Choppy roller coaster yesterday, very technical most probably. First notice days of October contracts, covering positions expecting the tomorrow’s stock report, clearing delivered position of October options, month end (and quarter end) approaching with funds adjusting positions. It was a very nervous session, early gains vanished and market settled lower. S&D are still heavy, macro is still not massively exciting, every rebound is meeting producers selling, giving them a relief but not really encouraging for the sustainability of each rally… It’s already talking about the yields of corn and soybeans in the next USDA WASDE report, likely to decreased on corn and increase on soybeans. Funds sold 6,000 corn, 7,000 soybeans and 3,000 wheat. Corn is estimated to be long (76,000 lots) against wheat and soybeans (respectively short 30,000 lots and 17,000 lots). 

Night session is so far a tick down on soybeans and corn, a bit more on wheat. Noting too much.

 

Weather wise, still dry in Black Sea, dry and Warm in Australia. No other real worry elsewhere.

 

Q3 stock report is expected tomorrow. Logically it’s expected to raise from previous quarter on wheat (grains was coming from harvest) and decrease on corn and beans (not refill by the harvest just yet). Wheat is expected to be around an amount corresponding to the full US production: 2,150M bushels (58.5MT), +185.5% from Q2, +12.7% from Q3 last year. Corn is expected to be around 1,750M bushels (44.5MT), -60.6% from last quarter, but +42% from Q3 last year. Finally soybeans are expected to be pretty tight, 200M bushels (5.4MT), down -68% from last quarter but +117.4% from Q3 last year.

 

Wheat production will be adjusted as well at the same time (it will actually be the final estimate). No massive change is expected from previous quarter. Previous quarter was 2,136M bushels for all wheat (58.13MT) and it’s largely expected to stay above 58MT, harvest being over. It will confirm the 2015 wheat crop has been abundant and was +5.3% compared to the 2014 wheat crop.

 

One year of wheat is over, roll on the new crop! 31% of winter wheat is planted, slightly lagging, however, it is highly premature to get stressed about it, even if some geniuses are trying to forecast the yields as soon as planting has taken a 7 days delay… 7% has emerged which is slightly lagging as well, make senses. Corn is 18% harvested, +8% week on week, +7% compared to same stage last year but -5% compared to the 5 year average. Soybeans on the other side are on their way to be an early harvested crop: +14% harvested this week to 21%, last year it was 9% and the 5 year average is 16%.

 

Corn condition was unchanged as largely expected: 68% of G/E. Soybeans condition were decreased -1% to 62% of G/E (and then +1% of P/VP to 12%). There was some chatters throwing some doubt in the USDA’s soybeans ratings: how can G/E be -1% when only Arkansas and Tennessee G/E ratings moved down -2%. Most of the states had a 1% increase in G/E (Iowa, Illinois, Indiana, Minnesota, Nebraska and Mississippi) and other state were unchanged. Sounds like a harsh round up has been made somewhere indeed.

 

MATIF is no exception, lower Chicago and higher euro has dragged the market lower. Market is adjusting down again this morning with Chicago in red territory. Rebound is sold by coops and farmers, a relief for some, a need of treasury for the others. FC Stone is asking a good question. Will EU plant less wheat to plant more corn? The arbitrage is worth taking a look at indeed.

 

Russian prices are firming up, it is a cumulative effect of the dry weather in the Black Sea area and the export tax. Talking about the export tax, it’s largely expected an official announcement is imminent, it would lower the minimum to 10 rubles and raising the tax free allowance to 6,500 rubles. Ruble regained some strength (more or less +7.5%) since reaching a multi month low at the end of August. Meanwhile, it’s reported Ukraine has exported 8.9MT of grains so far this season (including 4.8MT of wheat) and officials expect exports to reach 36MT this year.

 

EURUSD is pushing higher and is not helping commodities labeled in euro. Back in the mid 1.12’s. Ranging is expected until next FED decision or next Greek event, with 1.851 billion euros owed in October, 2.8 billion euros in November and 4.804 billion in December, there is still some potentiality of new excitement!

 

One, two, three… After VolksWagen, Skoda shamefully admitted being involved in the so called Diesel Gate, and then… Audi! Where is it going to stop? If it’s as widespread as most pessimistic analyst think, we could be in a position of Too Big Too Fail. And nothing would happen, the dust would gently but put under the carpet. On the other side, if there’s some real consequences, it might be indeed the end of diesel cars and a comeback in hype of the bio fuels could be seen. Bosch is said to be the supplier of the software, they allegedly provided a software for testing purpose only warning manufacturers it would be illegal to use it in real life. Financial market don’t like it, and are down this morning in Asia and Europe, with automobile sector being naturally slashed.

 

Still on financial markets, China keeps worrying investors. As well, Glencore is in a tough ride and is officially a penny stock, below 1 euro on Xetra. The stock lost 75.33% this year. The CEO is shareholder and lost $500 million yesterday, it hurts. The company is trying hard to implement a debt reducing plan, bought back company’s share and cancelled dividends,… Analyst think Glencore need to go further in restructuring. If the stock is decreasing more, the credit ratings is at risk and it’s not going to help by any means. CDS are on fire, implied probability of default is more than 50%.

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