norm.


Corn is genuinely surprising, it is resisting so well compared to wheat, but we are at some point the short is much more important in Corn. There was no major short covering so far, is this a ticking bomb? That being said, the weather market is targeting mainly wheat, a bit of corn in Illinois is subject to talks but the star is really wheat. Wheat is now probably short around 85,000 lots while corn is still in the 6 digits of short.


On the other side, El Niño is supposed to be good for US and Canada, bad for Australia and New Zeeland. As far as agricultural markets are concerns. El Niño will certainly weight on Palm Oil, Rice, Sugar and Asian Coffee.


Crop Progress for wheat, corn and soybeans is respectively this week 94%, 85% and 45% (respectively +7%, +10%, +14% week on week). Far above last year and the 5/10/20years average.  Winter Wheat condition is… Improved… +1% week on week of G/E (45%), -1% week on week for the P/VP (19%). Far better them last year, slightly below the 10/20year average for G/E but the P/VP are much below the average. So quality is very satisfactory so far despite the talks. Let’s meet next week! Firs publication of Spring Wheat condition: 65% G/E, 4%P/VP. An early planted crop in good conditions. So far so good. 67% of the spring wheat is at germination. 56% for corn, 13% for soybeans, all in advance compared to last year and the 5 year average.  Winter wheat is similar: 68% (better than last year and 5 year average) are developed.


Bird flu talks are back. A few numbers: this is a $48.3 billion economy, this is going on since mid-December 2014, 37 million birds infected so far, out of  9 billion this is 0.41%, 168 infected locations (over 233,700 poultries, 0.07% of poultries are infected) over 16 states. So far, the egg industry seems to take the harder hit, some industrials declared ‘force majeure’ due to a disruption of 25% of their supply. USDA is working hard to maintain consumer confidence: it’s far enough from Thanksgiving not to worry about turkey sales.


MATIF was on fire again. Mainly fuelled by Chicago. Old Crop availabilities are still very high.


Flour Mill in Oman bought 60kT of Russian Wheat, Pakistan (private importer) bought 40kT of soybeans from Argentina, South Korea bought 63,kT of optional corn last week, Ukrainian grains stocks are at 12.9MT, up 42% from last year. Chinese soybean imports will rise to 77MT (+5.5%) next year, it will be interesting to see the completion on crush. This is above USDA expectations. China will offer 5.32MT of state reserves of corn this week, up 39% week on week.


EURUSD is taking a breather, back to below 1.13. Greece bring euro lower but US Fed hiking rate in September (market consensus) bring US dollar lower: who will win the battle?


A bit of reversal after the rally so far on the night session.

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