Elena Faige Neroba Business Development Manager Maxigrain

After the publication of the WASDE report, the market is bearish. Despite this, growth factors have been remained, which can be won back in the coming months. The weather in the EU and the Black Sea region contributes to the normal development of winter crops and the formation of a sufficient level of soil moisture for a new crop in most regions.

CORN

The key factors of uncertainty in the market have not been changed - these are demand from China and production in Latin America. Another significant increase in the forecast for Chinese imports to 24MMT was in line with expectations and offset by a decrease in demand from other importers, primarily the EU. The decrease in feed consumption in the EU does not correlate with the volume of meat production.

Mato Grosso growers, according to IMEA, sold 68% of their 20/21 corn crop, 19% ahead of the average. Forward sales at 21/22 reached 11%, which is 9% above the long-term average. Sowing is going on with a long delay due to the late harvesting of soybeans. Analysts expect China's corn stocks to drop 64.3MMT to their lowest level in five years. Corn prices in Dalian have been remained stable at a high level in recent days. The reason for this is the measures to restore the pig population. At the same time, the market casts doubt on the presence of such large reserves in China for a number of indirect signs. Among them are the disproportionately high volumes of forward contracts, and the declaration of intentions to expand the cultivated areas, and the admission of new varieties of GMOs, and the replacement of corn with wheat from the state reserve. The information appeared on the market that imports in 2021 could be up to 40MMT. The world's largest agricultural trader says China's record-buying activity is not over yet. According to the CEO of Cargill Inc. Dave McLennan, in an interview with Bloomberg, the purchases of the Asian country will have to "go through at least another couple of quarters" before the leading importer of soybeans and corn has sufficient stocks. Harvest prices, which have been risen to more than 50% since the August low, need further increases to limit consumption, he said. Inforgafica Farm Policy. But today, China has demonstrated that it considers itself to be the main market leader by canceling the purchase of 132,000 tonnes of US corn.

Major corn ımporters

Despite the fact that the market expected a reduction in the estimate of the corn crop in Brazil to 103-105MMT, and in Argentina - to 46MMT, the US department did not change its forecasts. Moreover, official Brazil raised its forecasts for corn production to above 110MMT.

Turkey will hold another corn tender on February 11. The previous tender on January 12 was closed at an average of $ 265 per CIF, which is almost in line with today's FOB prices. South Korea, after a two-month break, returned to the market and resumed buying corn. The interruption in supplies, according to the USDA, will lead to a reduction in annual imports by 0.5 MMT. According to Platts, feed mills in South Korea have been reluctant to buy corn due to rising prices, and since the last purchase on December 3, CFR NE for Asian corn has been risen by $ 48 / tonne or 20%. Trade sources from Singapore have linked South Korea's interest in the recent introduction of cheaper Argentine corn. US corn is the most competitive price in North Asia from October to November, according to Platts' Maize Arbitrage Price Matrix. Argentina's corn export season starts in March-April, which puts it in the category of the competition with other countries.

WHEAT

Russia has agreed on the procedure for calculating the export duty for the new season, which has raised many questions in the domestic market. In the current environment, it becomes dangerous to take short positions in view of the fact that the amount of the duty at the time of the transaction will not be clear. Here are just some of the questions the market has about this duty.

1. What contracts will be included in the benchmark: with what period of shipment? Or just spot? After all, it is natural that for short positions, the further from the date of shipment, the higher the risk that the price will change significantly by the time the contract is executed.

2. Will port breakdown be taken into account: small/deep? There is a natural spread between ports and this must be taken into account.

3. Protein premium? Customs statistics do not take into account different qualities, and there is a spread between different classes of wheat.

4. Corn and barley are not the "strongest" positions, they are rarely loaded from Novorossiysk, and many of these deals are tenders, the price of which for the exporter is higher than the market price due to additional costs.

5. If the parties decided to take into account the past discounts/premiums (under previous contracts) in the contract, this already distorts the price, but these are the obligations of private companies and they go outside the market.

