All grains prices in Chicago had a slight drop on Wednesday. There was a decline in grains prices in Paris too.

The EUR/USD currency pair went down to 1.0795. Light oil increased to 46.06 USD/barrel.

Futures on European benchmark Brent oil and a May delivery became cheaper by 1.22% to 50.34 dollars per barrel and earlier their price was 49.73 dollars per barrel, which was the lowest price since the end of November. The Cushing, Oklahoma reserves, considered a WTI hub, increased by 1.4 mln barrels. So, the total US reserves reached 533.1 mln barrels.

The lack of bad news yesterday lowered the grains exchange worldwide. There was dead-wing – constant growth on forecasts for South American yields, oncoming rainfall in US Midwest, oil price decline, a number of bird flu areas worldwide, interest rates’ growth – currently only in the USA.

Soybean yield in Brazil is estimated at over 110 mln tons, yield in Paraguay is estimated at over 10 mln tons while the estimate for Argentina is at over 55 mln tons. Corn yield growth is huge too.

Supply for these grains will be huge as it quickly grows at Brazilian and Argentinian ports.

Contrary to these facts, there is high soybean and corn demand worldwide. Soybean import in China will set another record for a 14^th consecutive year. USDA’s Beijing representative made the first estimate of 89 mln tons for 2017 – 2018 soybean import in China which is +3 mln tons on 2016 – 2017. Soybean import in China was only 25.8 mln tons in 2004 – 2005. 30 mln tons of soybean will be purchased from the USA, which is a signal for the fierce competition among soybean sellers worldwide. American soybean export is likely to decrease versus 2016 – 2017. Soybean production will decrease in 2017 – 2018 but this will not result in stock decline.

The need for soybean import in China will grow despite production growth on oilseeds in the country. The new governmental policy has led to the decrease of corn areas and the increase of soybean ones. Subsidizing soybean producers will increase their income as the profit from a decare of soybean is estimated to be 7.5% than a decare of corn. However, low soybean production remains in China, which have been 1790 kg/ha for the last four years – much lower than the level in the USA. There are a lot of reasons leading to this, but the main one is the small number of co-operative farms in China. Thus they are unable to apply modern processing technology, seeds, fertilisers and chemicals. Obviously, there is a process of inter-farm cooperation going on in China, but this is related to various demographical problems in the country.

Rapeseed import in China will rise to 4.1 mln tons in the next season, which is lower than the 2013 – 2014 record – 5.04 mln tons. National rapeseed stocks were being accumulated then but this policy has been forgotten now. Rapeseed production in China will go down by 400,000 tons in the new season to 13.1 mln tons, which reflects the end of a government regulation scheme of a minimum level of oilseed prices.

High demand for protein and oilseed oils will be high not only in Asia but in South America too.

According to information from Oil World, 2.4 mln tons of soybeans were processed in Brazil in February 2017 versus 3.2 mln tons in February 2016. 6 mln tons of soybean were processed in the country in the first two months of 2017, which was 0.5 mln tons more than 2016. Processing will reach 41.7 mln tons by the end of 2017 versus 39.07 mln tons a year earlier. Despite soybean processing growth in Brazil soybean stocks may grow to 7 mln tons at the end of 2017.

According to information from Oil World, American soybean export will be lower this season compared with the previous one. This will be the result of the estimated high soybean export from Brazil, which will be 61 mln tons in 2017, +9.4 mln tons more than 2016. It is quite likely that soybean export from Brazil will be higher as a result of the growth of the new yield on last season's yield – 12 – 15 mln tons. 4.84 mln tons of soybean were exported from Brazil between March 1 and March 19 versus 4.72 mln tons exported a year earlier. Export was lower in the last days of the period due to worse weather conditions and straikes at some ports. Nevertheless, the total March export is expected to reach 9 mln tons (8.37).

Wheat prices have risen considerably worldwide for the past few days. This contrasts the high wheat demand. Obviously, the oncoming harvesting campaign and the large stocks in the world are making producers worry and they have started selling. There is an interesting trend currently in China, where small milling factories reduce their production or close down altogether being under pressure by the high domestic wheat prices. Wheat import has been growing for the past few months and we are talking about high quality grains, which are used in flour production. Keeping this in mind, wheat prices in Chicago do not look high compared with other suppliers worldwide. Russian wheat is currently not very competitive due to the high ruble interest rate. Moreover, Russia will be badly affected by the restricted export for Turkey. However, it is quite likely that this issue will find a quick solution. Turkey has banned the import of wheat, corn and sunflower oil from Russia.

According to FAS USDA's latest forecast, wheat import in Egypt will reach 11.5 mln tons in 2017 – 2018, which is 0.5 mln tons more than the current season. Wheat consumption in Egypt will grow by 0.3 mln tons to 20 mln tons while wheat production in the country will be 8.1 mln tons. Experts estimate that 2017 – 2018 wheat ending stocks in Egypt will be 26% less than 2016 – 2017г down to 2.55 mln tons. Low wheat ending stocks in Egypt are a signal for the country’s oncoming problems. These stocks are sufficient to cover domestic consumption for about three months, which is too little.

The Ministry of Agriculture of India is about to introduce a higher wheat import tax of up to 10% versus the current 0%.

Corn price – Corn futures in Chicago went down by 2.25 – 2.5 cents/bushel yesterday. INTL FCStone projected corn areas in the USA of 91.6 mln acres in 2017. Last week, ethanol production in the USA decreased by 1,000 barrels daily to 1.044 mln barrels daily. Etanol stocks reached 22.595 mln barrels, which is a drop of 171,000 barrels for the week. Over 2.77 mln tons of corn were used for the production of ethanol during the week. Weekly export American corn sales are estimated at 900,000 – 1,200,000 from the old yield and + 100,000 – 300,000 tons from the new yield.

Soybean price – Soybean futures in Chicago went down by 1.75 cents/bushel yesterday. Weekly export American soybean sales are estimated at 350,000 – 550,000 tons + 100,000 – 300,000 tons. Soybean meal sales will be 150,000 – 350,000 tons + 25,000 – 100,000 tons while soybean oil export will be 0 – 30,000 tons + 0 – 30,000 tons. USDA reported an export sale of 120,000 tons of soybean to China from 2017 – 2018 yield. INTL FCStone estimates 87.3 mln acres of soybean areas in the USA in 2017.

Wheat price – Wheat futures in Chicago went down yesterday. Export American wheat sales are estimated at 250,000 – 450,000 tons + 50,000 – 250,000 tons. USDA reported an export sale of 120,000 tons of hard wheat to Saudi Arabia. 14.29 mln tons of wheat have been exported from Ukraine since the start of the season.