Grain prices in Chicago went down on Monday with wheat being on top. Prices in Paris were on the fall too with wheat once again leading the trend.

The EUR/USD currency pair increased to 1.0591. Light oil decreased to 54.17 USD/barrel.

Information from oil company Baker Hughes on Friday showed that the number of oil rigs increased by five last week, which is sixth increase in a row on a weekly basis. Thus, the total oil rig number is 602 – the highest number since October 2015.

Wheat futures decreased yesterday. It appeared that nobody wanted to physically receive the wheat at the end of the March contract, so sales began. Weekly export checks on wheat from the USA were at 538,000 tons, which almost repeats last week’s level. Corn export checks were 1.46 versus 1.17 mln tons a week earlier. Soybean checks were at 705,000 tons, which was much lower than the level from the previous week.

Another piece of the bear position is the good crop growth in South America – almost no problems at all. There was some rainfall in Brazil at the weekend. Soybean harvesting and safrinha sowing has been delayed, but only slightly. Rain decrease is expected before the end of the week..

There has been some rainfall in Argentina too, which enhanced crop growth in the central part of the country. There will be more rainfall at the weekend, which will further stimulate crops.

Winter wheat crops in France were in slightly better condition last week. As of February 20, 2017, 93% of soft wheat crops were in good or excellent condition (92% a week earlier and 94% a year earlier). 90% of winter barley areas were in good or excellent condition (91% and 94%) while 85% of hard wheat areas are in the same group (85% and 90%). As of February 20, 2017, 17% of the planned areas have been sowed (8% and 6%).

This is, however, only the first reading of the text. Humidity is low all over the country. Wheat is now suffering from the lack of rainfall. Corn is likely to have some problems too, especially in the sowing phase. Wheat crops in the USA have been hit by drought so far, but this is now felt in Europe as well. Rain in India has been missing for quite some time, which will be a key factor for the decrease the wheat yield forecast.

American farmers are still in two minds about the future corn and soybean areas. Facts favour soybean now. Soybean price has increased by 15.2% since the start of the month while corn price rise is only 2.5%.

Palm oil price has gone considerably down. Initial reports confirmed that palm oil export from Malaysia remained unchanged in the first 25 days of February, compared with the same period of last year. This did not boost the market and the price dropped to its lowest level since November 16, 2016. Analysts expect a price rise before the end of April as a result of the drought in 2015. Indonesian palm organization expects a 30 – 40% increase on palm oil demand for biodiesel production in 2017. Despite the price currently falling, demand boost and price increase are expected before the end of the season.

Corn production will decrease worldwide in the new season due to the forecast for decreased areas in the USA and China – the two biggest producers. A decline in corn stocks is expected too. World corn yield will be 1.026 billion tons in 2017 – 2018, which will be a 26-mln-ton decrease versus 2016 – 2017. Corn areas will decrease by 1.8 mln ha to 0.1812 billion ha. There will be a decline in China, the USA and South America while there will be growth in the EU and the ex-Soviet republics. The growth in Ukraine and Russia will continue for certain. Areas in China will decrease by 2.1% to 36 mln ha. Corn stocks will decrease worldwide, despite being still big. Demand will keep growing fast.

Between February 17 and February 23, 522,700 tons of grains were exported from Russian sea ports versus 317,900 tons a week earlier. The export consisted of 426,400 tons of wheat, 81,200 tons of corn and 15,100 tons of barley. The Sudan with 107,100 tons, Egypt with 66,100 tons and Vietnam with 64,600 tons were the biggest buyers.

Between February 18 and February 24, 729,300 tons of grains were exported from Ukrainian sea ports versus 731,900 tons a week earlier. The export consisted of 230,300 tons of wheat, 491,500 tons of corn and 7,500 tons of barley. Iran with 101,200 tons, Egypt with 70,700 tons and Spain with 60,000 tons were the biggest buyers. 

Altogether, the two countries exported 1,252,000 tons of corn in the week versus 1,049,800 tons a week earlier.

Between the start of the season and February 22, 2017, 28.65 mln tons of grain were exported from Ukraine, including 13.33 mln tons of wheat, 10.53 mln tons of corn and 4.64 mln tons of barley. Wheat supply for Egypt has decreased by 18.5% to 1.06 mln tons, supply for Thailand went down by 12.5% to 1.4 mln tons and supply for Spain is down by 67% to 276,000 tons.

Rusagrotrans reported that about 25 mln tons of grains were exported from Russia between July 2016 and February 2017. This makes a delay from last season’s tempo, despite the big export in January (highest monthly level since 2010 – 2.39 mln tons). 26.18 mln tons of grains were exported from the country in the same period of 2015 – 2016. Wheat export was 19.24 mln tons in the mentioned period versus 19.58 mln tons a year earlier. Grain export from Russia was between 1.8 and 2.0 mln tons in February versus 2.75 mln tons in February 2016. Egypt will be the main grain recipient with the already purchased 710,000 tons of Russian wheat, but this will not be enough to beat the March 2016 record of 2.77 mln tons. March 2017 grain export from Russia is projected at 2.5 – 2.6 mln tons. Between August and September 2016, Russian grain export for the whole 2016 – 2017 season was projected at 37 mln tons, including 28 mln tons of wheat. The forecast was initially decreased in January to 36 mln tons and now once again to 35.1 mln tons, including 27 mln tons of wheat.

Despite this season’s lower wheat and corn yield potential, which might lead to price increase, Russia could prevent this because of the country’s big wheat stocks. We hope that oil will remain relatively expensive in the new season, which will keep the ruble high too. Thus, Russia will not manage to offer cheap wheat at the international market.

As of February 27, 2017, 95% of areas sowed with winter grains in Ukraine (6.8 mln ha) have come up, Ukrainian Ministry of Agriculture reported. 81% of the areas (5.5 mln ha) are in good or excellent condition while 19% (1.3 mln ha) are in poor condition. Winterkill loss is below 10% of the sowed areas.

Current season soybean yield in Brazil will exceed 107.8 mln tons according to Agroconsult’s latest forecast. The previous forecast estimated 105.3 mln tons. The country’s export potential is estimated at 61.1 mln tons, 9 mln tons of which will be exported as early as February and March. USDA projected soybean yield in Brazil at 104 mln tons with 59.5 mln tons exported. Soybean yield in Argentina will be 54 mln tons in 2016 – 2017 versus 57 mln tons in 2015 – 2016. USDA estimated a yield of 55.5 mln tons.

Wheat price – Wheat futures in Chicago decreased considerably yesterday following rainfall in the USA’s wheat belt. However, rainfall was bleak in Kansas. In the week ending on February 23, 2017, US wheat export checks were at 537,877 tons, which marks a 6.12% decline on the previous week and a 38.8% decrease versus the previous year. Strong export has to remain if USDA’s forecast for this season’s wheat export from the USA is to be completed. Egypt is again on the market for wheat with a delivery between April 1 and April 10. This season will be very strong as far as wheat import in the country is concerned. 81.7% of winter wheat crops in Ukraine are in good or excellent condition.

Soybean price – Soybean futures in Chicago went down by 2.25 – 2.5 cents/bushel yesterday. US soybean export checks were at 704,945 tons (-35.6% and -33.2%). Between the start of the season and now export soyben checks have been 6.18 mln tons higher than last year. China expects soybean import decrease following the reduced processors’ margins. Soybean meal demand is weaker due to the bird flu. 34.3% of soybean areas in Brazil have been harvested with an average of 26% in the past few years.

Corn price – Corn futures in Chicago went down by 2.5 – 3.75 cents/bushel yesterday. US corn export checks were at 1,461,396 tons (+25% and +100%).