Mixed start of the week. Soybeans posted a third bullish session in a row and reached level that triggered aggressive offers and should see some resistance: 980 cents on X6. Market closed way below the highs indeed, if we go through these 980 cents, objective would come back to be the $10 level but considering the heavy fundamentals, it would be tough to sustain. Corn finished just a tick up in a sideways trendless session while Wheat closed sideways: slightly up in Chicago but with the contago getting decreased, ticking down in Kansas and Minneapolis. In Chicago, funds sold 2,000 Corn and 500 Wheat while they bought 4,000 Soybeans. In Europe, there’s a bit of euphoria, market was up +1% more or less and CME EU continues to be at premium to MATIF. Not sure how long I will last but the situation is widely seen as abnormal.


Night session is still bullish on Soybeans and the 980 cents level is indeed to be retested. Meanwhile, it’s barely ticking up on Corn, ticking up on Wheat in Chicago while there’s a bit of pressure in Kansas and Minneapolis but nothing much. MATIF and CME EU are expected to tick up with no major move in the early trade.


Export inspections were no surprise, within markets expectations. USDA kindly replied to my emails. Indeed, there is a difference between total grain inspected and US exports. Indeed, old crop inspections are short -1.887MT of the USDA corn exports, -1.467MT short of the USDA soybeans exports and -0.842MT short of the USDA wheat exports.


Note that the WASDE export data comes from Foreign Ag Service (FAS).  An exporting firm is required under the Export Sales Reporting Program to report shipments to FAS in the week for which shipments occur.    Typically the export data as reported by FAS and the inspections data as reported by FGIS (Federal Grain Inspection Service) are fairly close.  On a weekly basis, FAS checks its export data against FGIS inspections data.   Note however, that on a weekly basis, differences do exist.   Much of this is due to lags in reporting and differences in the reporting weekly timeframe.    However, other reasons for differences also exist.  


Container exports may be a lot of the difference between us (FGIS) and FAS.  There is a lag in reporting of containers because the export destination is often not known at the time of inspection.  Though our weekly inspection totals will increase some the differences will not be made up.  Also, there is the 15,000 MT exemption from inspection per non-port area export location per year.  Those exports would appear as FAS export sales and not be in our EGIS data.   There is also the exemption from inspection of export land based carriers to Mexico and Canada, therefore some of those shipments may not be reported by FGIS.  Finally, FGIS reports standard weights for export trucks, containers, and rail.  There may be some differences in actual report weights vs. the standardized weights by carrier type that we report. 


The reason we don’t include the St. Lawrence shipments because the grain that we inspect in Canada along the seaway was already inspected in the U.S. being loaded on a Laker.  The Laker takes the grain to Canada but sometimes it is off loaded in storage then loaded back on to a Salty.  In other words we don’t want to report the same grain twice.


Anyway, this week, wheat shipment reached 562kT, above the weekly needed split but it better have the momentum the first half of the season, especially that now the corn and soybeans are coming in the bins and silos. Corn was a good 1,285kT, but it’s clearly what is needed for a few weeks, more than 1MT per week will be tough to sustain for 50 weeks, so here as well, better to gather some advance rather than the opposite. Soybeans shipment only reached 755kT, this is not enough, also more than 1MT per week is needed, however it should gain some pace with the harvest starting.


Indeed, harvest has now kicked off clearly: 4% of the soybeans are in, 9% of the corn is in. Tis is slightly behind the average but we’re only more or less 2 weeks in the harvest so there’s no issue. As per the condition, it’s now not really expected to post any significant move and we have very good quality crops, much better than last year. No move on corn (74% of G/E and 7% of P/VP) and no move either on soybeans (73% G/E and 7% P/VP, to be fair there’s even a tiny upgrade, soybeans rated E are +1% to 19% while soybeans rate G are -1% to 54%, but this is negligible but confirms they are the best soybeans since 22 years). So the end of the season is near and the next one is approaching: winter wheat is planted at 17%, slightly above the average of last year and the 5 year average. So everything is going on a timely manner.


It sounds like a boycott. The question is now how long the Egyptian government will take to react rather than if they will react. There is no other solution, facing the clear boycott of traders, Egypt could very quickly face some food security issue. Will GASC have to make a third tender to prove their points? I seems that GASC has understood how difficult it is to have ergot free wheat, they just need to convinced the government, should a third voided tender be necessary, probably not, but hey, you’re never too sure… But let’s suppose we’re back to the international 0.05% max limit on ergot, traders confidence has been badly hurt and Egypt will have to expect reluctance, less offers, more premium. They are the largest wheat importers, they need wheat, but if the execution is highly risky, this is a clear issue. But whatever Russia says, international balance sheets need Egypt, it is so heavy that Russia, Ukraine and EU cannot just forget about Egypt. If Egypt is wheat dependant, large exporters are also Egypt dependent.


In Russia, as far as wheat is concerned, it seems now that every major district is posting a higher yield than last year (yield is currently +9.43% above last year), Siberia (third producing area) is now marginally above last year. The national harvest reached 90% and 72MT have been harvested. In other words, the USDA WASDE number is reached, although this is not a clean weight, this might lead to a bigger than expected Russian crop. Barley harvest is 92.9% completed with 18.3MT (yield +3.06% better than last year so far) while corn harvest reached 14.1% with 2.1MT (yield +3.75% above last year so far).


China keep struggling getting rid of the corn ageing stock. Only 1,800T were sold in the latest auction while 1.2MT was on offer.


Oil is failing to find some bids suggesting the hopes for any action on supply is gone. NYMEX Crude us just below $93 while ICE Brent is in the mid $45’s. Iran will sell India oil for its emergency reserves. On Freight, Baltic Dry Index BADI is raising again +36 to 830, mainly dragged up by Baltic Capesize Index BACI which posted a +10.30% gain. Volatility on bigger vessels demand is the current key of the market. Gold is trading above $1,315 per ounce.


On currencies, EURUSD is trading around 1.12, currently just below. Tomorrow will be the big day and might give a new trend: 20% of the market still expects a hike tomorrow, 27% for November and 56% for December. Would be a huge bullish news or the US dollar if it’s happening tomorrow, but f it is not happening, a hawkish speech is expected, so bearish potential seems limited. November hike? 6 days before the US presidential elections? Sounds unlikely. December is definitely in the agenda though. GBPUSD is struggling to keep the head above 1.30.

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