After starting the day well into negative territory, Soybeans finished up +4.25 cents on Q6. Slowly but surely, the backwardation is flattening. It topped (Q/U spread) 32.75 in the 3rd of June, went back to 5.75 in 6 sessions, topped 22 on the 6th of July and is now back below 4 cents. It’s expectable to see the situation getting more normal as if it’s true that situation is tighter than last year, there is no real widespread short term supply concerns. This season will finish with a 17.53% US stock to use ratio and 22.74% world stock to use ratio while new crop ratios will be respectively 14.16% and 20.41%. Tighter but the world is still sufficiently supplied in Soybeans. Anyway, it is still all about the weather and what ifs, especially for beans and corn crop in the US. Wheat concern are much more in Europe but this is much more a quality concern rather than the size of the crop (a hit in France will be more than compensated by the Black Sea). Corn finished also up (around +5 cents), as well as Wheat (around +4 cents). Funds bought 6,000 lots of Corn, 10,000 lots of Soybeans and 3,000 lots of Wheat. MATIF Wheat was also up, following the US and still worrying about the French crop quality and size.

 

Tuesday reversal on the night session so far, Soybeans correcting -7 cents or so, Corn -5ish cents and wheat -3ish cents. MATIF should open relatively stable and tick lower.

 

In France the harvest has started indeed. The south part of France (for barley, wheat and durum) is pretty good, no massive disappointment on yields, proteins and test weights. The western side of France seems to see lower yields than expected but no widespread fungal decease so far. Center and eastern side of France will kicking off soon and it’s the areas the most at risk. So basically, and it’s the quite normal, harvest has started by the best areas, they have been the warmest and the sunniest so that’s no surprise but these relatively good news cannot be extrapolate.

 

As of 30th of June, there was 266 million bushels of unshipped soybeans, this is 7.24MT. The likelihood it’s going to be shipped in the next 7 weeks is pretty low. Should everything be rolled would not be a fundamental issue, it would create a neutral transfer from one marketing year to another but out of 7.24MT, there might be a few cancellation which is the issue. And export inspection showed again the failure to reach the average pace required to meet the new US export  target (USDA raised the old crop exports by +0.95MT to 48.85MT): 7 weeks to go, and 521.5kT is now needed weekly as only 367.4kT were shipped last week. The 10 week average is a mere 230.3kT, it really need to pace up, danger zone. On corn, despite a strong data (1,327.5kT) it is short the required pace (USDA raised old crop exports by +1.9MT to 48.26MT) and now needs a 1,502.2kT average. For sure the last weeks of the season are going to be pretty interesting. On wheat, it is quite interesting to point that on the latest USDA WASDE report old crop US exports have been raised (marginally though, +0.05MT) to 21.14MT while the total of export inspections last marketing year has reached 20.248MT. So there is some kind of insistency in the crops allocation I guess. Also, on current crop, wheat shipment reached 444.3kT, slightly shy of the required pace and considering the availability of wheat, one better export sooner rather than later, especially when record yields of 10T per hectares have been seen: South Dakota is doing particularly well in that matter. 10T/ha is becoming not as unusual as it used to be, UK’s East Yorkshire seems also to reach these levels. Anyway, US wheat export shipments need to average 480kT for the next 46 weeks.

 

The big question was also about the ratings. Has the favorable weather improved them? To be fair, market was more looking for a non-downgrade in ratings rather than an upgrade. And the result is no change on corn, 76% of G/E and 5% of P/VP. To be absolutely fair, there’s a +1% Good and -1% Excellent but that’s minor. If soybeans G/E is not moving either (+71%), P/VP is slightly higher, +1% to 7%. However, corn and soybeans crops are in a much better condition than last year: it was respectively 69% and 62% last year. And, considering the drought talks, it’s always useful to check corn ratings this time in 2012: 17th of July 2012, corn ratings were 31% G/E. Corn is silking timely and in good condition (56%, +24% from last week), soybeans are setting pods also in favorable conditions (18%m +11% from last week) so it is fair to say that so far so good. A lot can still happen but each day without a huge weather stress is basically a marginal bearish news. Spring wheat ratings were downgraded to 69%, -1% from last week going below last year (70%). It doesn’t really matter, there’s so much good quality wheat that there’s a huge buffer as far as the quality is concerned, and let’s not be picky, 69% is still very good. Winter wheat harvest is going on nicely, 76% is done, 10% last week.

 

India is issuing a new corn tender, seeking 40,000T.

 

On Freight, Baltic Dry Index BADI has now clearly reset its bullish trend is was up again to 748. Oil still just above $45, no real trend these days while Gold is also playing around $1,330. Summer holidays range?

 

No big move on currencies, EURUSD still below 1.11 and GBPUSD above 1.32. Boris Johnson in Brussel showed he wanted to cooperate with the EU, and has been actually pretty well welcomed.

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