Last week in Chicago, Soybeans were up +3.73%, Corn +4.10% and Wheat +3.82%. Wheat in Europe was up +4.18% on MATIF (in euro) and +3.54% on LIFFE (in British ponds). So one could expect, or hope a breather. But Monday was very strong, especially in Europe as MATIF posted a gain of +€1.75 and London Feed +£3.75. It is still hot and dry across Europe, Scandinavia and Black Sea, the yield are suffering. It could mean that 145MT and 67MT productions for EU and Black Sea could be at risk. And this morning, UkrAgroConsult cut its estimates of crop in Ukraine by -0.8MT on wheat (to 24.7MT while USDA WASDE is at 25.5MT)… So difficult to see any balance sheet bearishness coming from nowhere at the last minute… The market is also dragged up by the stampede on malting barley: big question as heat and drought will increase the yield and increase the downgrade to feed, will there be enough low nitrogen barley for everyone? In England, as winter barley harvest is starting, most probably not. The issue is the export surplus of Scandinavia is gone, Scotland is just fairly balanced,… It’s actually hard to find malting barley in Europe, and quite a lot being basis wheat, it contributes to fuel the wheat market.

 

EU Crop Monitor MARS bulletin was released and showed indeed a pretty awful picture: UK and Ireland, rain deficit, temperature accumulation surplus; Belgium, Netherlands, Germany, Poland Sweden, drought; north east of the black sea, drought; Baltic states, rain deficit… Only France is looking not too bad (a bit of rain surplus in south west) but considering the fact is not flagged put in parallel with the fact it the wheat crop will be around 32MT instead of 38MT expected earlier during the season, this is quite worrying for countries that are flagged! Wheat yield will be -2.4% below the 5 year average (-3.5% from last year) and barley yield will be -3.3% below the 5 year average (-4.8% from last year) according to the EU Environment Agency.

 

On the other side, US markets were quite calm yesterday in comparison as Soybeans moved down -2.00 cents, Corn up +2.00 cents and Wheat down -2.25 cents in Chicago, +2.25 cents in Kansas and +7.00 cents in Minneapolis.

 

In Chicago, funds sold 6,000 Wheat and 3,000 Soybeans and bought 9,000 lots of Corn. It will be a tight call next CFTC COT for Wheat, long or short? From Wednesday to yesterday, funds have bought a net 5,500 lots. Today’s session will be the key! Also, it would be interesting to see funds moving back to short considering the crop situation in Europe…

 

Night session is pretty quiet in Chicago, Soybeans are down -3.25 cents, Corn -3.25 cents and Wheat -2.75 cents. In Europe, markets have opened a tad lower, a well deserve breather but how long will it last? MATIF Wheat is down -€1.00 but London Feed down just -£0.50.

 

In the US the crops are in a fairly good state, especially compared to last year! Winter wheat is 80% harvested. Spring wheat is rated 79% G/E (33% last year! But -3% week on week…), 4% P/VP (40% last year! Unchanged week on week). Corn is 72% GE (unchanged week on week, 62% last year) an 9% P/VP (unchanged week on week, 12% last year). Finally, soybeans are 70% G/E (+1% from last week, 57% last year) and 8% P/VP (unchanged from last week, 14% last season).

 

Egypt is seeking wheat. It will be interesting to see what prices are traders are offering to GASC! Iraq is still in the market for 50,000T of wheat from Australia, US or Canada. US Export Inspections in the US are running behind last year for wheat, with only 397.9kT last week, the aggregated volume since the start of the marketing year is 2.62MT, -41% behind last year. However, if Europe is getting hit furthermore, US wheat could find a new export competitiveness. As the last month of the marketing year is approaching, with respectively 1,313.2kT and 722.0kT last week, corn and soybeans have totalised so far this year 49.8MT and 51.7MT… With 6 weeks to go, corn will need to be at 1.12MT per week and soybeans at 637kT per week to reach the target. This is doable but not a lot of margin for mistake… Or trade war!

 

No major macro stats today. EU Flash Manufacturing PMI was better than expectations to 55.1 while EU Flash Service PMI was not as good as expected to 54.4. Same data expected this afternoon in the US at respectively 55.1 and 56.5. EURUSD is trading at 1.1680, GBPUSD at 1.3100 and GBPEUR cross-rate around 1.1215.

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