Strange session yesterday, on both sides of the Atlantic Ocean. On the night and morning session, one was looking for justification of the rebound, and technical rebound, short covering, bargain hunting was mentioned (aka ‘I have no clue’). Indeed, not a great deal of fundamental news yesterday. Same kind of atmosphere is expectable today, Friday will be the real deal, and it’s interesting when it comes on a Friday, position liquidations before the week-end in a bumpy market is always funny! Generally, this rebound saw, either in Chicago and MATIF, a great interest for puts on wheat, traders took the opportunity to buy cheaper protection as the general mood is still bearish. We’ll see if Soybeans and Corn are the party poopers. Corn managed to stay slightly up yesterday, this will probably be indeed the bigger mover on Friday and traders are squaring their positions while Soybeans is evolving in a well-supplied world, so a small US Yield decrease probably won’t be a big deal. FC Stone is forecasting the Brazilian wheat crop to 100.9MT, this is a record, +4.7MT from last year. However, forecast are very different from one analyst to another, bottom estimates is ‘only’ 97.1MT. Anyway, it will be great for Brazilian farmers considering the Real low level (USDBRL currently close to 3.78). S&P has downgraded Brazil to junk (with negative outlook on top of it) so a sharp recovery is not expected anytime soon…
Indeed, tough to find bullish news on wheat. France AgriMer said French exports will decrease by -0.4MT to 11MT (mechanically, ending stocks will increase +0.1MT to 2.6MT, especially with a record crop of almost 41MT, indeed, up again +0.3MT to 40.7MT… Wheat galore!). Well, with nothing in Egypt GASC so far, is -0.4MT conservative enough? It’s now clear Wheat Export Tax will be somehow modified in Russia, increasing the competition and aggressiveness in prices. Interfax said the free tax allowance will be brought from 5,500 RUB to 6,500 RUB, then the formula would become, in Rubles, MAX(50,(WheatPrice-6,500)*50%). We shall see. Meanwhile Egypt extend the high moisture allowance (to now 13.5%) for wheat imports until May 2016. In other words, this is an additional effort to help the French origin, but will this be enough?
Even Food and Agriculture Organization increased the wheat production to 728.4MT (+5.4MT). This is +1.85MT above USDA WASDE in August.
Yesterday funds sold 6,000 soybeans, 3,000 wheat and bought 3,000 corn. Night session is showing some small momentum on the upside but nothing exciting so far. MATIF is opening flattish and currently in red territory.
Back to Russia, 65.6% of the Grains harvest is completed, 78.7MT harvested, if the yield aren’t decreasing, it will be 120MT rather than 102MT! RusAgroTrans is forecasting 102.68MT. In Ukraine, 2.2MT of wheat has been exported last month, nice pace.
Market says Iraq bought the Canadian wheat at $247.20 CNF. Japan is seeking 120kT of feed wheat, Q4 15 shipment and… Will the fifth attempt will be the good one? Yes you guessed it! Jordan is back and seeking – again – 100kT of wheat and 100kT of feed barley. Taiwan bought 56kT of US milling wheat, South Korea 60kT of feed wheat optional origin.
EURUSD still attracted by 1.12 but failing to rebound above.