Analysis 11/02/2020

European market

Due to a busy export activity, wheat prices were well oriented on Euronext yesterday. To confirm this positive environment, Egypt will proceed to a wheat tender today. The competition should be stiffer than last time as French prices moved up while Black Sea prices declined and gained competitiveness. The results will be known this afternoon. The French origins are currently benefitting from a currency advantage with a weak euro vs dollar. The single currency is dealing this morning close to the threshold of 1.09.

Oil and gas prices continue to decline due to a falling demand from China caused by the consequences of the coronavirus on the activity. Officially and so far, the epidemic caused the death of more than 1 000 people in China.

Beyond the Egyptian tender, we will also follow the Algerian tendering process, origins are optional, but the French wheat should be retained in majority.

Corn prices were in small evolution yesterday, traders were quiet before the publication of the USDA report tonight.

Yesterday, the rapeseed retreated in the wake of the palm market. The European balance sheet which is in sharp deficit this year will not be improved by a poor outlook of production this summer. On Feb 3, 4.05 Mt of rapeseed have been imported in the EU vs 2.83 Mt last year to date, i.e. +43%.

Russian wheat exports have reached 22.5 Mt from the start of the marketing year. This is a sharp decline compared to last year. This should push the USDA to revise down its target for the country.

American market

Wheat and corn prices dropped in Chicago yesterday a day before the monthly USDA statement. The economic context remains quite uncertain with doubts about the possibility of China to fulfill its commitment to buy US agricultural products.

The firmness of the dollar versus most of other major currencies is also penalizing the markets.

The next arrival of an abundant soybean crop from South America is capping the rising potential of the soybean.

Yesterday, funds were net buyer sin 6 500 lots of soybean, but net sellers in 8 000 lots of corn and 4 000 lots of wheat. Before USDA, funds are currently shorts in corn and soybean and long in wheat, which is a bit unusual.

Black Sea market

Traders will closely monitor the conclusions of tonight USDA’s report concerning the estimation of wheat exports in Russia. Currently forecasted at 34 Mt, this figure looks overvalued with the current pace of shipment. At the end of January, the Russian Federation exported 22.5 Mt of wheat, including less than 2 Mt during January. Beyond the wheat, the possible downward revision of Russian exports could also concern the barley and corn.

On the other way around, figures of the cereals’ trade for Ukraine and Kazakhstan should not be amended.