Main event of the day was obviously the monthly USDA WASE report.
No change on the US wheat balance sheet. But world wheat ending stocks are up… Balance sheet is becoming heavier indeed! +2.56MT to 229.86MT. Although it was unexpected, it’s not that bearish. USDA is still working with 26MT Australian production, a cut of -2MT is already integrated by the market. However, the move is due to higher Canadian ending stocks (+1.1MT, due to +1.6MT of production to 27.6MT, slightly diminished by higher exports, +0.5MT), but mainly higher EU stocks. Indeed, EU is hit by USDA this month, higher production (+0.39MT to 157.66MT), lower consumption on feed (-1MT) and lower exports (-1MT to 32.5MT). No major change in FSU, Ukraine exports increased by +0.5MT to 15.5MT. In South America, Argentina exports are increased by +1MT to 6MT.
US Corn, exports are down -1.27MT to 44.45MT. This is slightly offset by higher use (ethanol), +0.64MT. Ending stocks are up +0.64MT. In the world Production is down -1MT, mainly on lower South African crop (-0.75MT to 12MT). Canadian crop being increased to 13.6MT (+1.3MT), there’s -2.05MT of production probably scattered everywhere, cannot really identify where it comes from, WASDE magic… With Brazil beginning stocks adjusted by -1MT, the world balance sheet stays mainly unchanged, ending stocks are only down 60,000T.
US Soybeans, as quick as wheat to sum up: no change. World production is down -0.91MT to 320.11MT, ending stocks down -0.28MT to 82.58MT. No clue where soybeans lower production is coming from, magic as well… Argentinian exports are increased by +0.5MT to 11.25MT and beginning stocks of Brazil and Argentine are slightly adjusted on the upside.
So, what to conclude about this not really exciting report (this is an euphemism, SocGen said something right, it “put the street to sleep”)? On the US side, it’s neutral for wheat, bearish for corn, neutral for soybeans. Worldwide wise, this could be seen at bearish for wheat but with the Aussie adjustment to come, this is mostly neutral. Neutral corn as well. Neutral for soybeans (cannot really say +280,000T of ending stocks is bullish considering how heavy is the balance). This report is just a reminder it’s a pretty good year, ending stock in wheat will be 32.05% of total yearly use and 31.28% of production, for corn it’s respectively 21.84% and 21.75%, for soybeans it’s respectively 26.44% and 25.80%. So crop mood cannot switch to bullish… But market is always right, hey! Wheat moved up close to +2% and dragged soybeans and corn marginally up. Funds were even on corn and soybeans indeed and bought 4,000 lots of wheat.
US Weather is still warmer than the season’s average and it’s likely to last until early January. If wheat doesn’t enter into dormancy, if it’s not snowing, if it’s freezing hard,… Surely these are a lot of ifs but it is to be monitored closely.
Night session is quiet, small up on corn and beans while wheat are small down. Event less in other words. MATIF might edge a couple of tick higher but no major move expected at the opening.
MATIF Wheat moved up as well, pushed by Chicago and finding some technical support. The move was clearly limited by higher EURUSD. When MATIF closed, the premium to Chicago was down to $14.86, bit by bit, it continues to go down indeed… Also, with Z5 getting off the board today at the close, we’ll have a clearer view. Indeed, although MATIF move has been really currency focused the past couple of weeks, with such S&D and good next crop prospects, it’s tough to understand why non USD exposed coops and farmers aren’t selling these levels… But farmers don’t want to sell, they want better prices! French coop Axereal’s president Jean-Francois Loiseau said Reuters farmers think they can wait more. But he seems pretty worried, adding: “even with lower prices this season, there are still Russian and Romanian origins sold at 5-8 euros a ton less. So we can’t just wait, we need to be shipping vessels from the opening days of the season”.
Market chatters was saying 600,000 to 750,000T of Wheat has been purchased by Algeria, price range heard is $196 to $197.50. Initial bid was said to be not very aggressive at all… Anyway, with OAIC, results are not published so it’s always some guestimates. It’s part of the game! Treasury hunt! In China, the government pace of selling corn state reserves have been pretty slow and he pace could increase in the start of the Q2-16, putting pressure on prices. Ukraine government said the recent rains have improved significantly the crops! And indeed, it has, now only 17% of the crop is in poor condition, it was 30% a few weeks ago, 2016 grains crop is estimated to be 61MT (+0.5MT). In France, France Agrimer raised the estimates of ending stocks to 2.8MT (+.5MT), despite recent good exports. Poor overall exports and lower use has been taken into account.
EURUSD still very choppy, touched 1.10. As we approach the next week’s FED event, some are beginning to doubt, to be scared,… Will the FED actually hike rate? So far market is expecting it with a high level of confidence… But… Never say never!