LAST WEEK MARKET COMMENT

Without significant fundamental news, prices mostly were lower during the past week.

Traders are rather cautious ahead of the publication on Wednesday, of the NASS report on US quarterly stocks and farmers’ plantings intentions on corn and soybean, with a secondary consideration on stocks. 

They expect 90 million acres for soybean and 93 million acres for corn.

Consequently, corn and soybeans will compete for the acres this year depending on the farmers' profitability and crop rotation cycles. 

In Brazil, the soybean harvest in the key state of Mato Grosso is considered as achieved slightly above 90%. 

According the CONAB, 60.1% of the acreage in Brazil was harvested on March 19, and demand will gradually shift away from the US towards South America.

Inflation concerns are back in play again for the US dollar,, with yet another stimulus proposal hitting the political presses in the US – more direct payments begin called for.

And a further strengthening in the USD values could add downward pressure on the overall commodity values.

To note that the one-sided market continue, with the ratio of long positions vs. short that remains close to 90%.

This increases the chance of a sharp pullback if will arrive fundamentally bearish news.

No particulary movement by funds past week, with exception on corn that added some positions on the long side.

The Suez Canal is still blocked and there’s plenty of speculation about how long it will take to clear.

This is flowing through yet again into freight markets, with the front-end inverse that we’ve seen in bulk freight holding up firmly and continuing to fill out the forward curve with the new pressure.

At the same time, the new virus surge in Europe and the stagnating recovery there, not helped any by the new lock-downs, continues to lead towards diverging growth expectations.  

The physical business remains subdued and Black Sea prices fell sharply last week.

Markets are pricing in a substantial lag before any major recovery hits there.

In this context, wheat prices traded lower again, with improving weather in the US. 

Black Sea weather maps are filling in nicely on the extended runs with a widespread 1.5″ or so across the majority of the Russian winter wheat areas and much of Ukraine.

The pace of fields’ work is accelerating in the southern federal districts. 

In Russia, sowing has been completed on more than 340 Kha so far, according to last week official data. 

Weather conditions are favourable also in Europe, suggesting a significant rebound of the grains production compared to last year. 

French wheat crop conditions continue to remain at high levels with FranceAgriMer that said that 87% of winter wheat and 85% of winter barley are in good to excellent conditions, unchanged from the previous week. 

Spring barley plantings are now over in France and the first crop rating is showing that 92% of the crops are in good to excellent conditions vs. 86% last year to date.

Wheat price action will be mainly a function of the North hemisphere crop in the coming months. 

However, most of the northern hemisphere crop will be established only in the yield-sensitive period between April to June. 

Certantly, one of the wheat market's key price driver will be the pace of Russian exports in new crop. 

However, we also must note that wheat is finding some support from its competitiveness in the animal food industry compared to corn.

And so, March 31st report can potentially move price in either direction. 

Corn prices had seem in line on the week, but by the end of the week closed lower week on the week. 

The critical concerns for the world corn supply were the adverse weather conditions for the second crop in Brazil. 

But now, South American weather maps are also looking fairly decent for safrinha corn, with dry weather into this week but some more moisture into next.

A good size of the Brazilian crop is key to keeping a lid on the world crop values. 

The US Sec of Ag made comments Friday that partially re-assured grain markets about the potential Mexican GMO ban, suggesting that such a ban would not impact animal feeds. 

US corn/milo are both significant exports to Mexico to fill feedlots there.

The corn planting and stocks numbers will be a key driver of prices, of course.

To note the constant risk remains of long funds liquidation-led price action due to their sizeable long position. 

Also soybean prices declined even if only marginally. 

Brazilian harvest continues to catch up to the average harvest pace. 

The increase of supply from brazil are pushing demand away from the 

US, where now the primary demand driver is the local consumption. 

However, current high crush margins should keep up the demand for soybeans. 

The energy complex's weakness continued to spill over to the vegetable oils values, pushing soybean oil values lower over the week.

Also rapeseed prices retreated on the May 2021 delivery, which is the last contract of the 2020’s crop. 

This movement followed the fall of the canola, however, speculators are still holding decent positions on this product, generating a high volatility.

A lot of further price action for next week will be driven by the reported numbers in the NASS report. 

In add, as a reminder, from 1 July 2021 the Russian Ministry will also introduce a new export duty on sunflower seeds that will replace the current tax of 30% of the customs price but not less than 165 €/t.