Morning Comment – Wheat Corn Soybeans – 30/04/2015

No more news overnight from Russia but the decision is obviously imminent. Market would be now very disappointed if tax is not actually cancelled as of mid-May. But Russia seems to have very little choice now. Domestic wheat prices have fallen as international buyers were waiting for the tax to be lifted to show some bids. If Ruble recovered from Jan, it is still at a low level and fresh US Dollars will be welcome in the country hit by inflation on food stuff.

 

Nonghyup Feed Inc in South Korea is said to have bought 69kT of feed wheat and 65kT of corn. Optional origins. South Africa may raise its estimation on the corn crop to 9.82MT from 9.67MT. Still significantly down from last year though (14.25MT, but that was a record).

 

First notice day today for K5 US Contracts. Traders cleaned their books, rolled position, took profit on lower USD,… Green day. Led by beans. Another strike in South America: Argentinian crushers and dockers want higher salaries. Concern of corn planting impacting the soy acreage: farmers are so quick to plant corn they might decide to stay on the truck and plant a little bit more, decreasing the soy acreage. But we’ll see soon, soy planting will kick-off. Funds bought 3,000 lots of soybeans. Corn driven up by soy and short covering, funds were even. Wheat follow the pack, funds bought 5,000 lots.

 

Ethanol production was down from one month to another. It need to pace up a bit to meet the USDA target. Concerns are raising anyway. We know there will be big crops. But if on the other side the global demand is decreasing, price slide could be far from over.

 

Nothing really to say on weather today. Normal weather for the season across the US plains. Crop progress on Monday.

 

Eventless day on MATIF actually. Market was more or less neutralized between higher US Markets and higher EURUSD. The only action was on the K5/U5 and K5/Z5 spreads: 7,000 lots of K5 were spread, with an obvious pressure from shorts on K5. It’s probably not over yet, being pushed to physical is much more comfortable when you’re long rather than when you’re short where you’d better have storage certificates to show. A little fun event close to the close: a Z5 170/185 combo traded at even versus 179, 19.17% vol on the Put, 16.18% vol on the Call. There was a happy market maker around there and a broker to reprimand! But the deal was cancelled, an obvious fat finger. 52,000 lots traded on the first four expiries, decent liquidity these days! But consistently Z5 is more liquid than U5.

 

In 3 hours EURUSD moved from below 1.1000 the 1.1150. US Q2 GDP was disappointing. It’s becoming more probable every day that the FED won’t hike it’s rate in June. Market is actually not expecting anything before start of Q4 and some even say it will only happen in 2016. Anyway, at some point market might wonder if EUR deserve to go up though. Fears of the Grexit scenario is increasing (Sentix index is at 48.3%, on an increasing trend since the new government was elected). That said, the contagion index is at a very low level. In other words, market players think Greece is likely to leave at some point but the expected effect is thought be very low on the rest of the region. But market doesn’t like uncertainty and most probably the EURUSD would continue its bearish trend.

 

Quiet night session, soybeans still gently up tough and EURUSD is easing a bit.

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