Night session is all over the place, soybeans and meals but oil up. Corn is slightly up but wheat is nicely down… In Chicago! Meanwhile Kansas is up. MATIF is so far expected mostly unchanged but with more than 17 dollars premium to Chicago, at some point, it will have to reduce…
Decent snow is coming in the US, exactly what is need to protect wheat during dormancy. South America will be drier but week-end has been wetter. So no real weather issues these days.
US Exports Sales were published on Friday (one day delayed due to Thanksgiving during the week) and it was the highest figure of the year on corn! Indeed, 2.6016MT have been sold. Also, this is the first time it’s above required pace (754.38kT) to meet the USDA expectations (total of 45.72MT). However, a single sale are mostly responsible for it: 1.112MT to Mexico. It’s still very unlikely Corn will reach the USDA’s expectations bur never say never! Soy complex still benefits from bargain buying and Chinese demand and Soybeans were still strong to 1.3489MT, that being said it’s declining from last week but that was expected. The only real bad boy was Wheat, it is just not going anywhere: 360,300T only were sold. The pace is 15% lagging to the USDA’s expectations which are themselves down 6% from last year. Something need to happen there…
So really, the main mover of the week was wheat and there’s some interesting differences on different what markets. Front month on Chicago (SRW) was down -4.66% but only down -1.53% in Kansas (HRW), and the spread between the both continues to reduce and Kansas Wheat is close to go above Chicago, only 7.25 cents per bushels to fill. Same movement, spread between Minneapolis (HRSW) and Chicago widened as Minneapolis went actually up 0.10% last week. MATIF Wheat was flat in euro, down -0.50% in US dollar while London Feed wheat was up 0.8% in Sterling and down -0.22% in US dollar. European wheat is resisting very well compared to the Chicago sell off. Quite against fundamentals, silos full on record crop, French soft wheat is still in excellent condition overall, +5% compared to last year to 98% of G/E,… French farmers are still reluctant to sell but how long will they be able to hold their position? If next crop is good, better sell this one sooner rather than later. Shipment to Asia, like the latest Indonesia, could help to maintain the prices as well as the euro sinking.
No real change from EU crop estimates, pretty logically at this stage, everything is more or less known: -0.1MT on soft Wheat (to 149.1MT), +0.1MT on corn (to 57.5MT) and +0.1MT on rapeseed (to 21.3MT). Meanwhile, better week on wheat exports, at last, 553,000T of wheat were cleared from EU last week (+152kT from last week), a bit less barley (-29kT to 97,000T) but still concerning, very steady corn imports to 527,000T (+213kT). MATIF wheat was holding on good French port loading but it’s quite known some sell to Algeria has to be shipped away, hey! A new sale of 30kt to Mexico has been done according to market chatters, reaching 126kT this season, more than the cumulative 4 last marketing years.
There’s a lot of chatters around the downed Russian jet story and the economic consequences. The first sanctions are coming fast from Russia: Putin banned Russian companies from hiring Turkish citizens from early 2016, Reuters reported over 90,000 Turks to be sacked from Russian companies. Charters flight from Russia to Turkey are banned, import restrictions (unclear though at this stage, poultry concerned though) of products from Turkey,… So no joke from Russian authorities there. But there’s a potentiality of an impact on grain markets. Indeed, who is the second biggest importer of Russian wheat after Egypt? Turkey… Last week, there was “unofficial instruction” circulating to withhold wheat shipment to Turkey. Wall Street Journal developed the story this week end, and shipments seem to be on hold indeed. There’s a lot of confusion as no official statement are published. Also, a lot of chatters: bullish or bearish? On one side, Russia would have to be very aggressive to sell wheat supposed to go to Turkey elsewhere, but on the other side, Turkey would bid more heavily Canadian or Aussie wheat and maybe on some Ukrainian wheat. So likely an impact on physical premiums, but market global S&D probably wouldn’t be that much affected, that being said markets hate uncertainty. Anyway, both countries, for sure have a lot to lose over this matter, all other thing equal. If GASC is showing up in the next couple of days, this will be quite interesting! And seeing the state of the night session, if the trend keeps it this way this would be far from impossible! Turkey’s Erdogan made the first step towards Russia, kind of making an apology.
Iran said the wheat season has stared very well with decent rains. Therefore, Agricultures officials said there probably won’t be any major wheat import in the coming year and they are approaching self-efficiency. In China, there are still some massive stockpiles of corn and government is planning to cut domestic price to reduce the stocks. Argentina’s soon to be new government (to take functions on 10th of Dec) confirmed the export tax on wheat (23% currently) and corn (20% currently) will be abolished immediately as promised during the campaign (also the case for beef and sunflower) and soybeans will be reduced by -5% to 30%.
After one infected farm in France, US is now talking again about the bird flu, no new case but the aftermath. Digesting the fact this summer nearly 50 million birds died, exceeding the record of 1983. There’s a conservative rule of thumb, impact on demand of feed corn is 1 bushel per bird, so it means close to 1.3MT of corn demand could be missing. In Australia, the earlier concerns about quality are easing, it’s been holding pretty good. In Brazil, a few fields will be lost due to the dam breach (legal action is starting against Samarco, Vale and BHP Billiton) but nothing major (well as far as crop are concerned, human and environmental impacts of this event are likely to be dramatic).
EURUSD was too close to the 1.05 handle not to test it, and it did, we’re now below 1.06, euro is keeping sinking. ECB press conference will be monitored closely on Wednesday (market expects 6 more month of QE and a cut of deposit rate by 10 to 20 basis points) while FED’s 16th of December will be the big day! Market is still expecting a rate hike. Concerns from China aren’t over yet though, financial markets were down -5.5% on Friday mainly on the fact that Chinese industrial profits were down for the fifth month in a row, down -4.6% in October indeed.