Analysis Grains
Favorable weather pressures corn and soybean prices
The most action during the last trading session was in soybeans and corn. Favorable growing conditions in South America and disappointing demand from China put pressure on prices in the futures market. Wheat recorded a slight increase on the Paris exchange. Despite the smallest export in over twenty years, the French end stock of wheat is smaller than last season according to FranceAgriMer.
The March contract for wheat on the Matif closed €0.50 higher at €232.75 per ton yesterday. Grains closed in the red on the CBoT. Wheat closed 0.7% lower at $5.41¼ per bushel. Corn declined more than wheat, dropping 1.4% to $4.37¼ per bushel. The strongest price decline was seen in soybeans during the last trading session. The January soybean contract closed 2.6% lower at $9.51¾ per bushel.
Favorable weather forecasts for soybean and corn growers in South America are putting pressure on prices for these products in the futures market. Analysts note that it is particularly challenging to find the bottom in the soybean market. This is largely attributed to the good harvest expectations for soybeans in Brazil. Soybean planting in the country begins on September 1st, and the harvest of the first planted soybeans usually starts in January. With a relatively large harvest expected, traders are already preparing for increased supply of soybeans from Brazil.
The USDA expects that for the third consecutive year, the global soybean harvest will exceed consumption. This could lead to an increase in the end stock to 131.87 million tons, the highest level ever. The stock-to-use ratio in the USDA's forecast stands at 32.7%. Only in the 2018/19 season was this percentage higher. There is an interesting parallel to draw there. In that season, the trade war between the US and China reached its peak during the first term of President Trump.
Disappointing demand for corn
For corn, the Chinese customs figures were decidedly bearish. In November, China reportedly imported 300,000 tons of corn, which is 92% less than in the same month a year earlier. Since January 1st, China has imported 13.3 million tons of corn. Compared to the first eleven months of the previous year, China has imported 40% less corn. The subdued sentiment in corn was further exacerbated by the news that the Chinese state buyer Sinograin will not release imported corn into the market for the time being. This is part of the policy to raise corn prices in the domestic market. Corn prices in China are at their lowest level in 4.5 years. Chinese farmers are facing difficulties due to a good harvest and weak demand for corn.
Algeria buys wheat from Canada
Wheat on the Chicago exchange was influenced by the developments in corn and soybeans. However, the decline was relatively mild according to some analysts. Setbacks in Russia and Ukraine regarding the condition of the crop for the upcoming harvest are somewhat offset by positive developments in Australia and Argentina, where the harvest is currently underway. According to sources, Algeria has secured an unknown quantity of durum wheat for delivery in March/April. Prices are said to range from $340 to $352 per ton C&F (cost and freight). Most of the wheat is reportedly coming from Canada, but the US and Australia have also secured a portion of the order.
In France, exports are not progressing as well. FranceAgriMer expects that this season, 3.9 million tons of wheat will be shipped to destinations outside the EU. This is 66% less compared to last season and the smallest export since the 2000/01 season. Within the EU, FranceAgriMer expects to export 6.2 million tons of wheat. This is 2% below the EU export from last season. The end stock of wheat in France is estimated at 2.9 million tons, 10% less than last season.
