Yesterday, on the close, Soybeans were on the downside trying to make an unconvincing reversal Tuesday, they were losing -1.75 cents and the backwardation was still increasing. Wheat and Corn were on their side more significantly down, pursuing their softer start of the week. All the eyes are on the crop tors with a bit of skepticism though (as ratings improved on Monday night) but market chose the downside pressure mostly on technical and Statistques Canada release. The past two weeks slow buildup has been mostly retraced in a couple of sessions on Corn and Wheat, the bullish wave was lacking for sure of conviction. Funds sold 11,000 lots of Corn, 500 lots of Soybeans and 5,000 lots of Wheat. Tuesday is the cut off of CFCT’s COT so over the week, market will expect to see funds have increased their short position on Wheat by 5,900 lots, Corn decreased their long position by 6,000 lots and Soybeans increased their long position by 7,000 lots. MATIF was the biggest move of the day and continued to dig down with contango increasing. Who will dare going to the delivery as currently MATIF has no protein nor Hagberg spec? MATIF Finished down -€3.25 and at the time of the MATIF Close, MATIF premium to Chicago was back to $25.69, in a decreasing pattern since early august (it’s been well above $30).
Market was not massively worried by the Ohio Pro Farmer Tour reports. Indeed, Ohio locals are saying that the route they took will probably be above the state average. Also, it’s not a major state by any means and if the lower yield was realized (148.96 bushels per acre versus 163 bushels per acre for the USDA), it means only -1.173MT on the corn crop based on current harvested area estimates. This is already partially compensated by South Dakota better yield (149.78 bushels per acre versus 147 bushels per acre for the USDA) which would make +0.374MT on current harvested area projections. Total hit for the day: -0.799MT. But, market is not really worried that the lower yield hitting Ohio (Pro Farmer is -8.61% below USDA for Ohio) will be widespread: it’s probably the state that had the worst weather conditions during the summer. As per beans, the pods counts will suggest slightly lower yields for these two states but there’s still a very long way to go. Pro Farmer Tour day two reports are now coming in. Indiana yield is seen at 173.42 bushels per acre… USDA saw it at 187 bushels per acre, this is -7.83% lower than USDA, and therefore a more serious hit as Indian is traditionally the 5th biggest producer. We’re talking about -1.935MT on the current harvested area projections. And Nebraska, traditionally the third producing state is seen… At 158.6 bushels per acre. This is shocking. Allegedly, a USDA representative has criticized the methodology of Pro Farmer. Indeed, USDA is at 187 bushels per acre, in other words, Pro Farmer is -15.19% lower. With current areas projections, it’s a -6.781MT. So totalizing the damage of the 2 first days of Crop Farmer tour, it’s a total of -9.515MT of corn that is supposed to vanish from USDA’s expectations. Sounds a lot. It’s definitely something that need to be reverse checked with final deal to asses if there’s a bias in the methodology. On the other side, on soybeans, pods count were +1.03% above the 3 year average in Indiana and +5.98% above the 3 year average in Nebraska.
Stat Can was out also. All wheat output is expected to be +10.50% to 30.487MT, slightly above the latest USDA WASDE (30MT). Barley output is also seen higher +5.8% to 8.704MT. Canola is taking a small hit (-1.2% to 17.024MT) and Corn is also taking a hit of -8.9% to 12.349MT, quite below the 13.60MT expected by USDA. So overall, the weight brought to the Canadian balance sheet by wheat is compensating corn, while canola is only 207kT below last year so there’s no major issue there, ICE Canola was only +0.38% on the close.
GASC did not make any purchase and will for sure retender pretty soon. The difference between the best CNF (from Ukraine, at $182.17 CNF) and the second best offer (also from Ukraine, $185.71 CNF) was most probably leading to a one vessel only booking with a retender. But it’s still a higher price than previous tender. On the 1st of August, market closed at 406.00c/b in Chicago ($149.18/T) and €167.00/T on the MATIF ($186.52/T). On the 22nd of August, market closed at 415.25c/b in Chicago ($152.58/T) and €159.00/T on the MATIF ($179.94/T). Chicago was up 2.28% and MATIF down -3.53% in US dollar. By the meantime, best FOB offer to GASC from Russia was up +6.31%, in other words, premium went up quite a lot, regardless of the proxy. Best Ukrainian offer was also up +2.09% which is also a significant distortion compared to MATIF. So GASC was probably thinking it was too expensive and Venus (best CNF offer) was said to be asked to improve their price, which they obviously refused as they were leading the pack by far already. They also tried to bargain the second vessel of Ukrainian (it’s said they got $0.24 discount from Louis Dreyfus Commodities) and tried to have the Russian at the same price as the Ukrainian but Nidera only made $0.15 discount. Seeing that the markets, either in Chicago and in MATIF, were respectively down -1.5% and -2.0%, they might have decided to bend the muscles and show who’s the boss. Although there was no official reason for cancellation, tenders are always a free option for a few hours and GASC demonstrated it.
China imported 7758MT of soybeans in July, the main provider was Brazil with more than three quarters of the total. If it’s higher than June (+2.6%), it’s -18.3% lower than July 2015. China is still in a pattern of selling reserves and still struggles to find interest: 148kT of corn stocks were auctioned, only 7% of the total amount offered.
Night session is still down across the board, everything is more or less between -0.5% to -1% down. MATIF has also opened lower for a few ticks.
Oil is still close to $50, there’s a lot of speculations, fears or hope about the next OPEC meeting. Similar reasons (FED’s meeting) is bringing uncertainty to EURUSD which is now currently trading below 1.13, seems like it’s a bit toppish currently. Crude oil inventories and Ethanol data later today. On Freight, it’s back up towards 700. Yesterday, Baltic Dry Index BADI printed +5 to 692 on higher demand for bigger vessels which, the mid-size vessels index was down interestingly enough.