Not sure this USDA WASDE report was that much exciting. The only excitement market found was on Soybeans, they took the opportunity to come back above 1,100 cents per bushel in a +2% move. But else… Kind of waste of time. Corn finished up +3.5 cents, Wheat up +5.75 cents,… Nothing major. MATIF Wheat finished mostly unchanged. Funds were on the buy side after the report and bought 4,500 lots of Corn, 9,000 lots of Soybeans and 4,000 lots of Wheat,


So USDA WASDE was obviously the main event of the day. On wheat, the old crop world ending stocks increased by 1.51MT to 244.52MT. It’s driven by an adjustment of beginning stocks in Australia (+0.84MT), lower exports (-0.5MT) and use (-0.2MT) in Canada. Also to be noted, Russian exports are increased by +0.5MT, Ukraine exports are also increased by +1.2MT. Interestingly enough, US exports are raised by 0.05MT to 21.14MT while export inspections totalized 20.25MT, probably same mismatch in crop allocation there. So nothing much on old crop wheat. New crop picture is slightly different, a bit sweet and sour. Despite beginning stocks obviously bumped up by +1.51MT, ending stocks are decreased by -4.14MT. However, from the old crop to the new crop, ending stocks are still up +9.18MT to 253.7MT, 48.89% of the production and 34.78% of the use. There is no shortage by any means. US balance sheet is heavier, production is revised up by a nice +5MT to 61.53MT. Kansas winter wheat production will reach 12.36MT (+41% year on year), with a record yield of 56 bushels per acre (national yield is raised by +5.56% to 51.3 bushels per acre) With higher feed usage (+2.73MT) and higher exports (+0.68MT to 25.17MT), ending stocks are therefore revised up +1.5MT. World production is increased by +7.8MT to reach 738.51MT, +3.89MT compared to the old crop! Argentina, Australia and Canada are revised up +0.5MT each to respectively 15MT, 25.5MT and 29MT. Russian and Ukraine production are increased each by +1MT to respectively 65MT and 25MT. So what happened to tighten the balance sheet? EU production is only down -1MT to 156.5MT and there’s a -0.5MT decrease on North Africa, this is not enough,… Usual Chinese magic came to the rescue. Adjustment variable? Use is seen up +6.5MT. So should all of this be bullish? Not quite sure, bottom line, balance sheet from old crop to new crop is becoming heavier again and big moves on Chinese data are always welcomed with a bit of skepticism. Else, no real surprise on wheat to be fair, as heavy as it could, wheat galore!

Wheat Old July 2016

Wheat New July 2016

On corn, old crop world ending stocks are raised by +0.45MT to 206.9MT.  nothing to say really, the only big move is transparent: Brazilian crop is cut by -7.5MT to 70MTbut less use (-2.5MT) and less exports (-4MT to 18.5MT) are coming to the rescue. Argentinian crop is revised up +1MT and this is offset by higher exports obviously considering Brazilian situation, +1MT to 19MT. In the US, exports are seen up +1.9MT to 48.26MT with no impact on the balance sheet as use is lowered -1.73MT. On the new crop, planting data was suggesting at least an increase of +2.3MT of the production: USDA did not fail and increased the corn crop by +2.79MT to 369.33MT (yield has been left unchanged to 168 bushels per acre). Use was lowered (-1.78MT) and exports increased by +2.54MT to 52.07MT, therefore, US ending stocks are raised +1.85MT to 52.85MT. In China, ending stocks are seen up +2.1MT mainly due to lower use. So basically US and China are explaining most of the world ending stock move, +3.27MT to 208.39MT, this would be an increase of +1.49MT from the old crop. However, in Brazil, production is lowered by -2MT to 80MT, lower use (-1MT) and lower exports (-1MT to 22M) are coming to the rescue. EU production is lowered -0.45MT to 63.83MT but use is lowered (-0.95MT) and exports also lowered (-1MT to 2.5MT). So this is technically quite bearish as old crop ending stocks are revised up (+0.45MT), new crop ending stocks are revised up (+3.27MT), new crop production will be +50.95MT compared to the old crop (+5.31%), and production is rising quicker than the use and ending stocks will be up +1.49MT from one year to another. In terms of crop fundamentals, cannot expect much more bearish! That being said, new crop world ending stocks are 20.62% of the production and 20.65% of the use, it is still comfortable but used to be better. Also, there’s still the summer to go through in the northern hemisphere and especially in the US where drought conditions are developing in the South.

