Morning Comment – #Wheat #Corn #Soybeans – 09/07/2015

Market is still worrying about macro. It a bubble bursting? Added to the events from Greece, some are actually wondering if FED will increase the rates as soon as September. Wheat continued to go down on technical selling and harvest going on. Beans were up still questioning the effect of the wet weather while corn followed and is quite nervous about the USDA WASDE of tomorrow: will the yield be decreased? In what extent? 

Agrimoney reported Goldman said the “recent recovery in futures of many agricultural commodities has only set prices up for bigger falls ahead”, expecting price to fall 12% within the next 12 months (apart from livestock, +6% and GS is bullish metals and energy). No disrespect for Goldman Sachs but this would mean, taking Wheat as an example, a return to June lows. In these volatile market, a 12% move is clearly not a matter of weeks rather than months. Anyway, what is certainly true is more and more operators feel this bullish wave was largely unjustified and now, we are above what fundamentals suggest. In the fields in the US, a feel of optimism is coming back. Acknowledging the wet weather risk and quality risk, Corn yield should however benefit from cooler temperatures and soil moisture. Bottom line, there will be a lot of carry-out at the end of the next crop. Soybeans price should go down on global higher acreages while wheat would go down in a lower extent, El Niño limiting the downside. 375 for Corn, 875 for beans, 530 for wheat. ABN Amro is as well considering the weather issues are overpriced in the markets.

 

GASC bought 180,000T of wheat from Russia and Ukraine at $212.26 CNF average. There was still a lot of wheat offered. A total of 18 offers were shown for a total of 1,070,000T, 33% from Russia, 6% from Ukraine, 28% for Romania. 22% of French wheat and 11% of US wheat was offered as well, but it was just PR from Soufflet, Dreyfus, InVivo and Cargill, prices were outrageously uncompetitive ($226.05 FOB France and $255 for tue US). Tunisia bought 117,000T of soft wheat between $208.49 and $212.10 CNF, 75,000T of barley between $201 and $201.44 CNF. A private US exporter sold 240,000 of US beans new crop.

 

At least, since almost a month, MATIF is showing decent volumes on futures an option. Still more than 50,000 lots were traded on the new crop wheat contracts. Put Spreads, Combo (fence), call diagonal spreads, call spread versus delta. A lot of volatility adjustment is going on, panic mode. Chicago correlation is to blame but finally not only! Harvest is now running pretty well and south of Paris yields are better than expected, slightly lower protein but you can’t have everything at the same time.

 

ECB’s Mario Draghi is showing the muscles, he’s the man, the real king of Europe… According to him, it’s going to be “really difficult” to save Greece. Is he sealing Greece fate? ECB is ready tp implement a range of “non-standard” monetary policies measure if Greece leaves the euro zone. It can sound like blackmail. Anyway, new Greek plan has tu be put forward by Thursday midnight. Pressure is massively growing. EURUSD is still around 1.10, steam and pressure is accumulating, it sounds when it’s going to wake up, better be on the good side!

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