Friday was a USDA WASDE day but there was a few bits and bobs as a build-up.
Stratégie Grains cut its European soft wheat harvest by -4.69MT to 127.68MT, -14.15MT year on year. This month cut is driven by German, the soft wheat crop is cut by -2.53MT to 20.24MT. Denmark is cut by -0.33MT, the UK by -0.36MT, Sweden by -0.37MT, Poland by -0.56MT. From one year to another, Germany is set to suffer the most (-4.07MT), followed by France (-3MT), Denmark (-2.35MT), Poland (-1.92MT) and Sweden (-1.37MT). Spain is the only one expected do significantly better (+2.57MT). In other words, a pretty bad year!
On the other side, barley is on face value not too bad. If this month the production estimate was cut by -2.51MT to 57.13MT it is only a tad lower than last year (58.37MT). Moreover, the spring barley crop will increase by +1.97MT, so the hit is on the winter barley. The issue remains the quality, question is how much will be downgraded to feed. UK spring barley crop is pegged at 4.09MT (-0.23MT from last year), 2.72MT in France (-0.28MT from last year), 2.12MT in Germany (+0.28MT from last year), 2.49MT in Poland (-0.41MT from last year), 1.31MT in Sweden (-0.2MT from last year) and 2.72MT in Denmark (-0.43MT from last year). So there will be spring barley from brewing and distilling, it is indeed a question of how much will be downgraded to feed (20%/30%?) and who (and when) is going to blink first to lower the spec.
Also, Ikar said the Russian wheat crop would be 70.1MT (USDA WASDE was pegged at 67MT in July) and a total grain harvest of 111.8MT (-1MT versus previous estimates). Also, Ukrainian wheat crop is pegged at 24MT (USDA WASDE was pegged at 25.5MT in July).
So, with no further ado, let’s talk about the big white elephant in the room: USDA WASDE.
Wheat Old Crop: nothing dramatic, EU beginning stocks adjusted by -0.18MT, Canadian use upped by +0.30MT. Ending stocks therefore down -0.43MT. It’s still half a million ton handicap for the new crop…
Wheat New Crop: it was expected with fear… And well, it went better than expected. If EU crop was slashed -7.50MT to 137.5MT, it was offset by a better Pakistan crop (+0.80MT to 26.3MT) and a raise of both Russian and Kazakh crops (by respectively +1MT to 68MT and +0.50MT to 14.50MT). World production is now pegged to 729.63, -6.63MT from last month, -28.39MT from one year to another. But when there’s less and when it’s more expensive, you consume less in theory. Indeed, -5.13MT of world use, including -3MT in EU (mainly feed) and -1.25MT from FSU. Therefore, damage limitation on world ending stocks, cut by -1.92MT to 258.96MT, 31.82% of the use, 35.49% of the production. If these are comfortable ratios, excluding China gives another picture… Only 122.84MT of stock outside China, only 20.42% of the world production excluding China, and 19.76% of the world use excluding China. Chinses stock is indeed difficult to verify and not really usable for anything on international market, some of it is probably fermenting already and they are struggling to get rid of it on their recurrent auction. To be fair, storage conditions have drastically improved in 20 years. To be noted, US exports are increased by +1.36MT to 27.9MT.
Corn Old Crop: nothing much but a good news, lower use (-1.87MT) is giving a little help to the ending stocks (+1.6MT) to start the new crop with a little advantage.
Corn New Crop: pretty good picture here! US production is bumped up by +9.05MT to 370.51MT! Bahm! A nice yield bump, +4.4 bushels per acre from last month, to 178.4 bushels per acre, +1.8 bushels per acre from last season, +3.8 bushels per acre from two seasons ago. US corn crop is now only down -0.45MT year on year. Logic to see US feed raised by +2.54MT and exports by +3.17MT (to 56.69MT). Otherwise, Argentinian crop unchanged to 41MT, Brazil down -1.5MT to 94.5MT, South Africa down -0.5MT to 13.5MT, EU down -1.7MT to 59.8MT, FSU up +1.2MT to 47.7MT (making a 1,061.05MT world crop, +6.75MT from last month). World use being up by +4.81MT to 1,098.89MT, world ending stocks are up +3.53MT to 155,49MT, 14.15% of the use, 14.65% of the production. It will be still a strange season as with a production up +27.75MT, ending stocks will be down -37.84MT, but some switch from wheat on the use is necessary.
