Morning Comment – #Wheat #Corn #Soybeans – 19/06/2015

Yesterday was finally indeed the now very usual scenario on wheat as mentioned in the evening comment. Despite the weather talks, wheat just cannot find energy to maintain any bullish momentum. The intraday rebounds are not enough to trigger stops and massive short covering. The idea is now clearly that wet areas are going to be kind of compensated by other areas where wet weather has been hugely beneficial. Only Soybeans finally shew some green, delays and wet weather is still a concern: will planting be actually completed or will there be loss of acreages? But on their side, Canola has seen benefits from the rain. Meanwhile, Corn weather is quite favourable and followed wheat lower at the end of the session. Funds were even on soybeans, and sold 4,000 lots of each corn and wheat. 

Weather wise in the US, still slightly wetter than usual but the worst of tropical storm Bill is gone. EPA announced it’s a possibility to reset objective of biofuels in 2017. Informa acreages today, USDA stock reports on the 30th of June.

 

In Argentina, 99% of the soy harvest is completed. 55% of the corn harvest is completed. Estimates are unchanged. Morocco seems to be keen on leaving its import duty until 2016. They have enough wheat in stock until the end of the year and the crop of cereals this year is estimated to be a record 11MT. Australia is not impacted yet by El Niño and is seeing some rains. Japan bought 113kT of wheat from US, Canada and Australia. French ports loadings up 113kT from last week to 800.6kT, some room is being made in the silos!

 

MATIF closed slightly lower. Day was driven by traders and farmers looking at the sky awaiting rain in Germany, France and eastern Europe. There some signs of well needed rains indeed. But the day was very technical on the option market. Combos, Call Spreads, Volatility strategy as well as outright interest on mainly call options, especially on quite out of the money strikes.

 

Another day another story on chickens. Foster Farms (7,000 farms across the US), certified by the American Humane Association, who put “highest priority on animal welfare”, has been caught mistreating chicken in one of their facility in California. We’re still far enough from Q4 (peak of birds consumption in the US) and bird flu has left (temporarily?) the headlines, but hurting the consumer confidence can have an adverse effect on consumption. Keeping in mind the impact on demand for meals.

 

Pun day for the Eurogroup: Brexit would be the new Waterloo (referendum could be held before the end of 2016) while the Greek tragedy on Grexit is Grexhausting… No deal. Christine Lagarde’s IMF is said to be really annoyed and angry, complaining Greeks are not behaving like adults (it’s allegedly her own words). Indeed, the 5 pages new plan from the Greek government was just a plea to negotiate a deal on the debt but no new real economic measures were added to the plan. So no one folded just yet. The scenario of a default was science-fiction a few month ago, it’s now becoming more and more plausible. Likely? Still not sure. 22nd of June, the Eurozone summit might be the last chance for everyone to roll the date and enjoy the same party in 9 month. Two days ago there was a demonstration in Athens against austerity. Massive crowd. Yesterday there was a demonstration in Athens against Grexit, much less participant than the day before: Public Opinion in Greece just don’t want to have lower pensions and higher VAT, their choice is made, they think they’d be better out. And FX market could be in a panic mode but either there’s a strong hope of a deal maintaining the EURUSD above 1.13, either FX market think as well Euro would be better without Greece. But now there are rumours banks won’t open on Monday in Greece. Indeed, Greeks have withdrawn an incredible amount of cash from their bank accounts (market talks about 1.5 billion euros), fearing capital control. Greece surely doesn’t need an additional systemic risk on its banking system. Bottom line, the main risk for Europe is not really Greece leaving but being succeeded in doing so.

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