Mid Session Comment – #Wheat #Corn #Soybeans – 03/09/2015

Bearish mood, volatility, corn and soybeans resisting compared to wheat. This is the main stories these days. Unless wheat is really sinking, it might just be the story until the next USDA WASDE report… Corn and Soybean US yields will e the key. On Monday, corn G/E were downgraded -1% to 68% while P/VP stood at 10%. Soybeans were unchanged, 63% G/E and 11% P/VP, meanwhile, harvest of spring wheat is very early: 88% was done. Weather is helping corn, it is warm. Good thing is there’s no threat of early freezing. But bottom line, it is still to be proven some real damages are done. Overnight session is sideways on wheat, down on corn and up on soybeans. 

Funds are now estimated to be long corn 63,000 lots: how long corn will sustain? Soybeans are long 16,000 lots while wheat are short 24,000 lots.

 

Exports sales are expected today to be 250kT/500kT for wheat, 500kT/900kT for corn and 500,kT/1,000kT for soybeans.

 

Soybeans seeding will soon kick off in Brazil and are expected to be up 2.5%. Meanwhile, bargains for Brazilian farmers are continuing as the Real is continuing to sink to the mid 4.23’s. Brazil exports are up from last year on soybeans, to 5.16MT, +25% compared to August 2014, -3.28MT compared to July though. But August is traditionally quieter on soybeans. Corn exports were 2.28MT in August compared to 1.28MT in July.

 

According to the World Meteorological Organization, El Niño is said to be one of the most significate since 65 years.

 

What a few days… Last week twice the GASC. One boat one day, one boat the following day: $190.07 and Thursday and $190.80 on Friday. Then new month kick in and Algeria is showing up, buying, as initially reported by Reuters (who usually comes a few days after to increase the quantity) at least 400,000T of wheat at prices ranging from $195 to $196. However, Algeria’s OAIC, contrary to GASC is not publishing any tender result so we never know the actual… But GASC probably saw these offers tempting and traditionally French origin is sold to Algeria, so French traders seems to be keen on being aggressive (FOB premium are at MATIF Z5-€10 from Rouen) and introducing a bit of Russian, Romanian and Ukrainian competition in the equation could bring the market to very nice discount. So GASC is tendering again, mid-October shipment. There is clearly wheat everywhere from Europe to Black Sea, stock are piling in France, there are logistic issues,… The only hope is Russian exporters not as aggressive as they could due to the exports tax thanks to the Rubble at 67ish. But the Russian president is really keen on becoming the main Egyptian partner and even invest in facilities in Egypt. And… More than one million tons offered, once again! But French indeed has been very aggressive, Soufflet is offering $174.74 FOB! Glencore has rthe best FOB from Russia ($178.89 FOB), only one cargo offered with Ukrainian wheat ($178.99 FOB by Venus) and Romanian is far away (best FOB by Nidera is $185.88). That being said, France is still slightly more expensive than Russia CNF! France best FOB is $188.24 in CNF while 2 best FOB from Russia are between $187.94 and $188.18. This will be a close call.

 

MATIF is at a 1 year low… The negative physical premiums and the record crop and the full silos just before the corn is going to arrive (even if there’s much less corn, it will need some space in silos), strikes, competition,… Have we seen the bottom? Some panic sale wit few hundred lots have been seen today and yesterday! On Z5 two clips of 500 lots have hit the bids today. Yesterday 7 clips of 500 lots between 168 and 170 (only once it was hitting the offer) and a very nice clip of 999 lots at 168.50. Nice volume for Euronext while there is a confidence crisis: indeed, the cow boy crossing of the Z5 170 straddle versus 185 call on Wednesday the 26th of August has left a lot of angry traders, market makers and brokers. It is said to be under investigation. Anyway, the yesterday’s slide is continuing…

 

Russian harvest is 58.9% done, 73MMT so far of grains. At this pace, the 105MT target will be smashed! Wheat is 62.5% harvested producing 49.7MT.

 

South Korea is seeking 210kT of corn and 50kT of wheat. Hat trick for Jordan who failed for the third time in a row to purchase wheat and cancel the tender. Bangladesh is keen on purchasing 50kT of wheat… After the French cargoes rejections it doesn’t come as a surprise. Finally, Iraq finally made a purchase: Australian wheat was the best offer at $231.70 CNF.

 

Focus is still on China. Bumpy financial markets still. Macro signs are not very encouraging: manufacturing sector is contracting has a fast rate… And there are rumors the state regulated price on corn will be decreased. On its side EURUSD feel the attraction, it seems to be willing to go back in its range after a few days trip on the top.

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