Last week, ICE Canola moved up +3.02% in US dollar, CBOT Soybeans moved up +4.09%, CBOT Corn moved up +1.14% and CBOT Wheat moved down -0.45% while MATIF Wheat was down -1.46% in US dollars. A nervous week that was for sure, weather market, exports data and USDA report provided a nice nervousness to the markets. The week ended up with a big day, soybeans moved up but the main move was on spreads, the curve is on its way to come back in a contango: considering the supply and demand, is there really any reason to have a steep backwardation? N6 finished up +1 cents while Q6 was up +4.50 cents and U6 +8.75 cents. Corn finished down around a couple of cents down while Wheat was the directional star of the day with -15 cents. On Friday, funds sold 9,000 lots of Corn and 7,500 lots of Wheat while they bought 9,000 lots of Soybeans.


So Friday was the monthly USDA WASDE. For the US new crop, corn and soybeans acreage and yield remained unchanged. Yields are still respectively 168 bushels per acre (-0.24% compared to old crop) and  46.7 bushels per acre (-2.71% compared to old crop). This is still quite optimistic and historically the yield tend to decrease. But nothing such so far.


Still on the US balance sheet, wheat old crop saw a decrees of exports, this was expected but only a cut of -0.14MT to 21.09MT while export inspections totalized only 20.25MT. So where is the 0.84MT difference? Imports were marginally decreased -90kT, so US old crop ending stocks are up +60kT. So virtually nothing there but there’s this 0.84kT of exports discrepancy with inspections data. As per the new crop, US production has been bumped up +2.16MT to 56.53MT as first harvest reports are really encouraging. Ending stocks are up only +0.59MT as USDA’s expect an increase of feed usage (+0.81MT) and an increase of net exports (+0.68MT for exports to 24.49MT, offset by -0.14MT on the imports to 3.4MT). New crop ending stock ratios are 50.56% to the production and 85.24% to the consumption. In other words, US balance sheet is massively heavy, this is just a confirmation situation was more or less known. On corn, old crop exports are raised +2.54MT to 46.36MT, USDA think there will be some demand shifting from South America. This is slightly offset by an increase of imports (+0.12MT) and ending stocks are seen up -2.41MT. On the new crop, the only change is exports, +1.27MT to 49.53MT, ending stocks are then taking the hit of -1.27MT plus the -2.41MT of lower beginning stocks, bringing them to 51MT (-3.68MT), 13.91% of the production and 16.43% of the consumption, so there is not yet any shortage but for sure it’s getting thinner, less than 2 months of production and consumption in corn. As per the soybeans, similar pattern on the old crop (exports +0.54MT to 47.9MT) plus an expected rise of crush (+0.27MT), therefore, old crop ending stocks are brought to 10.07MT (-0.82MT). New crop, exactly the same patter as corn, exports are seen up +0.41MT to 51.71MT and ending stocks are taking the hit with the hit of beginning stocks: -1.23MT to 7.06MT. Ending stocks are only 6.83% of the production and 12.71% of the consumption. So US is becoming a bit tight but there is still a good situation on the world balance sheet, so at some point, there will be arbitrages to do with the cash basis and demand will shift anywhere cheaper.


As far as the world balance sheet are concerned, wheat old crop barely moved. No massive change, a bit of minor adjustments here and there, all compensating each other, world ending stocks are up +0.1MT to 243.01MT. New crop is becoming heavier again but nothing drastic either, ending stocks are just up +0.5MT to 257.84MT, which is 35.28% of the production and 36.01% of the use, bot more than 4 months. There some buffer for a dramatic crop in the next few years, world is not on the verge of lacking wheat. World production is pegged to 730.83MT (+3.84MT, still -3.41MT from the very good last year but one cannot expect to beat record every years and it is still a very decent crop, but interestingly enough, the wheat crop is actually the only one coming down from one year to another!), the revision on the upside is mainly driven by US as mentioned earlier (+2.16MT to 56.53MT), EU (+1MT to 157.5MT) and Russia (+1MT to 64MT). Consumption is seen higher, with tightening corn balance sheet, there will be some switches. EU is seen using +1MT on feed and India +1.15MT on non-feed. Old corn crop balance sheet is taking a hit, driven by a cut of the production of Brazil (-3.5MT to 77.5MT). This is offset by better Mexican crop (+1MT to 25MT). Therefore, crop is pegged to 966.37MT (-2.49MT). A lower consumption is helping ending stocks not to take the full hit and ending stocks are -1.42MT to 206.45MT. For the new crop, production is bumped +0.7MT to 1,011.77MT (+45.4MT from the previous crop!), the billion still is in view! The revision is due to better Mexican crop (+0.7MT to 24.2MT). No massive change otherwise and ending stocks are down -1.92MT to 205.12MT, which is just above 20% of the production and the consumption, so there is no shortage just yet and fore sure there will be some demand switching next year. Finally, soybeans are taking an old crop production cut of -2.60MT to 313.26MT, mainly driven by -2MT in Brazil (to 97MT).  No major adjustment elsewhere, ending stocks are down -1.96MT to 72.29MT. For the new crop, marginal cut of the production (-0.5MT to 323.7MT, still +10.44MT from last crop), and ending stocks are revised down -1.90MT to 66.31MT still more than 20% of the production and the consumption.


