Note: USDA WASDE heatmaps were done with an automated spreadsheet. See there: https://vinzenergy.wordpress.com/2016/06/11/heatmap-cheat-cheat-usda-wasde-report-excel-vba-macro-automation-wheat-corn-soybeans/

Friday, Soybeans ended up +10.50 cents, Corn +6 cents, and Wheat +9.50 cents. The main event of the day was the USDA WASDE report, surely that was bullish? Not quite, but hey,… Market is always right! It seems like market has now focused speculatively on the next season and quite disregarded the report as most of it was expected. Market finished collectively higher, only ICE Canola ended down -0.52% and Soybean Oil -0.84%. In Chicago, funds were on the buy side, buying 7,000 Corn, 5,500 Soybeans and 4,000 Wheat. On the other side of the pond, MATIF was up but in a lower extend, no more than +€1 with CME EU more or less following.

snapshot-december-2016

So, USDA WASDE. About wheat. On old Crop, no major change, world ending stocks are cut by -0.38MT due to an increase of consumption by +0.4MT. On the new crop, US stayed untouched. One of the change widely expected was in Australia. USDA increased the production by +4.7MT to 33MT. The Australian balance sheet is not impacted so much as most of the increase will go in exports (they are raised by +3.5MT to 24MT) and grater consumption (+0.5MT), therefore their ending stocks are up only +0.7MT. Canadian production is raised by +0.2MT to 31.7MT (this is exactly offset by a raise of +0.2MT), EU production is raised by +0.4MT  to 143.97MT, this is more than offset by higher consumption (+0.5MT), therefore, engine stocks are down -0.1MT. Brazil production is raised by +0.36MT to 6.7MT, their imports are raised by +0.3MT to 6.5MT, their exports are raised by +01MT and the consumption is raised by +0.5MT, therefore Brazilian balance sheet is hardly changing, ending stocks only up by +0.06MT. In China, production is raised by +0.85MT to 128.85MT. Finally, Russian exports are decreased by -1MT to 29MT and Kazakh exports are also decreased by -1MT. So world ending stocks are up +2.91MT to 252.14MT. This is quite a decent world production increase (+6.54MT to 751.26MT) for a December WASDE report. World stocks are 33.56% of the production and 34.08% of the use… Wheat galore! Interesting to note that Indian imports have been untouched.

wheat-old-december-2016

wheat-new-december-2016

wheat-old-to-new-december-2016

About corn. Old crop balance sheet hardly changes, ending stocks are down -0.45MT, world production is raised by +1.19MT to 961.08MT (driven by Southeast Asia, +1.2MT) and this was more than offset by consumption (+1.88MT, driven by EU, +0.49MT, Southeast Asia, +0.8MT and Mexico, +0.2MT). On the new crop, USDA did not touch to the US balance sheet. Brazil production is raised by +3MT to 86.5MT (most of it will go in exports, they are raised +2.5MT to 28MT). EU production is raised by 0.42MT to 60.7MT (this is mostly offset by a decrease of imports, – 0.4MT to 13.1MT, the balance sheet hardly changes, with ending socks raised by +0.02MT to 5.14MT). Canadian production is raised by +0.7MT to 13.2MT (this is offset by less imports, -0.5MT to 1MT), Chinese production is raised by +3.55MT to 219.55MT (partially offset by greater use, +1MT). FSU production is raised by +1MT, most of it will go in exports (+0.6MT). Finally, Southeast Asia production is raised by +0.6MT. That bring us to the world production up again +9.2MT to 1,039.73MT, world use is raised by +4.69MT (43% on the feed, 57% on the ethanol) and therefore, world ending stocks are raised +4.06MT to 222.25MT. World stocks are 21.38% of the production and 21.65% of the use. Quite a lot of buffer.

corn-old-december-2016

corn-new-december-2016

corn-old-to-new-december-2016

About Soybeans. Barely any change, world production is up a mere +0.11MT and ending stocks +0.15MT. On new crop, US balance sheet is unchanged. World production is up +1.91MT to 338MT. Crush is raised by +0.9MT in EU and decreased by -0.5MT in Argentina. World ending stocks are raised +1.32MT to 82.85MT. World ending stocks are 24.51% of the production and the stock to use ratio is back above 25% to 25.10%… This is to put in perspective with current Soybean rally!

beans-old-december-2016

beans-new-december-2016

beans-old-to-new-december-2016

Official CFTC’s COT (week ending on Tuesday), showed only significant activity on Soybeans. Indeed, funds sold 12,057 lots (Reuters was estimating 3,000 lots only), reducing their long position to 122,648 lots. Interesting to note they were against the market as over the COT week, market was up +1.50%. And little movements indeed on Wheat and Corn. Funds decreased their short position in Wheat by 2,589 lots to 115,920 lots while they increased their short position on Corn by 3,331 lots to 72,592 lots. Reuters missed their estimates also here as it was expected funds to buy seller of 7,500 lots over the week and 10,000 lots buyer on Corn. Similarly to Soybeans, funds were also selling the rebound as market was up +4.23% over the COT week. On wheat, standard trend following as market was up +2.37% on the week. From Wednesday to Friday, it’s estimated funds have bought 5,000 lots of Wheat, sold 6,000 lots of Corn and sold 4,500 lots of Soybeans. The cumulated short position as of Friday is therefore estimated to be around 71,000 lots.