Wheat stocks of major exporters are low

The General Administration of Customs of China has recently published "List of Countries / Regions Authorized to Export Grain and Plant-Based Feed to China." At present, the import of wheat from Australia, Canada, Kazakhstan, Hungary, Serbia, Mongolia, Russia, France, Great Britain, the USA, Lithuania is allowed. 1.7 MMT of wheat from the state reserve was sold this week or about 43% of the proposed volume.

Key points in the report are increases in domestic consumption in Argentina, Canada and China, which will reduce global supplies. Australia exported 2.5MMT of wheat in December, which is 173% higher than in December 2019. 800kMT was shipped to China. USDA infographics.

After unsuccessful attempts to limit the export of corn and limit the growth of prices for flour in the Argentine domestic market to 9% per year, the Argentine authorities may again increase export duties. Production in India may be 106MMT, according to local analysts, while WASDE estimates it at 107.6MMT. This will reduce the export potential, but will not affect the market as a whole, since today India has a limited number of potential buyers.

BARLEY

Before a new corn crop appears on the Chinese market, some of the grain will be replaced by imported barley, analysts at Strategie Grain say. Ukraine has already contracted more than 2 MMT of new crop barley for China, before the new year prices for CIF reached $ 295 per ton. Today the price tag in the ports of Ukraine fluctuates from $ 225 to $ 235.The sharply increased rates of purchases of Ukrainian, Canadian, Latin American barley indicate that China does not plan to soften its policy regarding Austrian grain in the nearest future, and it will look for new sales markets, first of all - Saudi Arabia.

VEGOILS MARKET

Argentinean processors entered into an agreement with the government, in exchange for guarantees of no increase in duties. The market is developing in a sideways trend due to the lack of new information and the beginning of a long vacation in China. WASDE's expectations didn't come true.

Producers of Mato Grosso sold 72% of this year's soybean crop, well above the average forwards. At the same time, against the background of the delay in the harvesting campaign, the supply of the first soybeans is limited, and information appeared on the market that some farmers may refuse to fulfill the contracts. In January, a record low amount of soybeans was shipped, and part of the lineup moved to February. Total shipment obligations have already exceeded 6MMT (according to various information - up to 12MMT), and most likely will not be fulfilled. China has already resold several boats of Brazilian soybeans and processed products, insuring it with American cargo. In anticipation of a long vacation, China has virtually suspended soy purchases as many processing plants will be closed until March.

The situation with the regular detection of excess glyphosate levels in Brazilian soybean shipments was again on the agenda between Russia and Brazil. According to ZernoOnline, over 2 years, Russian inspectors have identified about 600,000 Brazilian beans with a very high herbicide content.

Argentina's soybean meal exports grew 38% in January 2021 over the previous year's record, according to the Refinitiv commodity survey. Soybean oil shipments also increased and reached 477kMT, which is the highest export in January since 2017.

MEAT

China's grain imports hit a record high. China imported a total of over 129.2MMT of grain between January and November 2020, according to customs data for December, 29.6% up from the same period last year. In general, China's dependence on imports of staple crops such as rice, wheat and barley is rather low, although there is significant demand for other grains, oils and animal feed and meat products. The fact that corn and soybeans accounted for nearly 80% of total grain imports indicates that most of China's grain imports are for livestock feed.

The increase in grain imports to China over the past year is attributed to two key factors. First, the Chinese government is actively promoting pig production, which has led to increased demand for feeds such as corn and soybeans. At the same time, China's deep processing capacity for corn products has been increased from 76MMT in 2017 to 113MMT in 2019. Thus, the deficit in the supply of corn, previously a surplus crop, has been significantly reduced. Secondly, imported grains remain cheaper than Chinese grains. At the same time, the rate of pork imports to China has more than doubled compared to pre-ASF years, while domestic prices for meat, as well as for grain, remain at record highs. An outbreak of bird flu was recorded in Vietnam, 100k heads of birds were killed, and in Hong Kong, an outbreak of ASF, 3,000 pigs were slaughtered.

Despite the bearish report and the long Chinese holidays, there may still be a window of opportunity for soybeans and corn in March-April, and for wheat towards the end of the season. But as you know, bulls are herbivores and they need to throw food - news, and predator bears will feed themselves. If you want growth - give the latest news, and the more unexpected - the better.