Another red day across the board yesterday, with funds on the sell side for 9,000 Corn, 4,000 Soybeans and 2,500 Wheat, increasing the overall short, selling like if there was no tomorrow, selling like if there was no Friday and USDA stock and planting reports. Soybeans closed down -4.25 cents, Corn down -0.50 cent, Wheat down -4 cents in Chicago with Kansas premium getting hammered once again as Kansas closed down -6.75 cents bringing the premium back to a mere +0.50 cents. Minneapolis closed down -2.75 cents. On the other side of the pond, MATIF closed down -€1.25 and CME EU -€1.00.
The rains are materializing and market expects the drought situation to improve over the next couple of weeks. However, wheat is suffering in Oklahoma (G/E rated are down -3% to 37%), it’s stable in Texas (34%) and Kansas (38%). So not alarming but rain needs to actually show up and re-establish soil moisture on a long term basis. Conditions are dry enough to see corn planting improving in the southern states, 45% of Texas corn is planted, 80% in Louisiana, but they are obviously far from being determining states.
US Export Inspections were similar to the now established pattern: weaker momentum on soybeans leaving more room for corn while wheat is still struggling. Soybeans inspections were the lowest since September 2016 indeed with 555kT. This stays within the acceptable seasonal pace as 84% of the target is completed, this is to compare with 79% last year and 81% on the long term average. So it’s still technically running on basis to exceed the target as the end of the season as only 382.6kT per week on average need to be exported until the end of the season (23 weeks). Bon on the other side, the fact USDA reduced exports on the last WASDE can be seen as ‘aggressively cautious’ and the fact Brazilian exports are running ahead of their average will probably show that USDA was right in expecting a significant switch to south American sourcing, obviously especially from China. Corn shipments are picking up and reached 1,556.1kT. Still there’s a lot to be done (on average 1,072.8kT for the next 23 weeks) but the seasonal advance is comfortable, especially looking at last year. Indeed, 56% of the target is completed while it was only 38% last year at the same period. If it was an outlier year (proving however that the second half of the season can be very pacey), it is still above the long term average (52%). So, so far, so good. But wheat might have a funkier end of season and US farmers are probably happy that the wheat acreage are going to be lower in the US, hopefully compensating the lower demand by higher cash basis, but nothing is more sure by any means! And with only 541.8kT (6 week low), the target is 76% completed with only 10 weeks to go. Last year was 78%, the long term average 79%. In other words, it’s a 837kT delay, delaying on the same average pace would bring this to 1.03MT. However, one has to bear in mind that last season the final number was more or less -0.9MT lower than actual reported exports: almost a million ton of wheat is indeed usually not inspected (free quota, exports from Canadian port,…) and that would mean we are actually still spot on. Wheat needs 664.1kT per week to match the USDA target but if we assume 1MT total won’t be inspected, this brings the need down to 564.1kT which is still doable.
Market is now waiting for Friday… Will there be a surprise? Market on average is expecting a tad more than numbers USDA showed during the Outlook Forum (it was 90M acres of corn, 88M acres of Soybeans and 46M acres of wheat). Indeed, average of expectations are 90.969M acres for corn (-3.23% from last year), 88.214M acres for soybeans (+5.73% from last year) and 46.139M for wheat (-8.01% from last year). This would mean a global diminution of -2.269M acres. Will farmer, considering their situation, leave unplanted acres? Adding barley, sorghum and oats make it worse by -0.354M acres. Rice also with -0.307M acres. An offset is coming from cotton (+1.334M acres) but it is tough to synergise as only 18% (very roughly) of the cotton is going to food (cotton oil) and feed (cottonseed, cottonseed meal). So bottom line, there is still some potential acres to fit and corn could just be the surprise… There will be a quarterly stock release. Obviously stocks are expected to be lower than in the previous quarter, but they are expected to be higher than last year, giving a reminder that the world is well supplied, US are well supplied and that would put into perspective the (if there’s one) diminution of acreage. Wheat stocks are seen at 1.627b bushels (+18.59% from last year), corn at 8.534b bushels (+9.10% from last year) and soybeans at 1.684b bushels (+9.99%). No big surprise expected there, just back to reality as it will be a day fundamentals may matter.
The first guesstimate of soft wheat yield for the new crop has been thrown by MARS: 6.02T/Ha. This would be up +7.69% from the bad last year and extrapolating the yield increase to the whole wheat crop would bring back +11.13MT in the balance sheet, back to a more normal level of above 155MT. But this is very trivial and very early to speculate. Rain makes grains… In spring! And we’re only a week in. Patience.
Night session was on the upside, a well-deserved technical rebound. Soybeans up +3.50 cents, Corn +2.50 cents, Wheat +2.75 cents (Kansas is +1.50 cent, Minneapolis +1 cent). MATIF and CME EU are both up +€1.75.
Oil is slightly up market will wait for next US Crude Oil Inventories or OPEC statement to make another move and is currently rather quiet, NYMEX Crude trading around $48.25 and ICE Brent is trading at a $3 premium. On freight, same story again, market is on fire, Baltic Dry Index is +51 (+3.98%) today at 1,333 driven by both Capesize Index and Panamax Index, both up, respectively +5.53% and 4.23%.
Tomorrow is the day everyone is awaiting on the currency: Article 50 triggering and 2 years of negotiation. There is no visibility on what’s going to happen and it rather uncertain and blurry. GBPUSD is trading above 1.2550 and EURUSD above 1.0860. The only stat today is the CB Consumer Confidence is expected at 113.9.