Losers and gainers.
The week of panic and disappointment is finally over.
Corn prices rose moderately yesterday. Soybean and wheat contract prices also sluggishly went down.
The market is simply tired of reacting to "oval tariff news".
Although there is an important profile signal for wheat, which is not yet very involved in the threats of a "trade war" (its main buyers have nothing to seriously supply to the USA): the Russian Ministry of Agriculture announced that it may limit sales by direct non-tariff means if the harvest is low. With the peak low grain balances in the country after the surge in shipments at the end of 2024 and forecasts for a significant decrease in the winter crop yield, this is very likely.
According to data published by Rosstat as of February 1, wheat stocks in agricultural organizations are 32% lower than last year's level and 7% lower than the long-term average. In the Black Sea regions, optimal for sea exports, stocks are 3.1 million tons. This is two times less than last year's level on this date. We believe that if this is taken into account in the USDA forecast for the supply and demand balance released this week, the stock market should respond with an increase in quotes.
There may not be a sharp reaction on the supply side. Already now, the difference in the bid and ask prices for Russian wheat has risen to $4/t (12.5%, 248 and 252, respectively), and the spread with European and US wheat is uniquely small (we wrote about this the day before).
The macroeconomic situation for the next week is rather “bullish” for the stock exchange. According to published data from the US Bureau of Labor, the level of increase in employment outside the agricultural sector in February was lower than the forecast of 160 thousand by 9 thousand. Unemployment unexpectedly rose to 4.1%, with a consensus forecast of 4% and the same January level.
These are additional arguments for the pressure of the Presidential Administration on the Fed to ease the discount rate. Although in recent days the dollar index has already approached the minimum of September last year, having lost 4.6% since the beginning of February. For buyers in the US, these are losses: the ill-fated Mexican avocado may, accordingly, become more expensive, but for Mexican importers of US corn and Chinese soybeans, this is a profit.
The dollar, on the harsh statements of the administration, is losing its status as a "safe haven". If the "fuss" continues, investors will start looking for alternatives. Geopolitical turbulence calls into question the role of the dollar as the main defensive asset.
With a low dollar, the US shipped 6.2 million tons of corn worldwide in January, 43% more than a year ago, with most of it shipped to Mexico. The volume contracted there for the 24/25 season is more than 18 million tons, 7.6 million tons have already been shipped.
The situation is similar on the soybean market, although the main importer there is China.
Total bean imports in January/February reached 13.6 million tons. An increase of 4.4% compared to last year. The jump is the result of accelerated shipments ahead of the expected trade standoff with the US.
March imports are expected to be below 6 million tonnes due to the country's soybean stock levels. China will thus gain some leverage in pressuring Brazilian exporters and the tariff war with the US.
Base rates for Brazilian soybeans continue to rise in anticipation of a shift there of a larger share of Chinese demand from the US.
The FOB spot price spread between US and Brazilian beans has fallen to $5 per tonne for April offers, down from over $30 at the end of January. The party has begun for Brazilian soybean exporters.
The global market is likely to turn bearish, with US bean exporters having to dump.
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