Grain prices went up in Chicago on Tuesday with soybean on top. Prices in Paris dropped slightly.

The EUR/USD currency pair went down to 1.0575. Light oil increased to 53.00 USD/barrel.

In a statement in the Congress, Fed Chairperson Janet Yellen called for cautious budget increase which could be performed by Donald Trump’s administration, France press reported.

The lack of “bull” news yesterday made the markets decrease. On the other hand, Mexico sends out signals that the country will not tolerate the changes demanded by the new American administration and will search for South American corn and soybean supply.

There has been some rainfall in the Southern plains of the USA, which will affect wheat crops positively. Moreover, with the high temperatures now, the plants are growing fast. Rising temperatures are expected in the Northern plains, which will lead to snow melting and floods.

Soybean harvesting in Brazil will affect the oil sector in the world rather sooner than later. There is pressure for lower corn prices too. The future of the soybean crop in Brazil is brighter now. A few weeks ago this looked like the maximum but it was not. Soybean decrease expectations are based on the bird flu in Asia, the reduced margins by soybean processing companies in China and Mexico’s ambition to find supplies from South America. A law bill is being prepared in Mexico which will reduce supply from the USA and will increase supply from Brazil and Argentina. There has been too much talking, however, and USDA announced yesterday a new sale of 142,500 tons of soybean from the current harvest to Mexico. An export sale of 229,000 tons of new harvest corn to Japan has been announced too.

Rain has stopped in Brazil and harvesting has increased the tempo. There has been some rain in the dry parts of Argentina which will favour grain growth as well as an increase in yield forecasts.

Warm weather in the USA helps grains start their fast growth. It is, however, only mid-February, so new cold days are quite likely. The risk is high and it will stay like this in the next few weeks. Wheat demand is high worldwide, but so is supply. However, supply is weakening with every week running (apart from Argentina and Australia) which means that prices are to remain at their current level. Corn demand for ethanol production is high in the USA. Ethanol export is good too, despite China’s absence as a buyer.

ABARE’s latest estimate states that grain yield was 58.9 mln tons in Australia in 2016 which is 49% more than the previous year. Yield marked the biggest growth in the state of Victoria, where it reached 10 mln tons versus only 4 mln tons in 2015. Yield grew to 16 mln tons (+43%) in the state of New South Wales while the growth in South Australia was 56%. The average barley yield was biggest in history – 310 kg/decare. Barley areas were 3% larger than last year up to 8.7 mln decares. In 2016 – 2017, wheat yield reached an absolute record of 35.13 mln tons, which is 11.5 mln tons more than last year and 5.23 mln tons more than the previous record set in 2011 – 2012. Record 4.0 – 4.3 mln tons of grain were exported from Australia in January 2017. The previous record was set in January 2012 – 3.0 mln tons. Demand was high on behalf of Saudi Arabia, China and India. Wheat and barley prices are low due to the record yields. Australia has exported 8.2 mln tons of wheat since the start of the season and export may rise to 22 – 25 mln tons at the end of the season. Barley export was 3.3 mln tons in the first five months of the season. Australia is a bigger and bigger player on the world grain market with record yields, weak national currency and low domestic grain prices.

The Russian ruble has been constantly growing expensive in the past few months. This has not stopped grain export so far, which is at the 2015 – 2016 level. The ruble rising to 57.64 rubles for 1 USD is a very high ratio. I expect export will be much slower in the next few weeks. It is worth a mention that good grain export was kept even in the cold months of January and February. Interesting months are to follow with Russia making an attempt to sell a fraction of its available wheat.

Rusagrotrans predicted that grain export from Russia will rise to 2.9 – 3.0 mln tons in March. Export was 2.77 mln tons in March 2016. Wheat export will be 2.2 mln tons (1.7). February export forecast remains unchanged at 2.3 – 2.4 mln tons (2.751), including wheat 1.7 – 1.8 mln tons (1.85). 2.39 mln tons of grain were exported from Russia in January 2017 versus 1.9 mln tons in January 2016. 25.3 mln tons of grain (26.2) may be exported from Russia between July 2016 and February 2017, includong 19.5 mln tons of wheat (19.58).

85% of winter crops in Ukraine are in a good or satisfactory condition according to information from the country’s meteorological service. Winter crops cover 81.15 mln decares, which is +3.8% more than the previous year.

US farmers have sold about 80% of their soybean stocks as well as about 40% of their corn and wheat yields. This means that significant amounts of corn and wheat will be on the market in spring. Signals are expected for the demand shift from the USA to South America. Supply from South America is not big enough.

Soybean price – Soybean futures in Chicago dropped for a second day in a row yesterday. Soybean processing in the USA is expected at 4.32 – 4.33 mln tons. Doane analysts project soybean areas in the USA will be 86.7 mln acres in 2017 versus 83.4 mln acres in 2016. About 32% of soybean in Brazil has been harvested, which is 10% more than the average for the past few years.

Corn price – Corn futures in Chicago went slightly down yesterday. Doane projects 90.6 mln acres of corn (94) in the USA during the new season. 6% of first crop corn areas in Brazilian state of Parana have been harvested. 23% of the planned safrinha areas have been planted.

Wheat price – Wheat futures in Chicago went down by 2 – 3 cents/bushel yesterday. Japan is trying to buy 113,248 tons of wheat from the USA and Canada.