Soybeans Old Crop: use is cut by -1.86MT, world ending stocks are lowered by -0.41MT. Cannot really understand the maths there but hey, you’re the boss Sonny! (Sonny Perdue, US Secretary of Agriculture).
Soybeans New Crop: another ‘bahm’ type good news on the US front as the crop is raised by +7.51MT to 124.81MT, US is back being the first producer of corn and soybeans! Woo hoo! Yield is raised by +3.1 bushels per acre from July to 51.6 bushels per acre, +2.5 bushels per acre from last season and just shy of the 52.0 bushels per acre of the previous season. Here again, US use are logically increased (+0.43MT to 59.76MT) as well as exports (+0.54MT to 56.06MT). No major change on the balance sheet otherwise, Argentina and Brazil production are unchanged to respectively 57MT and 120.5MT). World ending stocks are up +7.67MT to 105.94MT, the world is very well supplied, as this is 29.96% of the use and 28.86% of the production. This season looks good indeed, a production up +30.40MT year on year and stocks up +10.33MT year on year. It cannot be bad everywhere!
Market reactions was bearish all over the place. Corn and Soybeans quite logically but also on Wheat as market was fearing the worse and I was actually ‘less worse’ and tough not to follow Corn and Soybeans, especially considering the extent! Soybeans were the star of the day, down -41.75 cents, Corn resisted but still printed double digit losses with -11.50 cents. Wheat ended down -17.75 cents in Chicago, -18.75 cents in Kansas and -21.00 cents in Minneapolis. As usual European markets had only half an hour to play with and Europe is not in the best shape but MATIF Wheat ended down -0.25 cent and London Feed -£0.15. In Chicago, funds sold 12,000 Wheat, 35,000 Corn and 27,000 Soybeans.
Friday’s move was basically the weekly move on US markets. Soybeans ended the week down -4.57%, SoyMeal -2.69% and SoyOil -1.47%. Corn was down -3.25% in Chicago and -3.51% in US dollar on MATIF (EURUSD was down -1.36%). Wheat moved down -1.71% in Chicago, -1.32% in Kansas, -0.65% in Minneapolis, -0.89% in US dollar on MATIF (+0.47% in euro) and -1.37% in US dollar for London Feed (+0.47% in British Pounds as GBPUSD was down -1.83%).
On the week ending Tuesday, CFTC COT showed fund buying: 11,655 lots of Wheat (increasing their long to 64,587 lots), 22,493 Corn (decreasing their Short to 29,708 lots) and 2,388 Soybeans (decreasing their short to 56,283 lots). Reuters estimates was suggesting funds were buyer of 13,000 Wheat, 8,500 Corn and seller of 8,000 Soybeans. From Wednesday to Friday, funds were seller of 13,000 Wheat, 36,500 Corn and 28,000 Soybeans.
Monday morning hungover? Indeed, market is not giving any sign of rebound just yet as the dip is pursuing. Soybeans are down -8.00 cents, Corn down -3.00 cents and Wheat -6.75 cents in Chicago. European markets are feeling the pain: USDA WASDE globally bearish, correlation with US markets,… MATIF has opened down -€2.75 and London Feed -£3.75.
Jordan is in the market for 120,000T of what and 120,000T of barley. Good luck! Considering the market, will we see GASC coming in? China sold around 1.5MT of its ageing stock of wheat, from 2012 and 2013 crops.
No major macro stats to be published today, summer holidays moods! Tomorrow, Chinese Industrial Production is expected at +6.3%, German Preliminary quarterly GDP is expected at +0.4%, UK Average Earnings Index expected to +2.5%. So pretty calm start of the week for the currencies with EURUSD trading a tad down above 1.1375, GBPUSD flattish around 1.2765 and GBPEUR cross rate trading around 1.1215.