Stock market traders were not very impressed by the figure corrections that the US Department of Agriculture USDA implemented in the Wasde report for February. The figures themselves were not very negative. For example, the world wheat production was reduced. The shoe pinches in particular with soy and corn. The production and stock figures were corrected, but from the perspective of the American farmer they are still very high.
As expected, the USDA dropped the figures for corn and soybeans in Argentina. Soybeans were down 3 million tons, to 49 million tons of production this season. Corn was down a meager 1 million tons, to 50 million tons. For Brazil, it also dropped the corn harvest by 1 million tons, while soybeans remained unchanged. If the 169 million tons estimated for this harvest year comes to fruition, it would be a record for the South American country.
Disappointment
Traders were disappointed that the department's numbers left U.S. ending stocks unchanged, at 1,54 billion bushels for corn and 380 million bushels for soybeans. Prior to the publication date, at least a modest reduction for corn had been expected.
The USDA expects a global corn supply of 3 million less and a soy supply of 4 million less. This is mainly due to a smaller harvest in South America. Overall, the global market is well-fed and there is an imbalance in the supply and demand situation. Especially now that the world is once again in the grip of import duties, between China and the US, there is a lot of fear.
Wheat stocks fall
The USDA reduced global wheat stocks by 1,3 million tonnes, to 257,6 million tonnes. This puts global wheat production at 693,79 million tonnes, marginally higher than in January. The European market missed the news yesterday (Tuesday 11 February) due to the publication time. The Matif closed marginally lower, at €236 per tonne for the March contract. There, the news that snow might fall in Russia on time after all plays a bigger role than what is happening in the US.
Corn gained €0,50 in Paris, rising again this week. In the US, wheat, corn and soybeans all ended lower as a result of the Wasde figures. Corn in particular had to give in – thanks to the stock figures. It ended at $4,84 a bushel, compared to $4,91.5 on Monday. The chance of a price above $5 is now gone. Soybeans settled at $10,43.5, losing 60 cents. Wheat limited its loss to 15 cents.
This morning (12 February) wheat opened flat on the Matif at €236 before falling slightly. Corn opened €0,50 lower and is hovering around €217.
For the long term, analysts remain cautiously optimistic when it comes to soy and corn, but in the short term the reality is different. The markets are under pressure and will remain so for the time being. The eyes are mainly focused on the political game of Trump - and the subsequent Chinese reaction - and the harvests in South America.
Straws
For Europe, weather news continues to dominate the prices. European traders, and especially the French, need a few big deals at all costs to get rid of their wheat. They are clinging to straw that frost damage and drought are lurking in the Black Sea region and that the Russian export engine is starting to run out of fuel. Especially with export restrictions coming this weekend. The fact is that French milling and baking wheat is still priced too high to compete with Black Sea wheat. Export figures have increased slightly, but remain far too low.