Grains prices in Chicago went slightly up on Tuesday. All grains prices in Paris increased a lot.

The EUR/USD currency pair went down to 1.0805. Light oil went down to 47.74 USD/barrel.

Russian President Vladimir Putin and his Iranian counterpart Hassan Houhani confirmed the OPEC agreement for production reduction. This agreement was also signed by other non-OPEC countries which extract oil.

Trade on Tuesday was cautious again in view of the expected forecasts on grain areas and ending stocks in the USA at the end of the week.

Wheat may be boosted by the estimates for small 2017 grain areas in the USA as well as its poor current condition. According to USDA, 37% of winter wheat areas in Oklahoma are in good or excellent condition versus 40% a week earlier. High drought level has affected 81% of the areas in the state with the drought level being very high in 46% of the areas. Dorught conditions remain in Kansas with 38% of the winter wheat areas (38) are in good or excellent condition; the numbers for Texas are 34% (34%). We should mention the fact that rain in the USA started at the end of last week and its effect will be evident in the weeks to follow. Rain is still going on and it will continue in the following days, but with lower intensity.

Farmers in the northern parts of the USA have been trying to reduce wheat areas and increase corn ones for quite some time now. Corn sowing in the southern parts of the country advances steadily. In the longer run, however, humidity will be necessary for crop growing.

On March 31, 2017 USDA will announce information about the expected grains areas in the USA. This report could affect significantly farmers’ decisions in the oncoming campaign. The current economic interest demands a big growth in the soybean areas. This year, farmers can destroy the myth that they are the ones who demand a constant corn area increase. The fact is that their working capital has decreased a lot and storage areas are full of corn while soybean has been sold and is being exported. It makes no sense to hold cheap wheat and corn, waiting for a possible price increase. Meanwhile, soybean sales and export have reached unseen levels since the start of the season – the highest levels for the past few years. It is unwise to expect producers to misread the situation. Soybean areas decreased by 9 mln acres in 2007 while corn areas increased by 15 mln acres. Soybean areas grew by 11 mln acres in 2008. Soybean areas grew by 6.5 mln acres in 2014. These significant measures were taken in times when economic stimuli were minimal. The situation is different now and corn sowing seems much more lucrative than corn sowing. Analysts estimate 2017 corn areas in the USA of 90 mln acres and soybean areas of 88 mln acres. Some optimistic forecast even predict larger soybean areas than corn ones. The farmers, however, will have the final say and it will not be the result of economic stimuli, but rather the weather conditions – this will tune the situation. We should not read only one side of the coin, though. A situation appears immediately for corn prices to soar. For example, if less than 90 mln acres of corn are sowed and the average production drops below the trend line. This will result in corn yield in the USA decreasing by more than 25 mln tons versus 2016. Even with the big ending stocks available, this will strengthen the balance and prices will go up. Soybean areas of 88 mln acres do not guarantee large ending stocks and low prices with the current high demand worldwide. Even with soybean areas of 92.5 mln acres, but lower average production of up to 45 bushel/acre the balance will look quite steady. The numbers we are going to see on March 31, 2017 will not be the last – summer has not started yet.

Rapeseed export from Canada will decrease in the new season despite the estimated good yield. USDA’s representative in Canada predicted that rapeseed areas in the country will grow by 5% in 2017 – 2018 up to 8.5 mln hectares because rapeseed growing is more profitable than other grains. Despite areas growth, the yield will be as big as last year’s - 18.5 mln tons. Rapeseed stocks in Canada will be very low at the start of the new season – 1.38 mln tons versus 3.01 mln tons at the start of 2014 – 2015. Export will be 9.5 mln tons versus 9.8 mln tons in 2016 – 2017. In 2017 – 2018, rapeseed consumption in Canada will be 8.6 mln tons (9.0). Canada will be a strong exporter, but without any export growth – on the contrary: a slight decline is likely. In the new season, Ukraine will definitely produce more rapeseed, but volumes are just over 1 mln tons there, so this will not change the market status.

India has introduced a 10% import tax on wheat. However, this does not make any special reading. The amount of the new wheat yield in the country, which is currently being harvested, will be of paramount importance. Estimates rate it as record high. This assumption has been made on the basis of the fact that India will carry on importing and not exporting. And this is what is going to happen. The import will be limited, but demand for high quality wheat from the international markets will remain. The presumably high yield will complete the thinner wheat stocks in the country. We are not talking about turning the country into a net exporter of wheat again, reproducing the situation of 3 years ago. Based on the growing wheat consumption in India I cannot see this ever happening.

In the new season, MARS projects higher average grain production. The average grain production for the past five years has been 5,290 kg/hectare; it was 5,250 kg/ha in 2016, and the estimate for 2017 is 5,460 kg/hectare. The numbers for wheat were 5,600 / 5,370 / 5,760, for barley 4,820 / 4,870 / 4,890, for corn 6,900 / 7,490 / 7,120, for sunflower 1,940 / 2,030 / 2,100 and for rapeseed 3,260 / 3,080 / 3,290. Optimism rules all over Western Europe. No wonders are expected, but just a recovery after the issues in 2016.

Corn price – Corn futures in Chicago went up by 1 – 2 cents/bushel yesterday. An official estimate states that corn yield in South Africa will grow by 84% versus last year up to 14.3 mln tons. New areas contaminated by bird flu have been identified in the USA.

Soybean price – Soybean futures in Chicago went slightly down yesterday. USDA’s representative in Canada estimates the 2017 oilseed yield in the country at 25.265 mln tons while processing will be 10.523 mln tons (-4.53% on the previous year).

Wheat price – Wheat futures in Chicago went up by 2 – 3.75 cents/bushel yesterday. 85% of the winter crops in Ukraine are in good condition. 35% of the planned early spring grains areas have been sowed.