The day the fundamentals matters. Nothing else matters…


This one was supposed to be an eventless report as all news were supposed to be integrated in the markets already, if not a bearish one on over dramatizing the weather patterns. But USDA WASDE always give us some entertainment! It’s why we like it so much!


On wheat, the old crop was helped by Australia beginning stocks raised by +1.35MT. Hence world ending stocks were raised by +1.91MT, giving a small advantage to new crop (well, offsetting the drama). There was an adjustment (probably the last one) to US wheat exports, decreased by -0.28MT to 24.49MT. Export inspections were 23.85MT, this means 0.64MT of unreported exports (cross border, Canadian port, small loads,…) which makes sense historically. On the new crop, more or less a status quo was expected or a little downgrade, especially in Russia. It was actually more than a little bit as Russian production was cut by -3.5MT to 68.5MT, EU production was also cut by -1MT to 149.4MT. A bit of offset here and there (US +0.17MT to 79.74MT, India +2MT to 97MT) but world production is cut by -3.07MT to 744.69MT. The strange thing about this report is that world feed us is cut by -2.92MT (with -2MT from Russia and -1MT from EU), in other words, with higher beginning stocks, lower feed use, despite a lower production, world ending stocks are increased by +1.83MT to 266.16MT! Stock ratios are still very comfortable with 35.74% of the production and 34.45% of the stock. Market cannot help to react to production regardless of any other data but also, and it’ a fair point, looking at the world excluding China. With China, world production from one year to another is down -13.53MT and stocks are down -6.21MT, without China, production is down -12.76MT (no real impact) but stocks are down -18.01MT. One sure thing is that EU will be pleased to regain some market shares as Russian exports will fall by -5.50MT from one year to another (they are pegged to 35MT, -1.50MT compared to previous WASDE): but could Russia be the surprise as USDA has not been massively accurate in predicting the crops? Fair to say that it has been very dry, but no comparison with 2010. Last thing, US new crop exports are raised by +0.69MT to 25.86MT.


On corn, old crop took a hit as Brazil production was cut by -2MT to 85MT, hence, world ending stocks are cut by -2.16MT. US exports are raised by +1.9MT. The new crop is obviously starting with a disadvantage then. And the additional main hit is coming again from FSU with total production cut by -4MT to 49.5MT, world crop is now pegged to 1,052.42MT (-3.65MT compared to previous WASDE). This is offset again by a cut of feed usage in FSU (-1.9MT), South East Asia helped a bit as well (-0.5MT) and world ending stocks are only down -4.46MT to 154.69MT (14.70% of the stock, 14.19% of the production). US yield is still pegged at 174 bushels per acre, no change of production (356.63MT).


On soybeans, no major move on the old crop Argentine ‘gave’ 2MT of production to Brazil and they are now pegged respectively at 37MT and 119MT. Old crop ending stocks are raised by +0.33MT (beginning stocks of Brazil raised by +0.99MT, world use raised by +0.15MT, US crush is raised by +0.68MT to 54.84MT). On the new crop, virtually nothing production is up in Brazil by +1MT to 118MT. World ending stocks are raised by +0.32MT to 87.02MT, 24.50% of the production, 24.33% of the use.


Fair to say that the most neutral part of the report was on soybeans. Market took it this way as Soybeans only ended up a tick. But Wheat and Corn reacted in a binary manner to the red numbers and the close was very strong: Corn ended up +10.25 cents, Wheat +20.00 cents in Chicago, +18.75 cents in Kansas and +2.75 cents in Minneapolis (the premium is collapsing!). On the other side of the Pond, MATIF was up +€2.50 but had only half an hour of market to play with. London Feed ended up +£1.40.


Night session feels like the day after the night before… Was that too much? If so by how much? Night session is correcting. Soybeans are down -9.25 cents, Corn down by -2.25 cents and Wheat down by -7.75 cents in Chicago, -7.00 cents in Kansas and -2.75 cents in Minneapolis. European markets are also correcting with MATIF down -€2.00 and London Feed by -£0.70.


Funds bought 26,000 Corn, 15,000 Wheat and were even on Soybeans. As it was the CFTC COT cut-off, market will expect funds to have bought 18,500 lots of wheat over the week and sold 35,000 lots of Corn and 43,500 lots of Soybeans.


Jordan made no purchase on the tender to buy 120,000T of wheat. They only received 2 offers and price was said to be too expensive. But yesterday GASC bought 420,000T of wheat, 300,000T from Russia and 120,000T from Romania after tough negotiations where suppliers had to bring their cost down. GASC did not provide the details but best CNF were ranging from $224 to $226.


The other big news was the North Korea and US summit. Nothing much concrete but it is a clear sign North Korea is keen on opening to the world but everything is still possible. However, the tone of speech is now much nicer between the two parties. Currencies did not give a toss though. Yesterday US CPI and Core CPI were both +0.2%, no major surprises. UK average earnings were +2.5% with an unemployment rate of 4.2%. Today, UK CPI was +2.4%: will this lower the appetite of the BoE to raise the interest rates? With Brexit approaching and the continuous shambles in the Commons, it could indeed. EURUSD is trading up above 1.1760, while GBPUSD is down around 1.335

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