• US winter wheat conditions were released last night as follows:

• Today’s April WASDE report is generally viewed as neutral to bearish for corn, wheat and the soybean complex. Most of today’s changes fell within the range of trade expectations however, further growth in global stocks triggered further weakness in Chicago markets.

• Corn end stocks were left unchanged as a 50 million bu reduction in feed use was offset by an increase in usage for ethanol. Everything else in corn was unchanged.

• US soybean stocks were raised 10 million bu to 445 million as the residual volume was reduced and there were no offsetting changes to either crush or exports.

• US wheat stocks grew 30 million bu as feed and residual use was reduced and more than offset the slight reduction in imports.

• Combined Argentine and Brazilian corn production was lifted by 3 million mt to a record large 132 million, up 36 million mt on last year. S American corn exports were raised 1.5 million mt and global end stocks grew by 2.3 million mt to a record 223 million mt. Importantly global end stocks minus China were also record large at 121 million mt, up 20 million (19%) from 2015/16.

• Global wheat stocks increased yet again to 252 million mt, a 2.3 million increase month on month on the back of increased opening stocks, reduced feed use and trade. Interestingly Black Sea stocks were seen to grow nearly a million mt on reduced exports. There are doubtless still weather issues to come, Argentine harvest conditions, rainfall and soil moisture issues in S and C Brazil in the coming month to six weeks. For now, US and global wheat balance sheets continue to loosen rather than tighten and the pressing necessity to find demand growth in coming months will likely continue to pressure markets.

• It is fair to suggest that S American production is now fully priced into the market at this time and future data revisions will likely be somewhat more marginal. With the NASS stocks and seedlings report and the April WASDE reports now behind us, market focus will shift more to N Hemisphere weather, which will warrant watching for clues as to future price direction.

To download our recap of today’s USDA report please click on the link below:

USDA-Recap-11-April-17

• This holiday shortened week has been mixed with the grains, corn and wheat, trading higher with corn leading the way whilst soybeans have turned a shade lower. It would seem that the ag markets have reacted to Friday’s CFTC report, which showed a move in fund positions revealing massive short positions in grains and, finally, a relatively flat position in soybeans. Macros lent some market support with spot crude oil some $0.60/barrel higher. European wheat futures closed higher holding onto early gains. Interestingly it has been weakness in soybean oil futures, presumably due to continued weakness in Malaysian palm oil futures, that has tempered the soybean complex.

• Malaysian palm oil futures have been driven by a slow but steady boost in monthly production. Palm oil production in March totaled 1.46 million mt, vs. 1.22 million in March of 2016. Palm oil stocks as of the end of March totalled 1.55 million, up slightly from February. The palm balance sheet is still somewhat tight, but barring adverse weather in the months ahead, palm oil stocks should reach a more normal level (1.7-1.9 million mt) by late spring/early summer. In US dollar terms, palm futures have fallen roughly $100/mt since the middle of February, and overnight fell to new five month lows.

• With a growing season ahead, and minor weather issues noted in the US and Argentina, funds are now paring back short positions in corn and wheat. With them having wiped out their cumulative net long position, market direction into summer will hinge solely upon N Hemisphere weather updates.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 7 April 2017

Our weekly fund position charts can be downloaded by clicking on the link below:

Fund positions

• Soybean futures bounced higher on short covering in a day of firmer day that left products higher too. Heavy rains in Argentina have triggered concerns similar to last year’s rain related crop losses. We are advised that, at most, the recent rains will delay harvest, but have not yet reduced crop size. However, it is fair tom say that dry weather is now needed.

• Corn in Chicago traded in a narrow range, ending slightly higher with the May ’17 contract firmly entrenched between its 20 and 50 day moving averages as fresh news remains lacking although the return of China and higher soybean meal and corn futures there added some support. The US weather forecast is offering a decent planting window to the C Plains in the coming ten day period, and a warmer temperature profile looks to last into month end.

• Chicago wheat followed global cash prices higher. Snow cover has eroded completely across the US N Plains and S Canada, and the forecast lacks excessive precipitation across the Dakotas in the next ten days. Informa Economics has estimated 2017 US winter wheat production at 1,285 million bu, down 387 million from last year and the lowest since 2002, which generally reflects normal abandonment and trend yield. It is demand that will determine whether US end stocks rise or fall in the next crop year. The EU/Black Sea weather forecast is a bit wetter beyond the next 6-7 days, but until this pattern change is pulled into the nearby period confidence is low, and better rain will certainly be needed across W Europe, where in Spain, France and the UK 30-day precipitation rests at just 50-60% of normal. A crop problem is needed to justify lasting rallies.

