- China has announced that it would try to double its biofuel production by 2020. At headline value, this sounds rather impressive, but when you reach into the data, you find that such a move would increase their 2017 corn ethanol demand by just 3.15 million mt. Such demand would be welcomed, not only by local growers but also by global exporters, but it does not materially alter the landscape for Chinese corn prices or supplies with their domestic stocks pegged at over 200 million mt by traders. China at some point will likely have to export corn.
- We have not seen a “turnaround Tuesday” as corn, wheat and soybeans in Chicago have continued higher on further fund buying. January ’17 soybeans have moved to their late November peak price levels whilst corn has hit levels not seen since early November. Wheat followed, but in a more half hearted manner as cash markets have been reluctant to follow. Weather premium is being added “just in case” the Argentine and S Brazil conditions continue dry for an extended period.
- StatsCan produced a 2016 all wheat crop of 31.73 million mt including 7.7 million of durum, 20.4 million of spring wheat, and 3.15 million of winter wheat. This wheat crop was 4.2 million mt larger than last year, and the second largest crop on record. The October snows did not seem to produce much impact on yield with the late October warmth allowing for a salvage of this year’s production. The finding of the additional durum wheat is important to world prices. StatsCan also increased their canola (rapeseed) crop to 18.4 million mt, which was also a record. The crop was slightly smaller than trade estimates that came in at 18.8 million mt. Nonetheless, the crop is sizeable and will offer the world considerable export capacity. As a sideline, soybean production was also record large at 6.5 million mt. The StatsCan crop estimates were considered slightly bearish amid the sheer amount of supply that was offered. In the past two days, the Aussie and StatsCan data has added 4.5 million mt to world wheat production, and we expect that the Argentine wheat crop will increase by another 1-1.5 million mt, which means that the world has just uncovered an extra 6 million mt of exportable wheat. This raises the supply competition for all world wheat exporters into June.
- Funds are covering net shorts in the grains while building the largest net long in soybeans since mid summer. US soybean sales continue to build and there is support for the forthcoming WASDE report to elevate the US soybean export total on Friday. There is some rain in the extended forecast for Argentina, but with the medium range models still offering dryness, our trust in that potential moisture is somewhat low. The market will add premium to price until better Argy rain chances are confirmed.