Corn Old July 2016

Corn New July 2016

On soybeans, old crop is also not showing any significant change, world ending stocks are lowered -0.12MT. The only big changes are US exports (+0.95MT to 48.85MT), Brazilian production (-0.5MT to 96.5MT) and exports (-1.55MT to 57.2MT). New crop world ending stocks are raised by +0.79MT, they’d become 20.59% of the production an 20.41% of the use. Main driver is the US once again, according to planting data, USDA could have been expected to raise the production by at least +1.8MT. Here again they did not fail and increased the production by +2.18MT to 105.6MT. Crush is increased by +0.27MT and exports are raised +0.54MT to 52.25MT. Else no major change, the only big change is +0.5MT on the Argentina crush. The report itself is pretty neutral, slightly bullish US actually but looking the picture from old crop to new crop tells another story: world ending stocks are still down -5.07MT from old crop to new crop.

Beans Old July 2016

Beans New July 2016

The second main event was the Egypt’s GASC tender, the first one of the new season. One surprise, confidence seems to be back! 1.01MT total was offered. There was also a non-surprise: French wheat hasn’t been offered at all, not much visibility on the new crop quality and French wheat is more subject to the ergot fungus so they did not dare offering. Anyway, it would have not be competitive compared to black sea, Ukrainian was the best FOB offer with $161.84, 115kT total was offered. Also, 595kT of Russian Wheat was offered, best FOB was $164.24. Finally, 300kT of Romanian wheat was offered at a best FOB of $169.33. Romanian wheat, despite cheapest freight could not compete versus the best offers of Ukrainian and Russian Wheat and was coming only in fourth position in the lineup. So GASC bought 180kT at an average of $173.03 in one Ukrainian shipment and 2 Russian shipments. Algeria’s OAIC tender later today. French wheat will probably have a similar issue, who want to take risk on quality? Baltic, German and Swedish will most probably better place this season. Or maybe even USA, HRW is still cheaper than SRW so it might indicate US is going to be very offensive on the milling section! However, if this is September loading, old crop can be offered.


Night session is still strong on Soybeans (+8ish cents on Q6), just ticking up on Corn and Chicago Wheat.


Gold has corrected and rebounding this morning but is now back just above $1,340 level. Oil is still in his range, NYMEX Crude having a $46 handle and ICE Brent a $47 handle. On Freight, Baltic Dry Index BADI rose again: +7 to 711.


GBPUSD is up and approaching 1.33. Uncertainty of Prime Ministry limbos are removed now. Financial markets are in a record high in the US on the Dow Jones and the S&P 500. The UK’s FTSE 100 is up +7.02% YTD,… So far, a bit of volatility of course, but hey, could have been worse and the apocalypse predicted during the Brexit campaign has not happened so far (well Brexit has not technically happen either also but will it?). EURUSD is still above 1.1050. But did we focus too much on Brexit? IMF warned again on the Italian situation: 11% unemployment, debt is 133% of the GDP,… The IMF doesn’t expect the Italian economy to fail to return to pre-2008 situation until at list the middle of the 2020’s. Sure that the so called PIGS are still in long term trouble. But meanwhile, Ireland increased its 2015 GDP from +7.8% to… +26.3%.


Reminder – Feel free to use my USDA WASDE heatmap & cheat sheet file: