From drought concern talks to record yields in 24 hours… It’s a bit exaggerated but the market mood is a clearly a bit lunatic and schizophrenic, but it’s the same every year in July and August to be fair. It’s supposed to be pretty hot the next couple of days in the US, with temperatures reaching the 100 degrees Fahrenheit (37.78 degrees Celsius) drought complaint level. Market could not care less and successions of warm episodes and wet episodes are actually pretty good. However, the corn is silking and the stage is pretty sensitive so one need still to be careful. But even if a real drought was kicking of right now, the spectrum of a 2012-like crop is slowly vanishing. So this was another day falling off from the cliff, Soybeans finished down -17.75 cents (on Q6), but oddly, backwardation increased (U6 finished down -20.50 cents). On could think in a harsh downtrend the situation might relax, especially with more than 7MT of unshipped export sales. Soybeans reached a 2 months low. Corn has now corrected the rebound of the first 2 weeks of July and closed -3 to -4 cents down while Wheat keeps digging lower -4 to -6 cents and seems to have the 400 objective in mind, this would be level not reached since Q3-2010. So weather is pretty good, EU crops are not as good as expected but highly compensated by the greatness of FSU,… Really, the picture is not too bad. MATIF Wheat initially rebounded but could not hold it facing the US losses and closed more or less flat.

 

Funds continued to sell, the sold 8,000 Corn, 12,000 Soybeans and 3,000 Wheat. This would mean that the cumulated position between the three of them is now something like short 25,000 lots, this is a big change! In the 14th of June CFT’s COT, funds were long 250,000 Corn and 200,000 Soybeans…

 

On top of this, Thomson Reuters / Lanworth came with pretty reinsuring news overall. In Canada, good weather conditions led them to increase the crop forecast by +3% on wheat (to 31MT while USDA is pegging it at 29MT). In Ukraine, wheat is seen near record of 26.4MT (25MT for USDA). Thanks to more planted area and great soil moistures conditions during the plantings, they see the 2016/17 wheat crop up +26% to 14.2MT (USDA is at 15MT) from the year before. They did not move their US Wheat estimates of 60.8MT (USDA is at 61.53MT). EU is cut -2%, due to wet weather at a critical stage of the development and is now pegged at 153MT (156.5MT).  So the balance sheet is not likely to become tighter and it’s actually a pretty good news France is losing a bit of quantity. On the corn side, EU corn output is revised down -2% to 67.1MT, still well above USDA (63.83MT) due to excessive rains but Ukraine is still pegged at a nice 28.3MT (USDA is at 26MT). On the US side, they are much more conservative, seeing 354MT (USDA is pegging the crop at 369.33MT), they use a very conservative 159.5 bushels per acre yield, while USDA is at 168. It’s likely the USDA WASDE balance sheet will become heavier has a cut in corn yield is not expected just yet. Old crop in Brazil is pegged at 74.9MT and 28.9MT in Argentina, versus respectively 70MT and 28MT in the latest USDA WASDE. A bit of margin to improve the data from one of the both there! US Soybeans are seen to 102MT versus 105.6MT for the USDA, they use 45.5 bushels per acre yield while USDA uses 46.77 bushels per acre. On old crops, Argentina is pegged at 60.7MT (56.5MT for USDA) and Brazil at 99.1MT (96.50MT for USDA), quite a difference, someone is quite off there. Finally, on Canola (and rapeseed), EU peg is cut  down -2% to 21.3MT, bad weather but on the other side, Canada production expectations are raised +5% to 17.9MT on good weather this time.

 

EU licenses were pretty good, 826kT of soft wheat and 191kT of barley exports and 138kT of corn import licenses. Also to be noted, 86,340T of Ukrainian barley was imported under the tariff free quota scheme. All wheat exports are slightly in front of the required pace, reaching 1.95MT since the beginning of the season (1st of July), being 6% of the 34MT USDA’s target. In June, China has imported 7.5MT of Soybeans, mainly from Brazil.

 

Tunisia is seeking a bit of everything: soft wheat, durum and barley. Japan bought 165,048T of food wheat, Jordan obviously made no purchase in the 100,000T hard wheat tender. South Korea’s agro fisheries bought 20,000T of US and Canadian Soybeans.

 

Night session is showing some sign of pace. Soybeans, Wheat and Corn are up between +0.75% and 1%, this is also the case for MATIF Wheat. A breather is well deserved but it would not be the first time market is opening up and sinks during the day!

 

Oil is still around $45, really $45 is the support and $50 the resistance, if nothing moves on the fundamental side, we’re likely to be stuck in this range. NYMEX Crude has a $45 handle and Brent Oil a $47 handle.  On Freight, has Baltic Dry Index BADI topped? It’s -10 to 736, due to lower demand on larger vessels.

 

No major move on Currency, US employment data and ECB today will be the events to monitor. Nothing much expected from the ECB. EURUSD has rebounded on 1.10 and GBPUSD is back just below 1.32 but no major move. Market has now integrated patience will be necessary to see Article 50 triggered, as the Prime Minister Theresa May was meeting Angela Merkel for the first time.

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