Market closed very strong yesterday, specifically on wheat, soybeans and corn were basically following. Short covering technical, weather market,… Same old topics since a few days, market might become bored about them. Funds bought 3,000 corn, 7,000 wheat and were even on soybeans. Reversal today, lack of significant other news. Soybeans are managing to stay on the upside though, thanks to the Chinese delegation.
Dryness in Black Sea and risk of frost in Brazil and Australia are the main topics of discussion. However, Australia risk of frost seems to be out of the picture and there was no widespread damage. US weather is close to ideal these days, for wheat planting, corn harvest and the end of the soybeans development. Planted wheat will need rain soon though.
US exports sales were mixed. On the lower range of expectations for wheat 313.7kT but still slightly higher than last week (+15.8kT), lower than expected for corn (426.3kT), slightly stronger than last week (+15.1kT) while soybeans exceed expectation to 1,316kT (lower than they strong last week, -476.2kT). China are in town so next week will show if there was a soybean rush. Tomorrow, a frame contract will be probably signed, anything between 2MT to 10mT is expected, 5MT to 7MT is realistic.
In Brazil, soybean crush is expected to increase by 6% and get above 42MT at the end of the year. In the US, better yields reports are keeping coming, it seems we’re heading to a new yield increase in the next USDA WSDE report. Reported Corn yields are variable but a small impression as well it could be better. Let’s be more cautious on corn.
MATIF went higher, following Chicago, helped by a lower EURUSD and the weather concerns in black sea. Helped by technical, the rebound is feeding coop selling, closes at the end of the month will be monitored. EU cleared 502kT of wheat export licenses (season total is 4.7MT), 114kT for barley (season total is 3.3MT). Corn imports were 113kT for a total of 1.5MT this year so far. Wheat exports are still lagging, last year same stage it was 6.4MT, competitiveness is hard to find even with two digits cash discounts in France. Reversal today as well with a lack of new topics to get excited with.
Ukraine and Russia winter plantings are made in dry conditions, it’s reaching respectively 26% and 56% of completion. At least one more week of dryness is expected. However, it seems to be very early to get worried about it and it comes as International Grain Council raised again its world wheat output to 727MT (+7MT compared to previous month, still -4.61MT below USDA forecast).
Still on the IGC, the world corn production has been lowered -1MT to 867MT, it’s now -11.1MT below USDA. Global stockpiles of grains are raised +11MT to 456MT, mainly on better wheat, barley, oats and sorghum productions. So still very heavy supply, so it might be a bit early to get worried about the 2016/2017 crop.
Back in Russia, if there is no new move on the export tax, the previous reduction is maintained. But farm ministry has proposed a new cut. There’s a bit of conflicting information going around. Sovecon is arguing the export tax will hurt production and export in a loner term. Market is really expecting (hoping?) the deductible part of the tax will be increased early October.
Financial markets are still nervous and mostly weak, main chatters are still about the so called DieselGate and the rumor other brands, like BMW, are involved. This would be tough for diesel industry with calls, notably in France, to ditch diesel cars from the road within 10 years. Might be good as well for bio fuels. Talking about biofuels, Nidera ceased trading them following a significant loss occurred by a rogue trader.
EURUSD back above 1.12, in the middle of the figure, while Brazilian real keeps digging, to 4.19… Meanwhile there’s a strike in Brazil, federal agricyulural agents are striking, hurting at the moment only meat logistic.