Grain futures were steady on Tuesday, ahead of Wednesday’s Wasde, with Paris wheat futures edging down after a bearish outlook from the European Commission.
The Commission saw EU soft wheat inventories set to rise by 200,000 tonnes in 2016-17, to 17.4m tonnes, in its first set of forecasts.
This is in stark contrast to the decline to 13.3m tonnes forecast by Strategie Grains, the influential analysis group.
The heavy stocks were seen resulting from healthy production, down 8.4m tonnes from the 2015 harvest, at 143.6m tonnes, and slow exports.
“The warmer-than-normal winter means that so far there is only limited frost kill in western Poland, eastern Bulgaria and Romania and the Baltic countries,” the Commission said.
EU exports were seen down 2.1% to 27.0m tonnes.
Given the ample inventories, the Commission was bearish on short-term cereal prices, seeing “no fundamental reasons for price levels to change”.
In fact the Commission raised the gloom prospect that “this is the new average price level to be expected”, although more evidence will be needed to underpin such a forecast.
French January shipments strong
Still, exports this season are starting to catch up, at least for France, the bloc’s top grower.
France exported 1.1m tonnes of soft wheat to destinations outside the European Union in January, customs data showed.
This is the second-highest monthly exports since the start of the 2015-16 season, down 0.2m tonnes from December levels.
Total French soft wheat exports so far this season are now down 3% year on year.
Algeria was the top buyer, with 329,000 tonnes of French wheat shipped.
Still, the figure does include 189,0000 tonnes of wheat going to Egypt, which were initially booked for December but delayed due to credit disruptions.
And hopes that a change in management at the Egyptian quarantine authority would support demand from the world’s top wheat importer may have been premature.
Hopes were raised that the replacement of Saad Moussa would spell an end to the zero tolerance policy on ergot contamination in wheat.
Reuters reports that the new management will continue to take a hard line on the presence of the hallucinogenic fungus in wheat imports, until new legislation is issued.
Traders have been unwilling to participate in state wheat tenders, over fears that cargos would be rejected, even if levels of ergot fell within the parameters of the tender, and international standards.
This position contradicts that of both the ministry of agriculture, and the state grain buyer.
March Chicago wheat futures ended up 0.4%, at $4.61 ј a bushel.
May Paris wheat finished down 0.2%, at E153.75 a tonne.
Corn futures edge up
Analyst Dr Michael Cordonnier left his forecast for the Brazilian corncrop unchanged at 84.0m tonnes, with the Argentine crop also unchanged.
The European Commission forecast 2016-17 corn imports at 10.5m tonnes, down 0.5m tonnes from the previous marketing year.
May corn futures finished up 0.3%, at $3.60 Ѕ a bushel.
Eyes on the Wasde
Market attention is now firmly fixed on tomorrow’s Wasde report, with soybeans set to be the most closely watched.
There is talk of a trim to US soybean stocks, but more important could by the world numbers, incorporating South American data.
“US ending stocks could increase on lower crush usage while world stocks look set to increase on higher Brazil and Argentine production estimates,” Benson Quinn Commodities said.
“Some estimates are suggesting beans could be more bearish,” agreed CHS Hedging.
South American question
“There will be a lot of focus on the Brazilian and Argentine corn and soybean production and there is some variability on the expectations for those two numbers,” noted Darrell Holaday.
“The high end of the Brazilian soybean number is 103m tonnes and the low end is 99m tonnes within the industry,” he said.
“The high end of Argentine soybean number is 62m tonnes and the low end is 58m tonnes.”
Trucker’s strike threat
Dr Cordonnier left estimates for the Brazilian and Argentine soybean crops unchanged.
But soybean supplies from Brazil could face further disruption this month though, if a threatened truckers strike for March 11 manifests.
The action is said to be calling for a 40% reduction in diesel prices.
Farmers in landlocked Mato Grosso, Brazil’s largest soybean producing state, are dependent on road transport to get their product to ports.
A similar protest last year resulted in weeks of disruption.
Although admittedly any government concession on diesel prices would help limit Brazil’s ballooning fright costs.
Chinese imports healthy
February soybean imports to China, the world’s largest soybean buyer, came in at 4.51m tonnes, up 6% year-on-year, and ahead of expectations of a number around 4m tonnes.
The number shows a smaller-than-expected decline, given the country-wide shut down for Lunar New Year, and delays in shipments from Brazil, the world’s top exporter.
The figure bodes well for future demand.
“Significantly higher soybean imports can therefore be expected in the coming months,” said Commerzbank.
May soybeans ended up 0.3%, at $8.44 Ѕ a bushel.
West African weather fears ease
Cocoa futures weakened, as prospects for the West African crop improved.
“Thanks to the recent rainfall, the prospects for the upcoming mid-crop of cocoa in Ivory Coast – the leading producer country – have improved,” Commerzbank said.
May cocoa futures in New York closed down 1.3%, at $2,970 a tonne.
But sugar and Arabica coffee firmed, helped by fresh strength in the Brazilian real, which was up 0.7% against the dollar in afternoon deals.
The move helped markets shrug off the early start to Brazil’s can crushing season, which is winding up a month ahead of the official start of the season, according to industry body Unica.
Unica expects 70 mills to be in running by March 15.
May raw sugar futures 1.4 percent, at 14.86 cents per lb.
And March Arabica coffee rose 0.8%, to settle at 121.70 cents a pound.
Cotton resumes price fall
But cotton futures broke lower, with continued worries about the heavy Chinese state stocks.
CBA’s Tobin Gorey said that “we are wary of thinking the market has now closed out season lows”
May cotton futures finished down 0.9% at 56.86 cents a pound.
(Source – http://www.agrimoney.com/marketreport/pm-markets-paris-wheat-edges-down-on-weak-export-outlook–3535.html)