Morning Comment – #Wheat #Corn #Soybeans – 27/05/2015

Funds continued to sell. 11,000 lots for wheat and 8,000 lots for corn… Wheat is getting closer again to the 100,000 mark while corn, option included, is getting closer to 200,000 lots! That is a level of short never seen pre-harvest. 

Indeed, the crop progress and conditions was seen as bearish. Spring Wheat and Corn planting are more or less done (respectively 96% and 92%) and soybeans planted 16% last week (to 61%). It is a hat trick of early planting, in advance compared to last year and the 5 year average. Early developed as well, germination is in advance, wheat is showing the ears in advance. And despite all the talks, wheat condition improved! Spring wheat went from 65% of G/E to 69%! Winter Wheat stable while the first condition of corn is 74% of G/E and 3% of P/VP.

 

USDA was estimating Russian Crop to 53.5MT in the last WASDE. Market was expecting a bit more. Russian Grain Union has released its forecast: 55MT (SoveCon is at 54MT). So USDA was a bit off but finally not too much. That being said, the Agriculture Minister has recently bet the actual crop will exceed forecasts. Definitely something to monitor.

 

MATIF Wheat followed US down. France, UK, Germany,… Weather is really favourable and we’re heading to a nice and sweet crop in terms of quantity and quality. A lot of options activity, market is very nervous. A line of 2,000 Dec 165/185 combos has traded. Egypt GASC is doing its usual strategy, after a couple of sell off, back in the tender, shipment July. Watch out Russian and French wheat.

 

Grexit, Brexit,… Euro has struggled recently. Greece still owes a few euros… They made the headline about the IMF and a couple of hundred millions redemptions but this was nothing compared to what they are facing in June and July. More or less half a billion is due to the IMF in several redemptions in June while July is going to be the big scary month: a couple of hundred millions of Government bonds will mature, almost half a billion is due to the IMF but that’s peanuts compared to the 3.5 billion owed to the ECB. And civil servants and pensions still have to be paid on top obviously… Surely this is not going to be smooth. As per the Brexit, one would be very naïve to believe that Central Banks are not studying the scenarios of countries (should that be their own or not) dropping out of the EU. David Cameron is said to be ready to offer a referendum before the end of 2016, France is scared because if the exit scenario is confirmed (and the likelihood at this stage is very high), that would be very complicated for French interior politics: indeed, they keep repeating that living EU is impossible, treaties cannot be voided,… They’d be proven wrong from across the Channel. Germany seem to be more keen on modifying treaties for British but the calendar is going to be very tight considering how quick would come the British referendum. So Euro might be at the beginning of its struggle.

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