The grain market is looking forward to the US Department of Agriculture on August 12. The monthly WASDE report should provide clarity about the acreage and yields in the United States. Until then, the market is struggling to find a clear direction.
The Chicago Board of Trade (CBoT) shows the sentiment of stock market traders on Monday morning, August 12 (Dutch time). Wheat and soy are in green and corn in red. Meanwhile, the Marché à Terme International de France (Matif) in Paris is recording a lower price for wheat. This is partly due to the higher yield figures (+12% in Europe and +14% in France).
Impact of the weather
Every month the US Department of Agriculture (USDA) publishes the 'World Agricultural Supply and Demand Estimate', also known as the WASDE report. However, the report for the month of August is significant for the market. New figures are announced about the area and yield (potential). As millions of hectares have not been sown this year, the findings are eagerly awaited.
The report includes much more data. For example, data on the area of crops that are GMP+ certified is being published for the first time. The report will be published at 12 noon Eastern US time, meaning Europe will receive it at 18pm. The reaction of the European market will follow on Tuesday, August 00.
Hectic market activity
Various market analysts expect the first minute after publication to be hectic. Opinions about the process vary widely. In previous reports, the USDA has often 'disappointed' with figures that estimate a much larger area and higher yield than analysts had previously expected. Only when the harvest is in can we speak with certainty about yield. Until then, it will remain a point of contention for the sector.
A Reuters survey shows that analysts expect a decrease in acreage for corn and an increase for soy. Their estimate is 88 million acres (35,61 million hectares). This is 3,4 million acres less than the July report. Analysts also estimate the yield to be lower. For soy, 1 million more acres are expected (total 81 million acres or 32,80 million hectares). Traders also estimate less yield per hectare for soya.
Supply and demand
The negative figures have a positive effect on the futures market. However, there are also traders who believe in the opposite. They expect another disappointment and government figures that will be much higher than analysts think, just as happened in June. The corn price is particularly sensitive to this. The real fact is that the demand side is the merchant and not the supply side. Due to the many outbreaks of African swine fever in China and the ongoing trade war, the demand for soy and corn is declining. This captures lower product, allowing final stocks to increase.
Most fireworks may come from wheat. The analysts are also curious about the figures provided by the ministry about the Russian harvest. The latest figures speak of what they consider to be far too small a wheat area and too high a yield. It is precisely the last figure that has always been adjusted negatively. Something that keeps happening.
Role of Europe
During a new Egyptian wheat tender last week, French wheat showed little competitiveness at a price level. Russia and Ukraine were allowed to supply. A strong euro exchange rate also does not help exports. This and better than expected yield figures in Europe are suppressing any European price increase. It remains to be seen to what extent the WASDE report will have an impact on us.