Morning Comment – #Wheat #Corn #Soybeans – 05/05/2015

The long expected crop progress and planting is out. Corn 55%! 36% in one week! That is some kind of pace. Way in front of last year (28%), way in front of the last 5 years (38%). After talking about delay, we are heading most certainly towards a very early planting. Soybeans 13%, 11% in one week. In front of last year (5%) and in front of the 5 years average (9%). But it’s still the beginning, a bit early to get excited. However, it is a good sign in the sense that farmers still want to plant soybeans, there was some fears that the corn planting would be more than expected and the soybean acreages would decrease. Apparently some are still keen on planting soybeans. Phew! Cherry on the cake, Winter Wheat condition improved, +1% of G/E (43%), way better than last year (31%). Slightly below the average (46%) but on the other side, only 20% of P/VP against 38% last year. Asking for better would be honestly greedy. Spring Wheat is 30% emerged, Winter Wheat 43% headed, well below last year. Conditions are very favorable.

 

No long speech indeed needed on US climate. Favorable, totally what can be expect for spring. Temperatures seems slightly higher but soil moistures are perfectly fine. On the European side, fears and complains of dryness in northern France a few weeks ago are over. The weather headlines these days in France is more about people complaining how wet their May public holidays are. So no more worries on the weather.

 

After a such bearish trend, GASC is unsurprisingly showing up. Opportunity for them to strike some discounted French wheat is interesting. Watch out the lineup, French trade house might offer some French wheat at a very good price to make some room in the silos. Russian wheat is still subject to the tax. Private tender as well in Taiwan for 50kT/65kT. China will sell some Corn, their stockpile as reached 82MT.

 

Strong close on Soybeans. Still talking about technical and south American logistics. Quiet so far in the night session, slightly down. Wheat and Corn were still down but only gently, we cannot expect two digits every day. Slightly down so far for the night session.

 

MATIF Wheat dug further down before the close, U5 and Z5 showing -3 euros while K5 only -1.75. Close to 7,000 lots where spread from K5 to U5 or Z5 without any particular care. As long as market goes down, we can expect this spread to widen. That being said, we’re entering in the last week of trading for K5 and it’s the last contract of the old crop. One could argue that the spread could go the other way around considering the high availabilities. We might need to fasten our seat belt, relax and enjoy the show. But there is only 20,000 lots on the open interest in K5, spreading 4,000 lots per day is totally achievable without any particular bother. Now the question is: will U5 look for its life low (165.25) or even the 155, K5 low in September 2014? There is no concerns on the weather, the crop qualities are so far  pretty good, the silos are full,… A bit of upside (summer seasonality) is totally expectable but the prospects are really good so why the trend should revert durably? Option markets was very busy, interesting to watch and the least that can be said, it doesn’t seem the operators are massively bullish: a bid on the screen of 1500 lots of Z5 150P was hit, Z5 180C sold 500 times, U5 165P traded more than 2000 times, a lot of interest in Put Spread, Straddle and Strangle. Traders are very nervous.

 

But market generally quiet. Brits are back at work after traditionally spending their first Monday of May home watching the World Snooker Championship finale but they will now focus on General Election. France will be off on Friday commemorating Second World War. No huge move on the currencies, ERUSD is easing a bit, coming back below 1.11.

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