Analysis 07/02/2022

European market

This week will be rich in news on the markets and volatility will be present, without a doubt. Today, Emmanuel Macron is going to Moscow to discuss geopolitical issues, and a USDA report will be released on Wednesday.

On the international scene, the US sold 295,000t of soybeans to China, and 110,000t of feed wheat and 65,000t of corn to South Korea.  The end of the Chinese New Year this week could lead to further large purchases from China. Russia is expanding its export destinations as China now allows sourcing from all Russian regions.

The rebound of the euro against the dollar is penalising the competitiveness of European origin and the withdrawal of Algeria from French origin suggests a high carry-over stock. Exports to China in this context remain key for the balance of our balances.

Rapeseed prices were down on Friday in the wake of canola, despite the firmness of crude oil and soybean prices. The reopening of the Dalian market this morning in China is showing strength.

This morning, the euro remains firm against the dollar at 1.1440. The ruble against the greenback is trading at 75.95. Oil continues to rise to 92 usd/barrel  in New York.

American market

All commodity prices in Chicago rose sharply on Friday, with funds buying back positions ahead of Wednesday's USDA report. Geopolitics remains a matter of concerns for all traders, with a continued build-up of Russian troops on the Ukrainian border.
The USDA attaché in Argentina has lowered its corn production estimate to 51 Mt, down from 54 Mt posted last month. In total, the South American corn production is expected to be cut by at least 6 Mt from last month's USDA estimate of 173.9 Mt. The Chinese imports remain crucial for the evolution of prices. The estimates are subject to divergence and are estimated at between 20 and 28 Mt. On the bearish side, US ethanol stocks remain high, as current weather conditions in the US are limiting road traffic.

The biggest surprises are expected in soybeans, with a likely significant reduction of production estimates in South America as a result of the recent water shortage combined with a persistent Chinese appetite.

On Friday, funds were net buyers in 1,500 lots of corn, 5,000 lots of soybeans and 6,000 lots of wheat.

Black Sea market

China has allowed wheat and barley exports from all Russian regions, opening its market to grain exports from Russian deepwater ports, Russia's Federal Service for Veterinary and Phytosanitary Surveillance said. Previously only seven regions could export grains to China, and the list didn't include Russia’s leading grain-producing regions.
The Russian exports could take market share from European, North American, and Ukrainian origins. However, Russian exports to China are unlikely to rise significantly this marketing year, being limited by test shipments.

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