 

On a weekly perspective, ICE Canola went down -1.11% in US dollar, MATIF Rapeseed -0.50% in US dollar, Soybeans went up +0.97%, SoyMeal +2.16% but SoyOil went down -2.05%. Corn was definitely the leader of the week with +4.44% while MATIF Corn went down -0.44% in US dollar. Wheat was still a mess: Chicago was up +3.29% but Kansas only up +1.41%, Kansas ended the week -4.75 cents below Chicago. Minneapolis was on its side down -1.29%. With Kansas wheat lower than Chicago, it’s expectable this would bring a bit of pressure on the high premium of Minneapolis. The premium retreated last week and Minneapolis ended the week 135.75 cents above Chicago and 140.50 cents above Kansas. MATIF Wheat was down -3.42% in US dollar and CME EU -2.62% in US dollar. As the expiries are approaching, CME EU ended the week 10.50 above MATIF Wheat. Finally, LIFFE Feed Wheat ended the week down -2.62% in US dollar. Bumpy week also for the currencies with Italian referendum and Brexit shambles. But with next week FOMC meeting widely expected to raise the rates, the US dollar ended the week generally stronger: EURUSD went down -1.04% on the week, and GBPUSD went down -1.14%. Wednesday is finally the day, unless an enormous surprise is happening. US Unemployment Claims were as good os expected on Thursday to 258k. The same day, ECB said they leave the rates unchanged (expected) but they will slow the pace of their bond purchase fever to still a significant €60b per month (from €80b) but stating it will run as long as it is necessary, next December seems now a more likely target rather than March. They also reduced the minimum maturity of the eligible bonds and also the minimum yield, in effect opening the door to purchase bonds with lower yield than the ECB rates. Inflation is seen at 1.3% only in 2017, it is set to raise but will stay below 2% until at least 2019 (forecast is 1.7%). After initial bullish reaction as it could be seen as tapering some way, euro was back under pressure. Friday, preliminary US UoM Consumer Sentiment was better than expected to 98. Next big macro day is obviously Wednesday (there UK yearly CPI though on Tuesday): US Retail Sales and Core Retail Sales, US PPI, Crude Oil inventories… Then FOMC! Might be a shaky day!

 

Talking about oil, Crude Oil struggled over the week to keep a clear bullish momentum. NYMEX Crude ended the week at $21.50, -0.35% down over the week on doubts about enforcement of the OPEC deal, on the idea that US Shale Gas operators will become more profitable and increase production. However, the new week might start with a bit of bidding as Saudi surprisingly said they will be ready to cut the production more than expected, intending to bring the OPEC production lower than the psychological level of 10M barrels per day (currently 10.06M barrels) from the 1st of January. On top of this, Saudi said non-OPEC members agreed to make a cut of 558,000 barrels per day. Brace for a shaky opening! On Freight, Baltic Dry Index BADI corrected -9.02%, driven by lower demand on larger size vessels (Capesize index was down -28.18% over the week), partially offset by lower size segment. Meanwhile, Panamax index was flat week on week. Finally, Gold ended the week at 1,157.74, feeling the pressure of a stronger US dollar.

 

On Thursday, EU cleared 264,000T of soft wheat export licences, 10.5MT total so far this season. Total wheat exports have reached 33% (11.61MT) of the USDA’s target of 25MT. Romania is now the good leader of EU exports with 3.11MT, followed by France (2.03MT) and Germany (1.73MT). On the other side of the pond, US export sales were stronger than last week with wheat commitment reaching 527,300T, corn 1,496,400T and Soybeans 1,467,700T. For sure, inspection will be busy again on Soybeans.

 

Saudi’s SAGO is seeking 715,000T of hard wheat, no official result known just yet. Egypt’s GASC was seeking white sugar and tender was cancelled as they received only one offer at $580/T CNF. Japan bought 123,354T of food wheat from US and Canada. Taiwan’s MFIG bought 65,000T of Corn at 119.50 cents over Chicago K7, most likely to be US origin.