European market
After a strong rally over the past two weeks, the wheat market is consolidating in anticipation of further developments. The European market remained calm at the beginning of the week with the July 14 holiday in France.
A wait-and-see attitude prevails on the market while waiting for a better assessment of French production. Before the rains in the middle of the week, wheat cuts were gradually progressing towards the north of the country, with still extreme disparities in yields depending on the region, which makes the overall estimate complicated. Nevertheless, quality seems to be good.
On the Black Sea side, late harvests and uncertainty about the level of Russian production are supporting prices. Local analysts are correcting their excessive optimism displayed a month ago and have been successively reducing their estimates of Russian wheat production for the past 2 weeks. The USDA echoed them with a production estimate (excluding Crimea) at 76.5 Mt against 77 Mt last month.
In addition, last Friday's USDA report adds downward revisions to production estimates in the USA to 49.63 Mt and in the EU28 to 139.5 Mt. The world wheat stock 2020/2021 thus appears to be down to 314.8 Mt against 316.1 Mt last month.
In corn, the USDA has reduced, as expected, its forecast US stock 2020/2021 to 67.3 Mt against 84.4 Mt previously. This, coupled with declining Chinese stocks, also leads to a decrease in world stock to 315 Mt against 337.9 Mt last month.
In soybeans, the USDA lowered the 2020/21 world stock by -1.3 MT to 95.08 Mt. The good performance of palm oil is also should be noted. The palm prices are at the highest level since 4 months in Kuala Lumpur after the publication of a lower than expected Malaysian stock at the end of July in the last MPOB monthly report.
The rapeseed harvest continues to progress in France with still very strong heterogeneities in yield according to the regions.
American market
Of all the commodities, only wheat seems to be doing well in Chicago and remains at last weekend's levels. Corn and soybeans mark a sharp correction despite a USDA report that was in line with expectations. It is mainly the return of favourable rains on the Corn Belt that reassure operators, despite a deeper than expected deterioration in crop conditions.
Thus, on Monday evening, the USDA crop rating showed:
69% of corn crops estimated as "good to excellent", down by -2 points over the week
68% of soybean crops estimated as "good to excellent", down by -3 points over the week
68% of spring wheat crops estimated as "good to excellent" down by -2 points over the week.
The purchase yesterday of 1.762 Mt of US corn by China should also be noted. This volume is to be added to the 1.136 Mt already bought last Friday.
In spite of this, the funds are still selling for the 3rd consecutive session with 7500 lots of corn sold yesterday in Chicago. At the same time, they bought 2,500 lots of wheat and 5,000 lots of soybeans.
Black Sea market
The Egyptian GASC bought 114,000 t of Russian wheat during the 5th tender for the new campaign. The Russian prices were more competitive than Ukrainian or Romanian origins. Compared to last week, the delivered price rose by +8 $/t, which explains the low purchased volume.
Black Sea wheat prices followed the upward trend of both Euronext and CBOT. The delay in the start of harvests in Russia and Ukraine partly explains the current tension on the physical market. While the harvest is about to start in the central regions in both countries with much better yields than in the south, pressure on prices is anticipated by the majority of operators.
