Nice sell off on Wheat and Corn, Wheat coming back around the 500 level (-20ish cents per bushel, a nice -4%) and corn is trying hard to get out of the boring range (-5ish, Z5 last traded at 367.75) ! Soybeans finished with little move, sideways. Technical day and anticipation of today’s big fundamental monthly event. Obviously it seems the funds got more quiet on shore covering: Funds sold 10,000 corn and 9,000 wheat while they bought 4,000 beans. Tough to say if the traditional Tuesday reversal will happen, too much on the plate today. EURUSD (barely up on the day, in the mid 1.07’s) did not come to the rescue of MATIF Wheat: it followed Chicago on the downside, slightly less though, but an adjustment is likely to happen this morning. Very quiet night session so far. Beans and wheat small up, corn small down, all traders will probably spend the day quietly looking at each other, there’s a big elephant in the room: USDA WASDE. 

Winter wheat conditions has improved, the rains were beneficial, +2% of G/E to 51%. It is likely to continue, at this stage, a poor rating is no big deal if conditions are becoming better and considering the reestablished soil moisture, market clearly expects to improve again. On the harvest side, no surprise, corn is 93% (+8%) and soybeans 95% (+3%). In a couple of weeks, harvest 2015 will be behind us, bring on the crop 16/17!


Today will be rare day, like when a lunar eclipse happens exactly when the center of sun, earth and moon are on the same axis: “inch perfect” would say John Virgo! Indeed, today will be the November USDA WASDE report (9pm Dubai time) and… Egypt’s GASC tender! With consistency with its strategy (a few down session in a row, 3 here), the GASC purchaser issued a tender on wheat, shipment will be 11-20 December. It will be interesting to see at what time we know the result, the temptation to use it as a free option and to wait until after the USDA report is high! Let’s watch out Russian and Romanian wheat, Ukrainian will be tough to compete, for France, it can still happen, depending on how aggressive traders will be. By the way, Ukraine grains harvest is 96% done.


Talking about the GASC, they announced they might import commodities to supply the private sector in a bid to control commodities prices. Next step would see them offering wheat for themselves in their tender! Joke aside, it would be in conflict with the objective to import only 4MT of wheat looking forward. GASC also seeks soyoil and sunoil today.


Export inspection were interesting. Awful value for corn, 296,000T, market was expecting on average 550,000T. In other words, corn shipments are lagging 25% behind last year! Corn need a weekly pace of 400,000T for this not to become worse. It is still early in the corn marketing year but this need to change quickly, else USDA forecast won’t be met. Watch out US Corn exports tonight in the USDA WASDE report! Same picture on wheat (283,000T), although a weak number was expected, this is not changing the fact shipment are 18% behind last year and still shy of the requires USDA pace. On a positive note, nothing to say on beans, inspections were on the bottom of the expectations, but still above last year pace and the USDA pace (but tough to have a linear approach on soybeans, the pace is traditionally strong the first half of the year, and low he second half of the year).


So what to expect on the WASDE report? On the US production, Corn is expected, on average, to be slightly trimmed (-0.25MT) , a conjunction of lower yield (168.8 bushels per acre, -0.2 bushels per acre) slightly compensated by higher acreage. Nothing significant really. The focus will be on US ending stocks, the average expectations are expecting +0.76MT. In other words, there’s some room indeed to reduce exports by 1MT. US soybeans production is seen higher +0.6MT, mainly on higher yield (47.5 bushels per acre, +0.3 bushels per acre). There’s a lot of crushing happening, usage and exports might be increased but US ending stocks are still seen higher +0.14MT. Obviously no wheat production change, but ending stocks are expecting to be adjusted -0.13MT. On a world focus, Australian wheat will (almost certain) be brought down to 24MT (-3MT). Elsewhere adjustment will be minor. On Corn, US and South America will most probably be bumped up, compensated by a trimmed Europe and FSU production. Overall, no major change to expect. On soybeans, same, no real deal expected, US will higher production would compensate a South American trim. So rather than a big fundamental mover, this report will be a reminder that fundamentals are heavy, no massive change to be honest. So there are two opinions, either market won’t care, either it will be back to reality. The bull side is unlikely but a surprise is still possible and you never know how funds can react.


On the weather side, Australian Bureau of Meteorology is seeing El Niño currently peeking and effect to ease in the first quarter of 2016. So far, although strong, has El Niño be all talk and no action? In FSU, much needed rain seems to be expected, probably contributing to the CME bearish mood. But rain is probably more needed for the mind rather than the crop, once again, spring rains are more important but obviously, soil moisture will be highly welcome now.

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