Elena Faige Neroba

The market is dominated by bullish sentiment. The weather factor and uncertainty in yields, a strong euro and China's appetites are pushing stock quotes and the cash market up. Most of the factors mentioned are of a short-term nature and in the nearest future, the market will win them back. Both USDA and IGC didn’t include actual weather impact in the reports but market already working with much lower numbers.

CORN The US has not yet published data on losses due to the storm derecho, and the market estimates production expectations in Ukraine at 32-34MMT. The market is still waiting for more accurate data on the supply level and is in support.

Bloomberg reported that, according to their estimates, China has practically exhausted the non-tariff quota on corn imports. Given Beijing's growing appetites for livestock growth and stockpiling, it is possible that the quota will be increased. There are rumors in the market about 12MMT and higher. At the last auction, it was possible to reduce the domestic price of corn and slightly stabilize the domestic market. The EU has again zeroed the import duty on corn. Romania's harvest could be cut by 40% due to drought. Crops in France are also not in the best condition.

The rate of export of corn from the United States is significantly higher than last year, primarily due to sales to China. As of August 27, according to the USDA, 13.4MMT of new crop corn have been sold, out of which 6.4MMT, or 48%, to China, compared to 5.5MMT this season, out of which China bought 0.1MMT or 1,1%.

Vietnamese buyers are postponing purchases and canceling some South American corn boats due to an oversupply of grain. Importers booked about 3MMT for August-September, but demand remained weak. They are now considering postponing purchases until later months, Reuters reports.

WHEAT Exporters' activity can create difficulties with purchasing and shipping in the ports of the Black Sea region in September and October. The market senses a shortage of feed wheat and a limited supply from the EU. Jordan bought 60 thousand tons of Ukrainian wheat for delivery in the second half of October at $ 237.5.

Reuters this week collected expectations from local ministries and agencies: France - 29.5MMT, Germany - 21.88MMT, Britain - 10.5MMT, Poland - 11.8MMT.

On the other hand, the market is somewhat balanced by news from Russia and Ukraine. According to the data of the Ministry of Economy of Ukraine, based on a survey of farmers, the wheat harvesting campaign has been completed, the yield is estimated at 26.7 MMT. IKAR overestimated the production potential in the Russian Federation to 82.9MMT. Australia is still set to harvest up to 30MMT of wheat (the most conservative estimate is 26MMT), while Canada is expected to harvest 35.74MT, which is + 11% YoY. The crop will be the second largest crop after 37.6MMT in 2013. Average production of all wheat for 5 years ~ 30.9 MMT. Argentina's wheat crop in 2020/21 could fall by 50% in the northern and central parts of the country's agricultural belt due to drought, exacerbated by unusually severe frosts and crop-eating pests, the Buenos Aires Grain Exchange said.

Prices for food wheat of European origin continue to strengthen. Reuters notes that Polish wheat is already being considered as an alternative to French wheat in the Algerian market. BARLEY Argentina intends to sell at least 250kMT to China this year and a record 380kMT in 2021, Reuters reports. They could replace Australia due to politics tensions. Algeria will hold a tender for ~ 50km (2*25) barley on September 2 with bids valid until September 3, shipment from October 1 to October 15 to October 16-31.

VEGOILS MARKET A subsidiary of China Xiangtai Food Co., Ltd., Chongqing Ji Mao Cang Feed Co., Ltd., has entered into an agreement to sell 12KMT soybean meal to the Zhenjiang subsidiary of China Grain Reserve Corporation (Sinograin), according to World-Grain. China Xiangtai Food Co. Ltd., mainly focused on pork processing, recently acquired a 51% controlling interest in Chongqing Ji Mao Cang Feed Co., Ltd. (JMC). JMC, a private enterprise specializing in the sale of feed raw materials and offering feed mixture solutions for the expansion of the southwest China market, has more than 200 farmer customers and nearly 100 customers in the feed industry.

Brazilian media are reporting that the government may waive import duties on soybeans, corn and rice to combat rising local prices. The reports say the current taxes are 8% for corn and soybeans and 12% for rice. Brazil, the world's largest producer and exporter of soybeans, faced a shortage and high cost of beans between September and February due to active sales of future crops by farmers. Processors are ready to import American raw materials, the market estimates the import potential at 1 MMT per year.

As of August 27, the United States exported 22.4 MMT of new crop soybeans, of which 12.5 MMT, or 56%, was sold to China, compared with 5.6 MMT this season, of which China bought 0.3 MMT, or 4.6%. Infographics - Benjamin Bodart The Ministry of Economy of Ukraine expects sunflower harvest at 14MMT, which added the foundation for the growth of prices for oil and meal. This season will see competition between the EU and China.

MACRO In August, OPEC increased production by 550 thousand barrels per day, although it could be increased by 1.2 million barrels per day, say in ProFinance. Typically, monthly reports from OPEC and the International Energy Agency are released in the second week of each month. In anticipation of these reports, Bloomberg is conducting a survey of oil market experts from different countries, as well as reputable consulting firms, many of which, like Rystad Energy and JBC Energy, advise OPEC. Bloomberg also takes into account the readings of its own system for tracking the movement of oil tankers, and also takes into account information from third-party experts such as Petro-Logistics.

According to a recent survey by the agency, the production of the Cartel rose in August, which, in fact, was expected. However, the growth was almost 2 times less than allowed by the agreement in force since May. The fact is that Iraq and Nigeria, which had been fined in May, June and July, began to compensate for non-compliance with the limits by additional volume restrictions. Thus, in August, OPEC increased production by 550 thousand barrels per day to 23.94 barrels per day, according to the survey. At the same time, the terms of the deal implied the possibility of increasing production by 1.2 million barrels per day.

Saudi Arabia - the flagship of OPEC - increased production by 410 thousand barrels per day to 8.86 million barrels per day. For this country, the production limit is 8.99 million barrels per day. The UAE and Kuwait also increased their production. These three countries in June voluntarily cut production by three additional 1 million barrels per day.