Over the week end, I was discussing with different traders and brokers at the IAOM and the consensus was pretty clear: why on earth wheat is on a bull run rather than collapsing and how come corn is stuck in a minimal range. After wheat reached a 3 weeks high on Friday, fund yesterday funds sold 8,500 corn, 4,5000 soybeans and 7,000 wheat according to Reuters. The question is always do they create or follow the movement. Anyway, market was red across the board. Soybean getting away from the 900 psychological level, corn getting away (still not significantly) from the 380 boring magnet and wheat heading back to 500. Did we reach a high on Friday? Quite often, the first day of a new month (yesterday) is giving the trend of the month, so we’ll see, but we’re entering the period where the market is going to be very sensitive to the weather which can be… Unpredictable!
Night session is showing a small down across the board as well, a bit of profit taking on the short could be expected as a Tuesday reversal but so far, it’s not happening.
On the crop progress, although it was a slower pace this week, no real surprise. Corn and beans still on their way to be early: corn is harvested at 85% (+10% from last week) while the average is 78%, soybeans are harvested at 92% (only +5% from last week) compared to 88% average. The wetness has slow down the pace but was on the other side good for wheat: 72% of the wheat has emerged, back on track and there are 49% of G/E, +2% from last week (still -10% below last year though, but good weather conditions at this stage would improve drastically the ratings). On the other side, P/VP are down to 12% (-2% week on week). Planting are virtually back on track as well with 88% of the areas planted.
FC Stone is raising it US corn yield forecast to 168 bushels per acre, matching the USDA latest WASDE report. But they also raised the soybean yield to 47.5 bushels per acre, slightly above the USDA’s forecast (47.2 bushels per acre). Next WASDE is approaching indeed (10th of November)… Market (source being Bloomberg survey) expects a lower US corn crop, -0.75%, with a yield of 166.8 bushels per acre. A small increase of the soybean crop is expected, +0.18% with an increase of the yield to 47.25 bushels per acre.
MATIF was no exception: in the red territory… But still very strong compared to Chicago! EURUSD was not even down (+0.10% actually) yesterday to help MATIF. Indeed, Chicago closed -2.78% down where MATIF wheat was -0.55%. It seems like the GASC excitement is not really over yet. Quiet trading so far this morning, up two ticks or so. Helped by lower euro this morning.
In Russia, the corn harvest will slightly above expectations of USDA (13.5MT) if yields are as good as what has been harvested so far: close to 74% of the harvest is completed and more than 10MT have entered silos so far. On the other side, same-ish progress on the Ukraine corn harvest will be likely to be slightly below the USDA forecast (25MT) as so far less than 16MT have been harvested. Back to wheat, Russia’s harvest reached 63.8MT, up +4.2% from last year, harvest is virtually over as only 0.3% of the surfaces are still to be harvested. On total Russian grains, 98% of the harvest is completed and 105.8MT have been collected. If a bit of drying and cleaning will happen, it will for sure anyway top the 102MT expected by the government. On the dryness issue, finally it will naturally balance, less wheat might be planted and more corn might be therefore planted later in the season. Perfect to compensate this year of wheat abundance and slight corn shortage in Europe and Black Sea? SovEcon says the drought is worse than last year, but still, springs rains will be the key of the equation.
Still in Russia, the GASC tender was a wakeup call. Prices went down. IKAR said FOB prices went down to $197/T, down -$1. A bit more will be needed. And next GASC tender might happen soon if the purchaser is consistent with its strategy to tender after a few bearish sessions! And Egypt just said their stock would last until mid-april, big clue of a new tender approaching!
Ethiopia is said to finally have bought 856,000T of wheat over the week-end, they were seeking 1MT on a super-unusual tender. Shipment will start promptly and will be dispatched over 4 month, it’s going to be interesting to see if we hear about executions issues. Japan is tendering to buy 129,000T of US, Canadian or Australian wheat. Algeria has bought at least 350,000T of Durum in their tender last week, Canadian origin seems to be the winner but there are some chatters of Mexican wheat (obviously not the same of French wheat imported in Mexico! Ha ha). In Iraq, a bit of uncertainty around the tender as the trade minister has sacked 7 officials, including the grain board head, as some allegations of corruption has surfaced. Iran has purchased a total of 8MT so far this season on its local market, +1.8MT from last year.
EURUSD nothing to say really, a lack of fundamental market moving news, market is stuck around the 1.10 level, currently just below. Macro concerns are still focusing around China, manufacture index has disappointed the market.