Mid Session Comment – #Wheat #Corn #Soybeans – 27/08/2015

Technical selling, lack of interest and demand. Yesterday, markets moved down in the US. There are still some deep concerns about China slowdown. Slight relief today as Shanghai Composite Index rebounded more than 5%. Funds sold between 4,000 and 9,000 soybeans, between 5,000 and 6,000 corn, and between 3,000 and 4,000 corn. Rebound early on the night session, led by soybeans but else, it is (well kind of it was) a pretty shy one… A good thing, there’s no need to wait until the GASC tender result to know there won’t be any US wheat, nothing offered. Wise enough as SRW is not competitive facing the Black Sea. The rebound is on the verge of vanishing indeed following the publication of the GASC tender offers. Wheat was showing the red color and trading sideways (currently back up, tough to follow). 

Not sure export sales may save a bit of the bullishness. Wheat is above expectations showing 529.6kT (helped to come back from the red territory, +215.2kt from last week), but corn and soybeans had each roughly 132kT of cancellation on the old crop. But overall sales are still decent showing respectively 854.8KT and 1.33MT. Soybeans are actually above what was expected and corn in line.

 

Weather is still dry and getting hotter but no three digits temperatures (Fahrenheit) forecasted in the US. Corn harvest is kicking off in the south, yields are obviously below last year but seem to be in line with the 10 year average.

 

COAMA, the biggest coop in Brazil, said its farmers will increase by 3% the acreage on soybeans on the next crop. If global grains surfaces aren’t increased, it’s more likely it will be taken from corn surfaces.

 

It was kind of expectable once again, not only the market configuration but Egypt announced to have sufficient stockpile to mid-February. Usually, after such comment there’s a tender: bingo! Egypt GASC is showing up indeed and considering the competition and the FOB premiums actually being discount, it was deemed to be a bloodbath. And it is… 20 offers, totaling 1.18MT. Wheat galore! There are 7 offers at MATIF Z5 -$10/T or lower (6 from Russia, 1 from Ukraine), first French offer is just above $8 discount, not even close to be remotely competitive… MATIF got the signal and went down in negative territory, continuing the yesterday movement but is currently trading sideways.

 

It comes as Russian Agriculture Minister said his country is keen on boosting grains exports to Egypt, from 4MT to 6.5MT or 7MT. Definitely, there won’t be market share for everyone as Egypt still believe to import less than 4MT of wheat to protect local market. French wheat has better to be more aggressive as Egypt will go through the 25% mark of its wheat import objective. GASC said has well they will extend moisture exemptions (13.5% accepted on French Wheat with a penalty), this should be helpful bt probably not for this time… French wheat is still over the -10 euros mark FOB Rouen or La Pallice, Silos are full and icing on the cake a cargo of 52kT has been rejected in Bangladesh, this is bad marketing for the French origin. Cherry on the cake – yep, on top of the icing – there is a strike in Senalia and the cannot load since yesterday. On the other side, exporters in Russia are reluctant to export as the Ruble collapse increased a hike in the export tax.

 

Russia has harvested 65MT on 50% of the acreage, it will definitely overshoot the 100MT target expected by the government. Even SoveCon, more conservative, has raised its forecast to 101MT from 99MT. South Africa estimate for total corn is 9.8MT, down 31% from last year (which was record) but in line with the average).

 

Tunisia bought 75,000T of wheat, December to March shipment between $194.49 and $199.49 CNF. They bought as well 125,000T of durum (between $349.29 and $361.24 CNF). Jordan is tendering to buy 100,000T of wheat, optional origin. Thailand purchased 300kT of feed wheat, Black Sea Origin. Finally, South Korea bought 55kT of corn, optional from US or South America.

 

Ruble still very closes to 70 but nice bounce today, close to +3%. Ruble is not the only one in trouble (sorry for the pun), Brazilian Real is on a downtrend as well: down 27% year to date… Happy days for Brazilian farmers, no variable export tax like in Russia! EURUSD is coming back down slowly: will it reintegrate its boring range? As the date of the expected rate hike in September approaching… But some say FED is so squeezed, they are actually increase the rate because it’s expected and becomes very touchy politically as the US Presidential Election is approaching, but just a tiny bit because they are not 100% keen on doing it. Ray Dalio, founder of Bridgewater Associates, said he doesn’t “consider a 25-50 basis point tightening to be a big tightening” and is expecting “a big easing before a big tightening”. In other words, QE might continue even with a rate hike.

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