Market did a nice leg-splits! Soybeans ended the Friday’s session +10.50 cents and Wheat -1.75 cents in Chicago (-14.00 cents in Kansas, -16.25 cents in Minneapolis). So one can assume there was some significant move on the USDA WASDE, we will dig into that… Corn was struggling in the middle and just ended down a single tick. MATIF Wheat followed with -€1.75 and London Feed -£0.40. In Chicago, funds sold 13,000 Corn, 10,500 Wheat and bought 11,000 Soybeans.

 

So, it was the day of the month the fundamentals matter. Did they?

Wheat old crop ending stocks were cut by -2.61MT as the Australian production was aligned to the Australian Bureau of Statistics: final number 30.36MT, -3.14MT from previous WASDE. So, the new crop started with a clear and unexpected handicap. But the new crop world ending stocks managed to make it up for it, being cut by only -0.40MT to 268.02MT (36.14% of the use, 35.41% of the production). World production is now pegged to 757.01MT (+1.80MT, mainly due to the ever growing Russian crop, +2.00MT to 85.00MT, +0.80MT in Pakistan to 26.5MT offset by EU -0.90MT to 151.60MT). To be noted, the Australian crop is still pegged to 21.5MT. Global use is cut by -0.42MT, including -0.66MT in the US. The US balance sheet is heavier (ending stocks +0.79MT) due to the aforementioned lower use and higher imports (+0.14MT to 4.22MT) but there was no move on exports, still pegged at a challenging (but still reachable) 26.54MT. So, tough to say it’s significantly bearish and market estimated the world ending stock spot on so no surprise, however, this is another reminder that there is no lack of wheat by any means, anywhere. On top of this, winter wheat plantings came higher than expected, marginally down from last year (-0.27%, market was expecting -4.25% on average) to 32.608M acres. Also, the US Quarterly Stocks were higher than expected, to 51.00MT, topping the estimates by something like +0.75MT.

Corn new crop balance sheet started with an advantage as a little help was provided by the old crop as a combination of lower use (-0.92MT) and higher production (+0.44MT) helped the old crop ending stocks to be bumped up by +1.41MT. On the new crop, South America wasn’t touched, Argentina is still pegged at 42MT and Brazil at 95MT.  South Asian production was cut by -0.57MT and FSU was cut by -0.50MT, offset with the US now pegged at 370.96MT (+0.67MT) as yield was raised again to 176.6 bushels per acre (+1.2 bushel per acre compared to last month!). So overall, the world production is taking a marginal hit of -0.19MT and is now expected to be 1,044.56MT. Lower use (-1.28MT worldwide, including -0.38MT in the US) helped the ending stocks to be raised, +2.49MT to 206.57MT, 19.36% of the use, 19.78% of the production. Although the market move is mostly neutral, this is a slightly more bearish in theory than wheat, especially considering US exports were not moved, still pegged to 48.90MT. And market was expecting a cut of world ending stocks (-1.1MT), not a raise of +2.49MT! US Quarterly stocks were more or less as expected to 315.74MT, +1.12MT from last year. This is reinforcing the concern that US, with a -13.82MT crop year on year is struggling to get it out, US exports cut are most certainly on the agenda for the next WASDE if inspections aren’t getting better quickly.

On beans, very little change on the old crop, it isn’t worth wasting any time on the details, -0.13MT ending stocks. New crop, in the US, it’s pretty convenient: soybean yield are cut by -0.4 bushel per acre, to 49.1 bushels per acre, cutting the production by -0.92MT to 119.52MT. This enable the cut in the exports (finally throwing the towel) to be less painful for the US balance sheet: exports were cut by -1.77MT to 58.79MT, US ending stocks were then raised by +0.67MT (as crush was bumped up by +0.27MT). Argentinian crop was cut by -1.00MT to 56MT and Brazilian crop raised by +2MT to 110MT. Overall, world production marginally changed (+0.10MT to 348.57MT) and world ending stocks increased by +0.25MT to 98.57MT as overall use decreased by -0.25MT. Market was expecting a more bearish picture (+0.8MT on the ending stocks were expected) so a lack of bearishness seems to be the new bullish! Well, considering the level of short in the market, this is quite understandable. Also, the US Quarterly Stocks were a tad lower than expected to 86.57MT which might have help the rebound.

It gives an end to a bearish week overall (the first full week of the year, everyone is back from holidays). ICE Canola was down -1.43% in US dollar (USDCAD was up +0.39% on the week) and MATIF Rapeseed -0.25% in US dollar (EURUSD was up +1.31%). The soy complex was down despite the Friday’s recovery with -1.06% for Soybeans, -1.52% for SoyMeal and -1.87% for SoyOil. Corn was down -1.42% in Chicago and -1.08% on MATIF in US dollar. On Wheat, -2.3% in Chicago, -2.57% in Kansas, -2.23% in Minneapolis, -1.05% on MATIF in US dollar and +0.81% for London Feed in US dollar (mind you, GBPUSD moved up +1.17%, so market was down -0.35% in British Pounds). Bullish week for oil with NYMEX Crude up +4.65% and ICE Brent +3.33%.

 

CFTC COT showed an expected increase in the overall short as of Tuesday, more than expected, apart from Wheat: funds were expected to have sold 500 lots over the week, they actually sold 812 lots, increasing their short position to 128,990 lots. They however sold more Corn and Soybeans than expected (respectively expetdd to 11,500 lots and 4,500 lots). They sold 23,940 lots of Corn and 7,329 lots of Soybeans, increasing their respective short to 222,516 lots and 92,835 lots. A cumulative short of 444,341 lots. This is huge… A violent short covering could hurt, but they need a catalyst and so far… It’s not coming! From Wednesday to Friday, the overall shorting pattern is expected to continue as funds sold 6,000 Wheat, 16,000 Corn and 9,000 Soybeans. Also to be noted in the COT, funds increase their long bet on Oil and Precious Metals.

 

Night session is closed on US holiday (Martin Luther King Day) and European market started on a morose note as MATIF Wheat is down -€1.25 and London Feed -£0.50.

 

Saudi bought much more barley than expected, 1,002kT, lowest CNF west ports was $212.42, lowest CNF east ports was $216.47. Jordan is back tendering for 20,000T of wheat bran, no purchase were made in the previous tender.

 

The US dollar weakness is still on: EURUSD is now trading above 1.2250, GBPUSD above 1.3775 while GBPEUR cross rate is struggling around 1.1225. No significant macro data expected today. Tomorrow, UK CPI is expected at 3%.

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