CFTC’s COT was released after trading hours on Friday, as usual as of Tuesday. It showed funds bought Wheat and Corn heavily (respectively 77,169 lots and 37,671 lots), increasing the long on corn to 207,967 lots (almost as much as Soybeans now) and decreasing their short on wheat to 53,320 lots. Some of the Wheat short has been squeezed but they are resisting. It will be interesting to see their position next week with the USDA report, are funds going to go to bet on wheat fundamentals or on Wheat following its two buddies? Funds surprisingly only increased their long position by 1,355 lots to 210,051 lots, the bet is so heavy already, especially taking into account the Corn position, so it there some margin for significant more long? Reuters had estimated they bought 35,500 lots over the week so funds bought much less than anticipated. From Wednesday to Friday, funds sold an estimated 7,000 lots of Wheat, 9,000 lots of Corn and 27,500 lots of Soybeans, bringing their short Wheat to 60,000 lots, their long on Corn to 199,000 lots and their long on Soybeans to 238,000 lots. So heavy bets!


Markets are starting the week with a strong night session, Soybeans up +14 cents, Corn give or take +10 cents and Wheat +6 cents. Meanwhile, MATIF has opened also higher +€1.50. Market con still be nervous, digesting the report and still focusing on the weather. South American weather is cold, some freeze are reported in Brazil but the impact seems very localized and Coffee crop is more likely to be impacted than anything else. US weather is good in the US, it’s expected to receive enough rain where it is needed and temperature are back down to average seasonal levels. Floods in France are out of the picture, there some sunshine and heat also. Most welcome. A few rains but much lighter and much less concerning that previously. French wheat ratings decreased by -2% to 79% of G/E and at least one more week is necessary to see if there was widespread damage. Today Export Inspections and Crop Report could add a touch of volatility.


Morocco is raising the import duty in a bid to protect local crop from 30% to 65% from mid-June to Mid-August. Basically, it means 2 months without any imports.


Oil is starting the week on a lower note, NYMEX Crude has a $48 handle while ICE Brent is reproaching $50. $50 seems to be a formidable resistance, a fundamental news seems necessary to diverge. On Freight, Baltic Dry Index BADI is struggling  these days, -1 on Friday to 610. The past 5 weeks it has been much less volatile than the usual, evolving between 579 and 643. Gold is starting the week on a stronger not, helped by stronger US dollar, reaching above $1,280 per ounce.


GBPUSD and GBPEUR cross rates are starting the week on a softer note, it really seems that market is now conscious that the result of the Brexit referendum is more uncertain that it used the be a few weeks ago. EURUSD is navigating between 1.12 and 1.13 and will probably wait for the FOMC this week, market now expects that a rate hike won’t happen (only 2% of market participants are taking a contrarian bet) and the mood is switching to December. This wouldn’t be as much hike as expected, FED always made understand that there might be at least 2 hikes. Latest job data weren’t encouraging that being said and retails sales, industrial production, and housing data are expected before the FOMC. Anyway, answers on Wednesday!


USDA Heatmaps – File available to download, please read following blog post:

Ending Stocks Revisions & Ratios

June Snapshot


June Old Wheat

June New Wheat

June OldNew Wheat


June Old Corn

June New Corn

June OldNew Corn


June Old Beans

June New Beans

June OldNew Beans