Reversal day, at least clearly on Corn and Wheat, respectively down -4 and -8 cents, while on Soybeans, if they seemed to be keen on going down, N6 finishing at -2 cents, the spreads took a hit, the curve is still in backwardation though. Funds sold 10,000 lots of Corn, 1,500 lots of Soybeans and 7,000 lots of Wheat. MATIF followed lower but thechically, there’s a flag formation. Anyway, these level is meeting farmers and coop selling, fining a huge relief compared to a few month ago, France S&D is still quite heavy and if there’s no massive cut in the crop due to the wet weather, we’re heading again towards a very good crop. Yesterday’s mood was split really between weather market and pre report day. Indeed, today is the day the fundamentals may matters. On the other side, US weather market end western Europe weather markets are easing up. Although it’s a bit hot, US is forecasted some rains in the next few days. France has a few days of dry and hotter weather (some rains are still forecasted but they might be not that excessive). On the other side, there was a reminder of the situation in South America: CONAB cut by -3.7MT their estimates of old crop corn crop, to 76.22MT, blaming the drought on the south of the country. Soybeans crop, with harvest completed, was also revised lower -1.28MT to 95.65MT. It will be interesting to compare with USDA’s WASDE values.
So what to expect in the WASDE later today? First thing is for sure a reminder that wheat will be a big crop. US wheat is currently pegged at 54.38MT, considering how well the harvest has started, it is likely to be bumped up around +0.5MT. Also, technically, considering US export inspections, US old crop exports should be decreased by -979.9kT, we’ll see if it’s happening and if the operate to a transfer from old crop to new crop. US new crop ending stocks are expected to be bumped up around +0.5MT, in other words, just absorbing the bigger production. Else, worldwide, no major change expected, balance might become slightly heavier with higher US crop and Canadian crop, and virtually no change on the demand side, so world ending stocks should be steady, up from +0.5M to 1MT, leaving the ratio ending stock to consumption above a very comfortable 36%, in other words, no wheat shortage by any means. Has Wheat market been wrongly bullish? Fundamentally certainly but it’s been dragged by Corn and Soybeans and technical factors (funds short are feeling the pain). In corn, and beans, US old crop balance sheet is seen slightly lighter, good export demand and consumption is likely to cut the old crop ending stocks by respectively -0.8MT and -0.4MT. But eyes will be focused on South America indeed. Market expect that old crop will take further cut, in Argentina -0.19MT for corn, -0.81MT for soybeans; in Brazil, -2MT for corn and -0.84MT, the sum of the production cut in South America and the decreasing ending stocks in the US are expected more or less to hit equally the ending stocks, in other words, no big other changes are expected. New crop for them is a bit blurry, still very early in the campaign, but world ending stocks are expected to be revised down -1.5MT for both. So really, eyes focus on how heavier will the wheat balance sheet be, South America productions, US exports for old crop, US acreages and yields for the new crop: fasten your seatbelt and enjoy the show!
Nigh sessions is uncertain, higher Soybeans (+2 cents give or take) and lower Corn and Wheat (both -1.50 cents). MATTIF is expected to open lower but for sure, it’s going to be an animated session!
EU cleared 374,000T of soft wheat export licenses bringing the total for the season to 29.2MT, as far as all wheat are concerned, the total amount is so far 31.26MT, in other words, with just a couple of weeks to go, all wheat need to reach a total of 1.24MT to reach the current USDA’s target, 32.5MT, this look pretty good, it’s on the good track, it’s been a very eventful season, an emotional roll coaster! EU also cleared 55,000T of barley export licenses, 84,000T of corn export licenses and 312,000T of corn import licenses. On the other side of the pond, US export sales were on fire for corn and beans, exceeding the expectations. Commitments were respectively 1,679.2kT and 1,234kT Wheat was pretty weak to 223.8kT.
Argentinian harvest is still lagging behind last year, farmers harvested 86.7% of the soybeans (96.6% last year) but last week, they made very good progress, adding 8% on the counter. Buenos Aires Exchange still expects a 56MT harvest while some more rains are supposed to come into play, making condition difficult and slowing down the drying up. As per the new wheat crop, they are still expecting 4.5M hectares to be planted and the old corn crop to be 25MT.
In France, it was feared that soft wheat took a hit on ratings. So far it is not too bad, 79% is still G/E, just -2% from the week before, which is pretty good considering how bad It could have been considering floods and rains (it is just on the 3 year average). But there’s still a couple of weeks to wait to get sure the worst have been avoided. It’s known anyway that grains and oil seeds were not the crops that were badly hit: fruits and vegetables, potatoes and beets were definitely more at risk. Same for barely, ratings decreased by -2% to a still very good 76% of G/E, but once again, a couple of weeks to get sure the worst is avoided also counting on good weather, badly needed now, as light showers are forecasted for the next few days.
Morocco will hike import duty from 30% to 65% for soft wheat from mid-June to mid-August, more or less making imports impossible in a bid to protect local harvest. South Korea’s CJ bought 46,550T of US wheat, Japan bought 112,689T of food wheat.
Thanks to stronger US dollar and profit taking move, NYMEX crude is coming back below $50, while ICE Brent has still a $51 handle. On Freight, Baltic Dry Index BADI moved up a little +1 to 611, there is no clear direction these days.
EURUSD is back below 1.1350 and has tested the level of 1.13 before rebounding. Mostly technical are to expect until next week’s FOMC, which is now widely expected to be a status quo, but never say never! As per the British pound, is started the day with no big trend as the yesterday night’s debate on ITV between ‘Brexiters’ and the ‘Remain’ camp is unanimously described as a success of the ‘Leave’ camp by the observer. One can just imagine the volatility it would bring on the euro and the British Pound if the ‘Leave’ camp were to win…