The Fatal Attraction of Soybeans to the $10 level continued yesterday as market went back down playing with it and went actually as low as 993 cents but there was an interesting price rejection and market closed well above the low, ending the session down only -2.50 cents. Very technical session, a bit of profit taking on the Soybeans length before the tonight USDA WASDE report, but mixed with the weather concern in South America, plus a potential cut of -1MT in the WASDE of the Argentinian soybean crop as government said crop will be likely 56MT (December WASDE had 57MT, Informa was at 55MT, Lanworth is still at 57.1MT though), decreasing their estimates by -2.8MT. But on the Brazilian side, UkrAgroConsult increased its soybean estimates by +1.8MT to 104.4MT, USDA WASDE being pegged at 102MT. Tough to trade Soybeans these days! On Corn, same pattern. As Soybeans were significantly down, Corn this time followed, H7 went down to 352 (trading down -6.25 cents) but closed, as Soybeans, far from the low on day, ending the session with a little -1 cent. Back to Argentina, government said crop would be 34.51MT, this would be on the lower range of USDA WASDE expectations. Lanworth is at a very conservative 31.9MT, Informa at 36MT… But on the Brazilian side, UkrAgroConsult raised its estimates to 94.MT (+2.9MT) and Celeres is topping them with 95MT. Market believe USDA WASDE will show a bigger number than the current 86.5MT, but there’s a feeling USDA will be conservative and market is betting on no more than +1MT at the moment. In other words, the rain and dryness patter in South America is so complicatedly shaped that no one has really a clue of the real global impact. Pure scaremongering. Wheat was the only one to have a convincing downside. Market is starting to realise that winter is cold, but it happens ‘almost’ (sarcastic) every year and real widespread issues are pretty rare. There’s usually much more risk on heat and dryness, or night freeze before and after winter rather than cold during the winter. Chicago Wheat finished down -8 cents, but still, pretty well above the low as it was trading at some point down -14.75 cents. Kansas finished down -6.50 cents, bringing its premium to Chicago up to 13 cents. Still a bit of mess on Wheat spread indeed, Minneapolis ticked actually up, taking the premium to Kansas to 129.75 cents and 142.75 to Chicago. On the other side of the pond, MATIF ended down -€0.75 and CME EU -€0.50. In Chicago, funds sold 2,500 Corn, 8,000 Wheat and bought 500 Soybeans.
So what to expect on the USDA WASDE (9pm Dubai time)? On Wheat, nothing major by any means. On the supply side, as Informa is now on 15MT for the Argentinian wheat, the USDA WASDE could see a little bump up as it is currently at 14.4MT. On the demand side, US exports worth keeping an eye on as recent export inspections were not encouraging, but no real surprise expected here. World Ending stocks are expected to move by -0.13MT according the average of trader estimates, so virtually nothing indeed. China consumption could be the usual variable of adjustment, USDA attaché said the consumption could be as much as 122MT (+5MT from previous USDA WASDE), so a little downside on the ending stocks will make sense. For corn and soybeans, as mentioned, the focus will be South America, with expectations in Argentina of 36.3MT for corn (-0.2MT) and 56.48MT for soybeans (-0.52MT) and, in Brazil, 87.24MT for corn (+0.74MT) and 102.4MT for soybeans (+0.4MT). No major change expected on the world balance sheet for corn, a few adjustment here and here, market sees -0.29MT less of ending stocks, so nothing to see here. On soybeans, more surprises are possible. US exports on Soybeans to be raised? Global crush to be raised? But extent is expected to be pretty small as world ending stocks are expected down only -0.27MT. So as market is overall expecting nothing, it’s a bit of a suspicious calm atmosphere, it can actually be a shaky report if something actually happens…
Especially with a simultaneous quarterly stocks report! Quarterly stocks are expected to raise compared to same time last year: markets expects +9.45% on corn, +8.10% on soybeans and +17.75% on wheat. This is interesting to compare with production and demand (domestic total consumption and exports) increase: respectively +11.94% and +6.94% for corn, +11.07% and +4.17% on soybeans and +12.01% and +16.17% on wheat. In other words, and the most obvious is wheat, stock are growing a bit faster than production offset by demand would suggest. And on top of this, we’ll have a better view on winter wheat planting. But they are now widely expected to be quite lower than last year, market sees planting down -5.53% from last crop.
Night session is pretty quiet, the calm before the storm? Generally softer approaching the tea break of US markets. Soybeans are ticking down, Corn -2 cents, Chicago Wheat -1.75 cent, Kansas -3.50 cents, Minneapolis +3.50 cents, MATIF -€0.50 and CME EU -€0.50. Maybe more fun to come, quite often when nothing is expected, it can lead to a volatile report but there will be nothing good to see from the stocks reports and this can trigger a bit more pressure.
In France, France Agrimer increased by +72kT its ending stocks for barley, driven by less exports. Interestingly, socks are up from one season to another, if production is down -22.4%, it’s been absorbed by a drastic cut of exports (-33.9%) and stocks are therefore up +55.16% to 1.986MT. Corn stocks are cut by -181kT and are only down -7.2% from one season to another as the -11.2% production year on year has been partially absorbed by lower internal use (-13.2%, mainly on the feed) and lower exports (-18.9%). No major change on soft wheat, stocks are revised down -48kT to 2.635MT, -21.04% year on year. Starch use was decreased by -50kT, but exports outside the EU were raised by 100kT to 4.8MT (total exports are set to be 11.045MT). No major change on durum, stocks are revised down -9kT to 184kT, up +11.52% year on year.
Japan bought 162,777T of food quality wheat from US and Canada. South Korea’s MFG issued a tender to buy 70,000T of corn and rejected all the offers as they were seen as too high.
In December, the FAO world food price was stable, falling for the 5th year in a row with -1.5% in 2016.
Crude Oil Inventories were up much more than expected, +4.1M barrels (+0.9M barrels expected). On the Ethanol side, if production was up +6,000 barrels per day, overall demand was lower as stocks grew faster: +1.33M barrels, back above 20M barrels! Oil Prices were unimpressed, despite those bearish stats, scepticism about OPEC and non-OPEC deal (especially on Iraq and Iran side as well as Russia), prospect of US increasing Shale Gas production, only the market reaction matters. NYMEX Crude rebounded and is currently trading above $52.75 with ICE Brent almost to the cent having still a $3 premium.
Lower US dollar, EURUSD is back above 1.0675 and GBPUSD is trading around 1.2300. A bit of uncertainty is coming back in the headlines as president elect Donald Trump is about to get sworn in in a very controversial atmosphere. US Unemployment Claims are expected higher to 266k.