Afternoon Comment – #Wheat #Corn #Soybeans – 14/09/2015

Market is on the upside again today. Is market digesting still the USDA report? Let’s have a quick look after the Friday’s excitement is gone. 

Wheat. World Production is up 5.06MT and ending stocks by the same amount roughly 5.09MT. Canada lost 1.5MT, European Union gained 6.31MT, Ukraine and Russia both gained 1MT. That’s about it, really. No big change on the demand side, domestic demand is up 1MT in the European Union and 0.5MT in Russia. Everything was more or less expected but the bottom line is, wheat balance sheet is becoming heavier again! World ending stocks are approaching 31% of the production to 30.97%! This is not bullish by any means for wheat but wheat decided something else so far.

 

Soybeans. The data everyone was excited about, waiting for it, was soybean yield. Up! New estimates is 47.9 bushels per acre (+0.2 bushels per acre). The impact on US production is limited though +0.51MT to 107.1MT. But world production is down -0.44MT to 319.61MT. A bit of USDA style, -0.95MT is taken away from “Total Foreign Production” but it’s not coming from Argentina, Brazil, Paraguay or Uruguay, China, European Union, Japan, Mexico, Indonesia, Malaysia, Philippines, Vietnam, and Thailand. Huh? Where does it come from? With a minor adjustment on beginning stocks (indeed, it’s been crushing a lot lately) of US (-0.82MT), Argentina (-0.67MT) and Brazil (-0.15MT) the world ending stocks are down to 84.98MT (-1.9MT). Ending stocks are still 26.59% of the production, which is a very high level, the world is very well supplied in Soybeans. So difficult to call it a drastically bullish report.

 

But wheat and soybeans decided to follow the bullishness of corn, but was the report that bullish? Ok, Corn yield has been decreased o 167.5 bushel per acre (-1.3MT bushels per acre), this is having the mechanical effect of taking US production down -2.57MT to 345.07MT, higher use and beginning stocks adjustment bare bringing the US ending stocks to 40.45MT (-3.08MT). it is 11.72% of the production, lower indeed than the world ratio: 19.39%. The other bullish hit is European Union production, it’s coming down has expected -4.25MT to 58MT. Therefore, world ending stocks are down to 189.69T (-5.4MT) but are still a comfortable 19.39% of the production.

 

Market is probably thinking this is not enough on corn. Some more downgrade could come in the October report, indeed, Bloomberg survey was averaging 166.5 for the corn yield so does the market actually believes the USDA WASDE report forecast? Wheat and soybeans were following corn on Friday. Funds bought 9,000 corn, 3,000 wheat and 1,000 soybeans. The trend is continuing today but this time wheat is leading the move. Market says “technical” aka, “I have no clue why”, but rebound on the 20 days moving average is a realistic reason. Will Tuesday be a traditional reversal Tuesday?

 

Fridays export sales were stronger than expected on soybeans 1.7912MT but on line for wheat and corn (respectively 297.99kT and 411.2kT).

 

Nothing to worry about the weather in the US, an early frost could be a problem but so far, so good.

 

MATIF closed too early for a Friday to digest the USDA report. It did not managed to recover but surely doing it today. Wheat, Corn and Rapeseed all up. France Agrimer have improved the French corn rating, +1% of G/E to 56%, however, this is still seriously lagging from last year. Anyway, good quality or bad quality, there will be less corn this year. Wheat export licenses where higher last week, to 354kT (+164kT) but much lower on Barley (128kT which is -99kT). Anyway, some pace is needed as exports are dangerously lagging from last year, only 3.7MT of wheat and 2.7MT of barley have been exported this marketing year. Corn imports are 1.4MT total this marketing year and weekly pace has decreased (only 21kT last week, -87kT).

 

Meanwhile in Russia, export tax is lowered officially indeed to the previously leaks: MAX(50,(WheatPrice-6,500)*50%).

 

After bouncing on Friday, Euro seems keen on erasing it’s gains is coming to play with the 1.13 level. Not long to wait to see if the FED is hiking by 25 basis points the rate. The likelihood is still very high, only a few contrarians smalls bets are around (small bet, high pay out). However, a 25 basis point hike is not meaning the end of quantitative easing by any means.

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