Friday’s Comment – #Wheat #Corn #Soybeans – 28/08/2015

Chicago wheat went down on a lack of bullish news yesterday and was trading sideways today, currently down. IGC increased the global wheat production to 720MT (+10MT) mainly due to better crops in Russia, Ukraine, and European Union. US wheat will struggle to find some competitiveness on the export market. On its side, corn struggle to follow the wheat trend and finished higher yesterday. Trading sideways today as well, following wheat, but in a lower extent: if wheat is up, corn is upper, if wheat is down, corn is ‘less down’. Bullish price news are coming from Europe and the uncertainty about the US yield clearly helps to avoid corn to go down in a frankly manner. Beans rebounded yesterday, the mood is correlated to China’s mood these days (and it’s better since 48 hours). Soybeans rebound is pursuing today. Corn and Soybeans are very technical as well these days, a lot of position adjustment before first notice day on September contracts. Also, weather is still dry and warm in the US, fuelling as well the bullish mood on soybeans and corn. Yesterday funds bought 5,000 corn, 8,000 soybeans and sold 5,000 wheat. 

European Commission cut its estimates of corn crop to 58.7MT, -6.3MT compared to last month. The dryness is to blame. On the other side, soft wheat crop estimate is increased by 1.3MT to 140.7MT. Another estimation of French wheat crop by AGPB: above 40MT. It’s now a given, French wheat crop is at a record level. There will be a lot of exports to make and with silos full, loading strikes, ample supply all over the place and aggressive offers from Black Sea, it’s going to be tricky. Meanwhile, it’s the SovEcon’s turn to raise the grain forecast in Russia: 101MT (+2MT). Also, APK Inform forecast Ukraine wheat crop to 25.1MT, up 4% compared to last year. Wheat might find its salute in the lower amount of corn available in Europe but else, there’s not a lot of bullish feeling with this S&D… But, finally a good thing on European Corn, France Agrimer has increased by 1% the ratings of corn. Well, nothing to actually get excited about, they’re only at 56% of G/E.

 

GASC only bought 60kT of Russian Wheat and expected a better price! Indeed, today another tender: message is clear, “lower you premium’. GASC bought indeed yesterday only 60kT of Russian wheat CNF $190.07, best FOB offer was $180.47 and second offer more or less $2 higher and GASC assumed trading house could do much better. They still received an incredible amount in offers, lower than yesterday though: 940kT. But apart for an aggressive Ukrainian offer, not a big change compared than yesterday. Leaders is Ukraine and Russia indeed, best FOB Ukraine is $177.95 and best FOB Russia is $181.98 then $182.72. Might see one or two cargoes sold today. French is still very far: $185.74 FOB…

 

MATIF seems to struggle going down as well but still down today. Bottom line, if wheat is not sold and shipped out of France (and when it’s done not rejected like in Bangladesh), one can imagine a bloodbath on the MATIF and on the physical premium. That being said, if the low of the last season (around 155 euros per ton) is an objective, the circumstances were drastically different: a much higher euro and a much lower quality. Easy to get lost!

 

Taiwan millers bought 49,350T of milling wheat, shipment second half of October. Iran will not import wheat this year due to a satisfactory crop from local farmers and a good harvest according to the country deputy minister of agriculture.

 

EURUSD is coming back in its range, the rebound was quick but still. Market is waiting for the September FED’s rate hike and maybe some events from Greece with upcoming elections. Surprises unlikely though. Financial markets are in a good mood, Shanghai manage to print two big green days in a row: confidence crisis over? Everything is good in China? Ruble is rebounding while Real is going down. Currency markets are very volatile these days for sure!

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