Friday was all about the USDA quarterly stocks and prospective plantings, so let’s jump straight to it with no further ado.


Let’s start with the stocks. Wheat, corn and soybean stocks were above the average of estimations: while it’s marginally above for corn and wheat, the real significant bearish (all other things equal obviously) data is for soybeans. Wheat stocks as of the 1st of March were 45.04MT, down only -11.38MT from 3 month before. If we do a very linear extrapolation, at the end of the season, there will be 29.87MT of stocks, -860kT below the current USDA WASDE. But the consumption and exports are not linear by any means and as a matter of fact export inspections are far from showing a positive momentum. From March last year, stocks are up +7.70MT, this is +20.63%. If we assume this will be the rate of increase of the ending stocks from one season to another, it suggests ending stocks at 32.02MT, +1.29MT above the current USDA WASDE. So really, it is tough to see a bullishness from this figure and the end of the season is going to be tricky for wheat. But acreages came to the rescue. Corn stocks were also slightly above the estimations to 218.86MT, in other words, at the half of the marketing year mark, 56.88% of the corn was still in stocks, while half of the export and domestic consumption would (linearly) account for 186.69MT, leaving in theory 199.10MT in stocks mid-season (-19.76MT less). So the second half of the season (well now barely 5 months) will have to be pacey and export inspections will be under scrutiny for sure. But the last 3 months, stocks went down -95.73MT, and the pace would only need to be -79.97MT per quarter to reach the USDA ending stocks target at the end of the season. Finally, corn stocks are +10.15% higher than same time last year while the ending stocks progression at the end of the season is seen at +33.57%. So not really bearish as long as the end of seasonal positive momentum is keeping up its promises. So to be fair, nothing much on wheat and corn and the real bearish data is soybeans. And this is interesting to put in perspective with acreages, bearish acreage and bearish stocks, is it really worth switching corn to soybeans? Anyway, stocks were +3.27% above expectations, to 47.22MT. This is 40.29% of the crop after 50% of the year, confirming the first half of the season has been really good. Stocks decreased by -31.57MT in 3 months, this is a solid demand of 10.52MT per month. But this for sure won’t last as South-American soybeans are flooding the market (and it could be seen in the export inspections). Stocks are +13.32% above last year while at the end of the season, they will expected to be up +121.31%, so really, soybeans are still to show a significant slowdown and one can be really torn about the fact USDA decreased exports by -0.68MT on the previous WASDE but Chinese demand will be the key for sure.


On the plantings. If we look at the big picture, adding plantings of corn, soybeans, all wheat, cotton, sorghum, barley, oats and rice, those plantings will be 251.4M acres, -1.98M acres from last season’s final numbers. Considering the financial situation of farmers this is odd, there must be some kind of other switches to more niche crops or some potential to be revised up at some point… Especially considering this is fully explained by lower acreage of aggregated wheat, corn and soybeans as they will totalise 225.53M acres, down -2.05M acres from last season. No big surprise on corn and wheat, the USDA outlook forum numbers were respectively 90M acres and 46M acres, actual numbers were 89.996M acres and 46.059M acres. Market was expecting a little surprise on both but it never came, so this was a relative disappointment explaining the market reaction. So we’re heading towards a -4.26% reduction of corn plantings (-16.41MT impact on the current crop yield) and -8.16% on wheat (-5.13MT potential). So clearly market didn’t like it. But on the world balance sheet perspective, another good year in FSU and a rebound of production in Europe and this might not be a such big deal. And soybeans might just be the collateral damage as it was the surprise of the day overall. Bigger stocks than expected but also bigger plantings, and with price down -13.07% from the early January highs, switching from corn to soybeans is now a much less obvious farming arbitrage. Indeed, market was expecting on average 88.214M acres, just marginally higher than the 88M acres of the USDA Outlook Forum. Actual was 89.482M acres, +1.68% above the Outlook Forum, +1.44% above estimates, and +7.25% above last year, at the current yield this would be +8.50MT more than last year. If there is no major climate incident, next season will very interesting as far as international flows and balance sheets are concerned.


