What a week. Chicago and Kansas wheat down more than -5%, Minneapolis resisting relatively well to -2.8%, MATIF Wheat down more than 4.5% in euros (EURUSD moved marginally up week on week),… Wheat has clearly been back to fundamentals. It’s more like it’s been reminded to the market that the situation was good rather than a bearish report. It was more bearish for Corn and Soybeans but they were only down respectively close to -4% and -1.5%. But Wheat has been the victim of the dryness panic . It’s gone for the moment and obviously, there’s still a lot to go before USDA is assessing the next crop. So back to fundamentals but it doesn’t mean weather market cannot kick back, springs rains will be… In spring! So a winter is in-between and we can still hare about dry, cold, snow, freeze. 

Indeed, more and more talks are around Ukraine. Market says the start of the season is exactly like in 12/13 where the dryness in plantings have led a to a poor crop. True in a sense but once again, condition in the future will be determinant, And the crop 12/13 was evolving in a different S&D environment, especially the massive drought in the US (pop corn crop). This year, there will be a bit of buffer at the end of the crop, world wheat, corn and soybeans stocks are giving some space for a poor crop here and there. And focusing on Ukrainian wheat, ending stocks will be 4.70MT (17.5% of the production) while at the end of the crop 12/13 they were only 2.58MT. So would a poor crop in Ukraine be harmful? Probably not enough to justify the +8% rally of October in Chicago. Anyway, weather pattern has improved in Europe and Black Sea.


Due to a public holiday in the US, the CFTC’s COT has not been released as usual on Friday but will be today. More or less, it’s expected, as of COB Tuesday, funds to be short 34,000 lots of Wheat, short 21,000 lots of Corn and short 33,000 lots of Soybeans. So an increased short position for wheat and soybeans but as well, corn moved to short, basically switching its whole position. Estimation as of Friday are the following: short 28,000 lots for Wheat and short 31,000 lots for Soybeans (reducing their short at the end of the week) and short 22,000 lots for Corn (slightly increasing their short position). Depending on how accurate are the estimates, one has to be careful about short covering. It’s been demonstrated it can be pretty violent. That being said, the night session is so far not scared by any means and is red on wheat and soybeans (wheat approaching -1%) and flat on corn. And US weather is favorable to winter crops.


Exports sales were weak on Friday for wheat (253.5kTT). Week was saved by Soybeans 1,642.1kT and Corn 676.8kT.


In France Senalia and Nord Cereal being full, if there’s a decent couple of days of sell off, most probably GASC will show up, and timing would be good, sending a message like “you guys want to make some room? Be aggressive”. The anger is growing in the trading community about these storage issues that are becoming recurrent. Nord Cereals in Dunkirk has been only exchange approved since September 20115 and there’s already some issues. EU soft wheat exports are lagging 27% behind last year. That being said, the 550,000T Algeria bought, a good part of it might be French.


Interesting fact though, MATIF is holding really well, we’ll see if it stays the same when Z5 will be out of the picture. Option expires today on Z5. In France 97% of planted wheat is G/E and 96% of G/E for barley. Plantings have been done in excellent conditions.


EURUSD slightly down, still playing above 1.07. A new element has come in the macro jigsaw this week end with the events in France, how will financial markets react? French CAC40 only lost -1% at the opening. In March 2004, IBEX 35 fell 8% after the events in Madrid, and market struggled for recovering during more or less 6 months. Will French consumer confidence and economy will be impacted? Very bad moment as well as the build up to Christmas in Europe was about to start. Early last week, French government forecasted a minimum of 1.1% GDP growth in 2015, it might now be another story. Meanwhile, GDP in Japan was -0.2% in Q4. Dennis Gartman, on Friday, was highlighting that maybe they missed the top of the equities market and moved his advice to ‘neutral’ with, reading between the lines, a strong negative bias. He wrote: “we are not wise enough to say that a bear market is now upon us, and indeed we are wise enough NOT to say that”.

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