Technical day. Wheat is basically mean reverting, after going away from its 20 day moving average in a quick fashion, there’s a bit of natural correction. And today’s rebound is justified by weather concerns: ok, it’s been raining but not enough, bearish fundamentals are already digested by the market, etc,… And 500 on Z5 seems to be the level the market want to play with. Second session up in a row, lower level triggers some buying interest and short covering.
But wheat wasn’t really the star of the day, soybeans were. Back above 900. China demand will be the key, even if it’s lagging, there’s still good demand and low prices are triggering some demand. Yesterday, USDA reported a 132,000T of US soybeans sell to China. Also 20kt of soybean oil will head to China.
But overall, a lack of news today and a lot traders were bored and only thinking about Back To The Future day! MATIF has been really quiet as well. The MATIF/Chicago spread is a bit erratic these days, still very correlated, the correlation of the two markets has slight reduced since a few sessions. Z5 closed marginally iger but spreads are getting wider, sign that the spot demand is pretty weak, cash premium will have to be monitored.
Waiting on the results of Iraq tender. Despite the fact the higher Ruble more or less compensated the reduction of the export tax, it’s seems to be still the most competitive ($254/T), there’s some margin on the freight indeed versus US ($256.5/T), Canada ($262.18) or Aussie ($262.10). No purchased has been reported just yet.
Still in Black Sea, if rains are coming and is good for the emergence, it’s feared there will be some loss of acreage, farmers may skip (or replant) the winter planting to focus on spring crops. Market whispers that the winter wheat surfaces might reduce by 10%. One can joke ironically and precise it’s about the wheat to be harvest mid-2016, not mid-2017… Indeed, it’s still quite early to take any assumption, it’s still a bet rather than a forecast.
ECB meeting tomorrow, nothing massive to expect, there’s probably enough quantitative easing already so no dramatic statement to expect. On the FED side, market expects now a March rate hike. Right in the middle of the presidential campaign, that would be fun!
US Crude oil stocks were much higher than expected, +8.09 million barrels from last week, almost doubling market expectations. On the other side though, US gasoline and distillates stocks were lower than expected, decreasing from one week to another (total a bit more than -4 million barrels), so a pretty mixed data.