Market reaction was harsh on Soybeans: -17 cents on the close. Wheat and Corn were disappointed about the lack of surprise and went up respectively +6.75 cents and +5.50 cents. However, this might just be a bit of risk off as data was largely anticipated. Still some mess on the wheat spreads as Kansas was only up +3.25 cents and Minneapolis down -9.25 cents. Kansas closed -6 cents lower than Chicago, Minneapolis closed +107.75 cents above Chicago and +113.75 cents above Kansas. Not much activity on the other side of the pond, despite pressure on EURUSD, MATIF failed to show similar strength and closed only up +€0.75, CME EU was even down -€0.75. Funds sold 14,000 Soybeans, bought 24,000 Corn and 7,000 Wheat in Chicago according to Reuters.


But the accuracy of the estimated funds activity is still a bit dodgy. Last CFTC’s COT (a week ending on Tuesday, missing the USDA fun), showed funds heavily sold, again, and more than estimated, Wheat, Corn and Soybeans. Reuters estimated funds were seller of 2,000 Wheat. They actually sold 15,145 lots, increasing their short position to 136,150 lots. Interesting fact is that the market was actually up +0.53% on the COT’s week. The estimates on Corn was seller of 22,000 lots, actually was seller of 73,821 lots, increasing the short position to 155,512 lots. Finally, the long n Soybeans has vanished: It was estimated funds sold 20,500 lots over the week, they actually sold 27,753 lots, reducing their long position to 37,916 lots. So the aggregated short as of Tuesday was 253,746 lots… This is likely to be slightly reduced as of Friday as funds were expected to be buyer of 4,000 Wheat, 21,500 Corn but seller of 22,000 lots of Soybeans from Wednesday to Friday.


This ends an eventful week! The main move was on the soy complex unsurprisingly: Soybeans were down -3.05% over the week, SoyMeal -3.08% and SOyOil -1.40%. ICE Canola resisted well, +0.89% in US dollar while MATIF Rapeseed did not: -3.34% in US dollar. Corn ended up +2.25% but down -1.23% in US dollar on the MATIF (the issue is quite different there). Wheat markets were messy, Chicago up +0.41% but Kansas down -1.75%, Minneapolis down -0.28%, MATIF down -2.85% in US dollar, CME EU down -2.11% in US dollar and LIFFE Feed +0.17% in US dollar. Interesting to be noted, CBOT Wheat is $13.31 above CBOT Corn and Kansas Wheat is $11.11 above CBOT Corn. But on the MATIF, Wheat is -$8.25 below Corn. There is different problematic here and Corn is non-GMO, but this is a very low level of the spread and animal feed makers have opportunity to make some arbitrage in their recipe.


The week is starting on a higher note. Soybeans ended the night session up +2.75 cents, Corn +3.50 cents and What +4.25 cents in Chicago, +3.25 cents in Kansas and -0.50 cent in Minneapolis. MATIF is up +€1.00 and CME EU flat, on K7 but the curve is now on a good contango as U7 is up +€4.50 and Z7 +€4.75.


Oil is starting the week on a higher note, after retracing significantly since 4 sessions and closing Thursday and Friday above $50 on the NYMEX. There’s a technical component for sure but now also the expectations that a new move from OPEC will be needed. NYMEX Crude is trading around $50.75 and ICE Brent with a $2.9 premium. Freight is starting the week on a lower note as Baltic Dry Index is down -15 to 1,282. This is due to softer Capesize Index (-3.04%) but partially offset by Panamax Index (+0.36%).


First significant macro stat of the week was for Spain, Manufacturing PMI missed expectations by -0.7 to 53.9. UK also missed it by -0.9 to 54.2. French, Germany and European Union were spot on the expectations to respectively 53.3, 58.3 and 56.2 while Switzerland and Italia were better by respectively +0.4 and +0.5, respectively 58.6 and 55.7. European Union PPI was flat while +0.2% was expected and the unemployment rate confirmed to be 9.5%. Also Canadian PMI later today, US PMI (53.5 expected) and the main stat of the day really will be the ISM Manufacturing PMI, expected at 57.2. EURUSD is starting the week a tad higher, trading between 1.0650 and 1.0675 while GBPUSD is back down, just below 1.25.

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