European market
The strength of the euro against the dollar has pushed the parity above 1.16 yesterday. This return to the highest levels seen since October 2018 mechanically implies prices’ adjustments, particularly in view of a cheaper import potential in the euro area.
The latest July estimates from the IGC, have confirmed the hypothesis of a downward revision of the world production in both corn and wheat compared to previous estimates. However, the corn global production should be higher than last year, confirming the trend seen in the July USDA's assessment. The IGC now expects a wheat production to match last year's level, but the stocks with major exporting countries should drop.
In oilseeds, a firm veg oil market, especially for the palm oil in Malaysia, is supporting the seeds’ market. In addition, the downward revision of the rapeseed production potential in Ukraine will limit the export availability compared to last year. On Euronext, the November delivery managed to post an increase of +1 €/t, above the support zone.
American market
Although soybean sales reported yesterday (132 000 t) are far less impressive than those recorded in recent days, Chinese purchases of U.S. soybeans continue. The current pace, confirmed by the weekly export figures is far from last year's situation where, at this time of year, China was ignoring US origins in the midst of a trade dispute between Beijing and Washington. Soybean prices, which had been stabilizing for several days below the $9/b level, are again testing this level as the weekend approaches. At the end of yesterday’s session, the September 2020’s contract in Chicago closed at its highest level since the beginning of March above $9/b.
Weekly sales of old corn crop are slowing down. On the other hand, new crop sales volumes are increasing. Indeed, 2.3 Mt have been sold in last week according to USDA’s figures. This number includes the contracts announced on July 14 in 1.76 Mt. Despite this positive export activity, prices in Chicago are stabilizing due to good growing conditions and possible rains in the coming days.
Yesterday, wheat prices in Chicago declined slightly despite encouraging weekly export sales of 616 700 t. Downward revisions of the U.S. production prospects by the IGC had no effect. Indeed, the IGC revised the U.S. wheat crop by about -0.5 Mt compared to its previous estimate.
Black Sea market
Flow of information coming from the plains encourages Agritel to revise its previous Ukrainian production estimate from 2.8Mt down to 2.52Mt. As a reminder 2019 production was 3.35Mt.
This reduction of forecast is motivated by:
•. A reduction of the area to be harvested from 1.1Mha to 1.05Mha, because of some areas write-off in the south of the country
•. And by a reduction of the yield forecast from 2.6T/ha down to 2.4T/ha in the wake of echoes received from the plains.
Local operators are expected a slight reduction of the volume of rapeseed to be crushed domestically from 0.35 Mt down to 0.25Mt as a maximum. Consequently, the 2020/21 export potential of the country is seen at 2.25Mt vs 3.0Mt last season.
In addition, should be noted that the oil content of the 2020 rapeseed is lower than in 2019. On a dry content, oil content is so far recorded in average at 43% vs 45% last year.
