It was one of these days with a lot of entertainment… With a surprise and a nice market move.
Export sales came as a frustrating teaser yesterday. Nothing much to say about the, corn and wheat were within the (low) expectations respectively to 407.7kT and 860kT while soybeans were below the expectations to a very unusual little 361.5kT. It’s seasonal, soybeans usually decrease on the last third of the season, there should not be any worries, Chinese demand have been pretty strong. But let’s watch out for cancellation, because if Soybean prices are collapsing, there might be a few cancellations or roll over to ne next crop. If it’s quite likely the sales commitments are going to meet the expectations at the end of the season (corn need 446.5kT per week, wheat 204.1kT and soybeans 82.4kT), actual shipments are much more relevant to the balance sheet. And exports inspections are definitely the data to watch out and expecting a decrease of corn and wheat exports in the next USDA WASDE report is totally justified. On the other side of the pond, strong week in Europe, is there a hope? It’s good but the last few weeks pace might come a bit late. EU cleared 969kT of soft wheat export licenses, 87kT of barley export licenses and 148kT of corn import licenses. Total wheat exports have reached 73% of USDA’s expectations. Soft wheat need now to average a weekly average export pace of 646kT. It’s becoming more realistic but it might come a bit late, especially if the new crop is available sooner than usually. The winter was mild and wet and crops are at a very advanced stage.
Quarterly Stocks and planting intention report now. It’s fair to say that market disregarded the stock report. It’s fair to say the stocks did not really deviate from the average market expectations: 198.3MT for corn, 41.7MT for soybeans and 36.1MT for wheat. So no real surprise and it confirmed stocks are heavy, very heavy. Corn stocks are 0.74% higher than last year, soybeans 15.37% higher and wheat higher 16.40%. Corn and wheat are not really expected to improve as exports are depressed and the next quarterly report could be a carnage. However, paradoxally, corn was the best (the least worse) data, but market have focused on the other big data. Indeed, corn expected plantings are staggering! Well above expectations. Market was expecting a number just shy of 90M acres. Well… 93.6M acres that was: an increase of 6.36% from last season. Although it’s not final numbers and tey usually decrease on the next quarterly report, it’s not like US need corn… This is likely to be a compensation for lower winter crops acreage. Market instantly dug down and Corn lost -16 cents on the close. Soybeans were below expectations at 82.2M acres, a marginal decrease of -0.54% from last season. Wheat was the bullish surprise as it’s expected to be 49.6M acres, below expectations, this would be a decrease of -9.23% from last year. However, wheat lost 5.044M acres but corn gained 5.601M acres. So basically, we’re just seeing a farming arbitrage and considering yield of corn compared to wheat, the wheat bullishness might be far-fetched. If yields are the same, the total of wheat, corn and soybeans will be higher next year in the US. If the Wheat Corn spread is rightful on the data to increase, not sure it means it’s right for Wheat to go higher, the corn problem is likely to be contagious to wheat. Wheat finished up +8 cents while Soybeans were marginally up.
Funds sold 40,000 lots of Corn, this won’t be reflected to the next CFTC’s COT as it’s ending Tuesday. So finally, funds and their massive short Corn are once again, so far, proven right. Funds bought 3,000 lots of Soybeans and 5,000 lots of Wheat.
On its side, MATIF chose not to rebound and closed down. It tried to rebound after the report but the attempt was a failure. The higher EURUSD adding some additional pressure. European crops are in a very good state and is not in a massive competition with US wheat so market chose to basically ignore the report.
Night session is weak on Wheat, mostly unchanged on Corn and Soybeans are on the upside. MATIF should open slightly higher or flat but hey, these days, you never know!
Nothing to complain about the weather, there was rain in the US Midwest, North and South Dakota. We will ear for sure it’s now too wet… Nothing to report in South America or Europe.
Buenos Aires Exchange said Argentina farmers will harvest 60MT of soybeans, +2MT compared to their previous estimate.
Indonesia is going to issue new rules on corn imports, it’s said to allow feed mills to import directly with government approval.
On Freight, Baltic Dry Index BADI rose again to 429. Gold is still just above $1,230, while crude have a $38 handle and Brent a $40 handle.
EURUSD reached 1.1411 but is now back below 1.13. Still the same contradictory forces: US dollar want’s to weaken but on what basis should euro be higher? US employment data later. Also, still 2 months and a half of Brexit campaign and the arguments of the ‘stay’ lobby are still on the scaremongering side and probably counterproductive: last joke is English football lobby trying to make believe 400 professionals footballers will have to be deported if the Brexit win for Visa and work permit issues. With such enemies, the Brexit camp don’t need to campaign too hard… This will last until the 23rd of June…