Kind of waiting for it every month… USDA WASDE report: “today could be the greatest day of our lives”… Or not! Usual same kind of feeling, expectations are high but nonevent is likely. It will really be up to the US exports, wheat and corn will have to be cut at some point, there is absolutely no doubt about it. Whether it’s happing now or in a couple of month is another story… And export inspections clearly pointed the problem.


Export inspections were released yesterday indeed. For wheat there’s only 16 weeks to go until the end of the marketing year, in other words, 69.23% of the year have elapsed, and with 398kT of exports last week, wheat has now reached 63.23% of the USDA’s target. There’s some delay, 1.3MT behind the required pace and extrapolating the lag would lead to a 1.9MT delay at the end of the season. There’s really a need to cut the exports, 1MT would probably be conservative. Wheat needs to average 500.4kT per week now. For corn and soybeans, 30 weeks remaining, 42.30% of the year has elapsed and corn is at 28.72% of the target with the 439kT last week and Soybeans at 73.92% with the good 1.173MT of this week. Problem is obvious on corn where it’s basically 5.8MT behind! Should the lag continue, it could reach 8MT at the end of the year. If it’s unlikely to go to that extreme, situation us really worrying and corn need to average more than 1MT per week now until the end of the season. It won’t happen, USDA need to bring the export down but in a bid to smooth the data, let’s bet we won’t evens see exports cut by 2.5MT… Soybeans are in a more comfortable and need to average only 399.9kT per week until the end of the season. Let’s keep an eye on Chines cancellations, this kind of things can happen…


There’s nothing to expect on the world balance sheet for wheat. Three main data to monitor: US wheat exports obviously, India and Australia production. A bit of export and consumption adjustment here and there but nothing major. Disregarding US exports, ending stocks should decrease slightly. For Corn, also uncertainty about US exportations and disregarding this, no major change expected on ending stocks (expected marginally down). South American production could be revised down marginally.  As per soybeans, Brazil production could be decreased to go below 100MT. Let’s keep an eye on South American exports as well, especially Argentina. Overall ending stocks should be down slightly (but once again this will be up if US exports are decreased, soybeans are the less urgent though).


So all of these is a bit of rambling as it will be subject indeed to USDA’s decision on US exports which would be the actual driver of ending stocks move (up). And if there’s any surprise, it will come from there. So it’s like tossing a coin, analyst are really split over this, between the actual need of downgrade and the usual suspicion of data smoothing…


Back to the markets, the week started under pressure with Wheat leading the way down. Asia is away celebrating the year of the Fire Monkey and South America is carnivaling in Rio, so quiet market overall. Funds seems to bet on an export surprise and they were on the sell side:  They sold 11,000 Corn, 6,000 Wheat and 5,000 Soybeans. MATIF is even more depressed and is awaiting for the next GASC tender. Current levels are pretty low and it seems to find some bids, especially on the trade side.


Night session is sideways, up on the soy complex following rally in palm oil, still down on corn one cents or two and marginally up on wheat. MATIF is expected mostly flat.


EURUSD still on the 1.11’s. Despite the investor confidence down more than expected (Sentix to 6.0). The market is more driven by fears on the US growth rather than the situation in Europe (not much better). Gartman was pointing the fact the Restaurant Performance Index is collapsing (ie. nobody is going to restaurant anymore) which is usually a bad sign for the economy. German Industrial Production is down today -1.2%, putting a bit of pressure this morning on EURUSD though.


On Freight, same story everyday… Baltic Dry Index BADI is digging and digging,… To 293, fresh historical low as yesterday – and many days before – were historical lows, and is now down -38.70% YTD. Financial markets are a bit back in the doom and gloom mood. Down yesterday in the US, down again in Asia this morning with notably the Nikkei down -5%. Crude oil is back with a $30 handle and Gold is growing slowly towards 1,200 USD per ounce… Is Kondratieff winter on?

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