Friday’s Comment – #Wheat #Corn #Soybeans – 31/07/2015

Quite and uncertain sideways session yesterday. Wheat finished sideways but mostly with a bearish note. Only the front month manage to get out of the water. Soybeans rebounded frankly on good export demand and corn did follow. But no big news really, so it will be the usual excuse: short covering and technical buying. Night session opened on a positive tone. 

Once again some interesting discrepancies between Reuters and ADM IS who provide daily estimations of spec volume. They agree on wheat (funds bought 1,000 lots) but Corn were buyers of between 3,000 to 5,000 lots (unless AgResource get it right on its side to 8,000 lots buyers) and Soybeans were buyer between 1,000 lots and 4,500 lots.


Exports sales were way stronger compared to last week, it was expected but it exceed the expectations. This have contributed to give a some support to markets. Wheat feel at 700,400T (+197,600T from last week, no more than 600,000T were expected), Corn to 808,200 (+273,400T from last week, no more than 800,000T were expected) and beans is back to 7 digits to 1,315,800T (+993,200T, no more than 1.1MT were expected).


The Day 2 of the US WQC spring wheat tour put the yield to 47.3 bushels per acre (last year it was 48.4 bushels per acre) which is nicely higher than the 5 year average (45.5 bushels per acre).


International Grain Council lowered its new crop wheat production by -1MT to 710MT, led by Canada where crops have suffered with the lack of rain. On the other side, Corn has been increased by 3MT to 966MT, led by a China improvement.


MATIF wheat was helped by a weaker euro in its rebound. Sounds like 179/180 on U5 has triggered some interests and sellers vanished. One can ask: how long for? The rebound is definitely technical and there’s a clear lack of bullish fundamental news indeed. This period is always interesting, harvest is probably the favourite season for farmers and they are stretched inbetween of the joy of having nice looking crop and the fact that a nice crop usually make the price lower. It’s where it’s essential to have a pro-active price risk management on derivative markets. Option market is probably a good way to see some are still scared about market going lower, 4,000 put spreads total had their lower leg to 175 on Dec expiry. Harvest is completed at 70% for soft wheat, +10% this week, in advance compared to last year but last year was kind of an outlier! The only bullish matter is still the Corn crops and how much the siliking has (actually) been stressed. France AgriMer said it’s now only 59% G/E, -3% week on week.


Russian grain harvest is improving as well (21.9% is completed) but is still quite delayed compared to last year. Wheat surfaces are 29.3% completed


EU granted 240,000T of Barley licences, (1.4MT this season so far), 324,000T for wheat (1.6MT this season so far) and granted 243,000 import licences for corn (777,000T so far this season).


EURUSD moved down within his range. FED “uncertainty” (not a massive one so far), Greek talks, but really nothing to give the strength for a new fundamental move.


Fun fact of the day, CME had to dismiss complains of former floor traders on crush spread. They were complaining that it has become difficult to trade the actual spread (synthetic is tradable but it’s 50,000 bushels and ratio is 10/11/9, not for everyone size and soybean processors may work on slightly different ratios) as it’s involves three legs arguing that showing one leg taking into account the two others is a risky strategy and can lead to misexecution. Basically CME told them “quit your moaning and welcome in the real world, this is called trading!”.

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