European market
The markets marked a decrease yesterday in all commodities, mainly on fears of the global economic consequences of the coronavirus, more than on the fundamentals provided by the USDA report.
From a financial point of view, a very strong recession raises fears at the global level. And France is far from being spared from this situation. Indeed, the French economy depends heavily on tourism and the crisis affects the airline sector, one of flagship industries of the country. The stock and crude oil markets fell again yesterday in a context where covid-19 problems seem far from being resolved across the Atlantic with insufficient sanitary measures.
This morning the euro fell to 1.1290 against the dollar and crude oil was trading at 35.60 $/b in New York after testing the 40 $/b at the beginning of the week.
Unsurprisingly, the USDA revised down future wheat production for Europe and Ukraine. This decrease was offset by an increase in estimated future production in Australia accompanied by a drop in global livestock consumption. The impact of the health crisis on global demand rises the most fears.
In corn, there are also few surprises, with production in Argentina estimated at 50 Mt and in Brazil at 101 Mt. In the USA, 2020 production is expected to reach 406 Mt, which could lead to a 2020/2021 end-of-season stock of 84.4 Mt, the level never seen since 1987/1988 MY.
On the international scene, China purchased again soybeans from the USA for 720,000 t. Tunisia, for its part, bought 25 000 t of wheat and 50 000 t of feed barley from optional origins. Saudi Arabia has launched a tender for 960 000 t of feed barley.
Rapeseed is losing ground in the wake of crude and palm oil while soybean prices remain steady.
American market
Wheat prices have fallen sharply, with 316 Mt of estimated world wheat ending stocks 2020/2021. Be careful, however, of this increase, mainly linked to China and India, while stocks in the 8 main exporting countries are not changing much. However, the market is also keeping a close eye on the 5 $/bu level in Chicago, which, in case of a break, would mean a bearish chartist signal.
The report confirms very high US stocks in corn, with great uncertainty about the ethanol industry needs in the context of the current crisis.
Only soybean appears a little stronger, with very sustained Chinese demand, even if pre-crisis levels have not yet been reached.
Funds were net sellers yesterday for 5,500 lots of wheat and net buyers for 13,500 lots of corn and 1,500 lots of soybeans.
The funds' very short net position in corn suggests that they could buy back their positions at the slightest weather risk.
Black Sea market
The USDA made few changes in its second report for the 2020/21 MY.
In wheat, the USDA revised Ukrainian production to 26.5Mt against 28Mt previously. The Ukrainian export target has also been reduced by 1.5 Mt to 17.5 Mt. The Russian and Kazakh wheat production and export targets remain unchanged.
For barley and corn, USDA left its forecast unchanged.