• Soybean futures bounced higher on short covering in a day of firmer day that left products higher too. Heavy rains in Argentina have triggered concerns similar to last year’s rain related crop losses. We are advised that, at most, the recent rains will delay harvest, but have not yet reduced crop size. However, it is fair tom say that dry weather is now needed.

• Corn in Chicago traded in a narrow range, ending slightly higher with the May ’17 contract firmly entrenched between its 20 and 50 day moving averages as fresh news remains lacking although the return of China and higher soybean meal and corn futures there added some support. The US weather forecast is offering a decent planting window to the C Plains in the coming ten day period, and a warmer temperature profile looks to last into month end.

• Chicago wheat followed global cash prices higher. Snow cover has eroded completely across the US N Plains and S Canada, and the forecast lacks excessive precipitation across the Dakotas in the next ten days. Informa Economics has estimated 2017 US winter wheat production at 1,285 million bu, down 387 million from last year and the lowest since 2002, which generally reflects normal abandonment and trend yield. It is demand that will determine whether US end stocks rise or fall in the next crop year. The EU/Black Sea weather forecast is a bit wetter beyond the next 6-7 days, but until this pattern change is pulled into the nearby period confidence is low, and better rain will certainly be needed across W Europe, where in Spain, France and the UK 30-day precipitation rests at just 50-60% of normal. A crop problem is needed to justify lasting rallies.

• Fund managers have quickly shed their length in corn and soybean (and product) futures in the past five weeks and when added together, funds have sold close to 500,000 contracts of Chicago corn, wheat and soybeans. It should be noted that such sharp falls in net long Chicago positions are not unusual, but they usually occur in mid-growing season or during harvest. To have funds moving to large net short positions in the grains at the beginning of the N Hemisphere growing season is unusual. At some point between now and mid July we would suspect that funds will be chased out of shorts potentially triggering a Chicago recovery, which we would currently view as an opportunity to sell once again!

• Chicago futures are mostly lower today, wheat is currently just in positive territory, as post-USDA report short covering appears to be complete. It could be assumed that markets have stabilised and any meaningful downside risk will depend upon N Hemisphere growing conditions between now and August.

• It has been reported that bird flu in China has affected six additional humans, with one new death, bringing the total to  162 since October. Dalian futures open on Wednesday, and meal and corn price action will be watched closely.

• Favourable early season crop conditions are needed to trigger the next leg down in prices, and confirmation of lasting adverse weather is needed to go up, meanwhile until either materialises the trading range into late spring lies somewhere in the middle. We continue to urge caution against turning bearish here, but the trade is well aware that Jun-Jul weather almost always takes precedence over planting dates. The perception of yield loss will occur at some point, and as stated earlier our view is that any such a rally would create a selling opportunity rather that a rally to chase higher.

• In Chicago the grains, corn and wheat are trading a touch higher whilst soybeans are again lower. It is clear that the market now has some concern that US corn planting is not going to be as early as previously anticipated, and there is a suggestion that Midwest farmers will be anxious to accept the prevent planting program option in order to maximise profitability. Current soybean and corn prices reflect losses to growers and farmers are happy to play the government system if wet weather persists. This scenario has the market now adding some weather premium back into prices.

• Brazilian soybean exports for the new crop year to date are up a sizeable 31% (from last year) amid large Chinese offtake, and there are over 9 million mt of Brazilian soybeans in the line up to load during April. World demand for soybeans is record large. The Brazilian port of Rio Grande reported its first strike this morning with protests against the government and Petrobras. The strike is not expected to last and other Brazilian ports should be able to handle the vessel loadings with wait periods of less than a week.

• Historically is is usually all about weather following the March Stocks/Seeding report and 2017 is no different. The weather is too dry across the Black Sea, Europe and N Africa for wheat, while excessive rain will slow the early corn seeding across the Central US. Soybeans are sagging with China out on holiday. The soybean/corn spread is back to a more normal 2.4:1 as the market tries to encourage more corn acres. December corn above $4.00 will likely be a struggle without extended wet weather for the Central US.

Our considered views on the latest USDA releases can be downloaded by clicking on the link below:

March 17 USDA reports contemplation

To download our weekly update as a PDF file please click on the link below:

Weekend summary 31 March 2017

Our weekly fund position charts can be downloaded by clicking on the link below:

Fund positions