Morning Comment – #Wheat #Corn #Soybeans – 07/05/2015

One cannot be genuinely surprised about the bounce yesterday. Market has hit multi month low, it cannot be expected to go down indefinitely without some rebound. There was a rebound on wheat and corn indeed but it doesn’t mean bearish sentiment has changed by any means just yet. The timing is convenient, next week will be very busy: crop progress on Monday and USDA WASDE on Wednesday. A bit of risk off and wait and see mood make definitely sense. On their side soybeans finally have had a bit of profit taking after the recent rally (and despite the strikes, logistic in South-America seems to work fine), and generally he whole oil complex suffered yesterday. Wheat have been hit on a larger extent because first report of yields forecast in WQC crop tours are disappointing (some areas of Kansas and Oklahoma are disappointing indeed but the first yields are quite often the worst). StatCan showed that Canadian grains stocks were lower than expected: -25% for wheat, -19% for Canola, -23% for wheat.

 

US weather pattern still favorable neither too dry or too wet. Good for Corn and Bean planting. As of Sunday percentage will be probably impressive. Nothing to worry about in Europe either.

 

A lot of contradictory information on the Russian Tax. Cancel? Floating system? We’ll know soon for sure. But what is sure, there is still a lot of Russian wheat to get out of the country and is fired up to compete with European wheat.

 

US Exports Sales expected at 200/700 for wheat (but watch out the split between old crop and new crop), 400/900 for corn and 300/850 for beans.

 

MATIF Spread. The pressure of rolling the short K5 is over, now the focus is clearly on getting out of the expiry and making some physical arbitrages: spread could go negative further to pay the carry. MATIF Options market still very active. A four leg strategy traded, unusual for MATIF. Else, still a lot interest in puts, put spreads, strangles.

 

Weaker US Dollar surely did help US markets rebounding as well. It is now largely expected FED won’t rush to increase rates. The end of the week can be interesting in FX markets: US unemployment figures on Friday, UK General Election (we’ll probably know results during the night but who is going to be the PM is another story),…

 

Quiet so far on the night session. Only corn is showing a bit of significant red, retracing 50% of the yesterday’s bounce.

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