Improving corn condition and favorable weather forecasts for the US pressured corn prices in CME, while aggressive competition from the Black Sea region did the same for wheat prices. Likewise, the fall in domestic prices has dealt a blow to trading activity.
At the Rosario cash grain market, trading activity was mostly concentrated in negotiations with immediate delivery, but there was also interest in exporters' bids for October delivery. 2017/18 corn trading activity was much lower than in previous weeks.
The current situation of the export sector is ambiguous towards market activity. With a maximum payment capacity of between USD 140 and 142 per ton and cash offers around USD 135 per ton, there is a healthy export margin. Simultaneously, FOB basis for Argentine shipments are competitive in relation to those offered by our main competitors, as shown in the attached chart.
When we look at volume, however, exporters are not showing their maximum potential. Export commitments (expressed in DJVEs) stand at 16.5 million tons, two million less than at the same time last year, despite the 27% (or 8 million tons) jump in estimated production.
At the same time, the sector has already bought just over 17 million tons in the current market season, so it has enough stock to carry out the 100% of its commitments. This may detract incentives to improve prices in the domestic market. As a reference, at this point last year commitments stood at 18.5 Mt whereas total purchases equaled 13.5 Mt, so they had to go out to get 5 million tons, supporting prices.
Wheat prices deflated in the external market but there is a light the domestic one
The bearish trend for wheat prices has left no stone unturned. In Chicago, Kansas and Minneapolis wheat prices are being pressured by expectations of generous wheat production in Russia, and FOB prices for Black Sea wheat are far below those from US ports.
Meanwhile, in the local market, the wheat for January 2018 delivery has traded between USD 166 and 168 per ton. The price is supported by disappointing wheat production from our main customer: Brazil. According to Conab's latest report, the cereal crop would fall from 5.58 to 5.20 million due to adverse weather that affected yields. This may implies that our neighbor country will demand more of our wheat for the next harvest