US Market will be closed today as it’s Thanksgiving in the US. So yesterday, kind of an usual scenario. Quiet night session on the upside and after, market woke up, Soybeans continued to bounce on bargain buying, wheat finally chose to continue to sing while corn was right in the middle on the upside. Funds were logically on the buying side of Corn and Soybeans, buying respectively 7,000 lots and 9,000 lots and on the short side of wheat selling 2,000 lots. It was still a technical session, with First Notice Day on Monday. 

Nothing to say on the weather side, nothing bullish by any means, enough rain everywhere. Of course there’s still a few to claim there’s some localized place where it’s not enough rain and some other places where it’s too much but situation in the US is overall pretty good, in South America as well and it has relaxed in Black Sea. The main weather issue is in India where wheat planting are delayed but this should be fine anyway and a sizable problem would not disturb massively global S&D.

 

The rebound on soybeans was also fueled by news coming from Argentina. Indeed, most optimistic traders were expecting a complete write-off of the 35% export tax on Soybeans. Macri’s plan was to decrease it 5% per year starting in 2016 and he did confirm his plan has not changed. If this can be seen as less bearish, also farmers need to sell their crop, they are not going to sit on their stockpile for 7 years waiting and hoping the tax would reach 0%… This was pure speculation. China demand is still quite strong as well.

 

GASC tender have seen plenty of offers, this was expectable, there’s still a lot of wheat to get rid of, especially from France. To be noted, Ukraine was not represented, indeed, out of 995,000T offered, 420,000T was from France, 465,000T from Russia and 110,000T from Romania. Ukraine self-limitation of exports and prospect of lower winter crop probably entered in the equation of not offering the origin, but it’s to be noted it’s the second tender without Ukrainian offer. French Wheat was the best in FOB terms, 5 vessels were offered below the best Russian FOB. And this time, freight having decreased from France as well (now $10.20 from 2 ports), French wheat managed to keep its advantage and GASC purchased 2 vessels from France, one from Soufflet and one from InVivo, making a total of 360,000T this season. Is this enough to get overly excited? Not sure, it is only 11% of the supply of this season so far, which is very little compare to what it used to be… More or less 40% last seasons! GASC have purchased so far this season 3,190,000T, at the start of the season, GASC was adamant they’ll purchase only 4MT. It might actually be more but it would mean that even if GASC is buying only French wheat for the remainder of the season, the supply of French wheat would barely reach 30%. So tender result are good, but certainly not enough. To be noted, InVivo had to lower its price by $0.37 to compete with Soufflet and be part of the deal at $205.74 CNF for French wheat. GASC also purchased the best offers from Russia ($198.95 FOB, $206.15 CNF) and Romania ($200.88 FOB, $206.15 CNF) making a total purchase of 240,000T at $205.94 CNF on average. After this, Egypt said reserves are enough to meet its needs until 23rd of April 2016.

 

The repercussions of the downed Russian plane from Turkey are still unsure, there might be some impact. After banning poultry imports from Turkey (on alleged sanitary issues), there’s some tensions around the Gas (Turkey is the second largest buyer of Russian natural gas after Germany) but it comes as the same time as Ukraine want to stop buying Russian gas as the price is cheaper in Europe (well Gazprom actually has another version of the events, they cut the supply because Ukraine hasn’t paid in advance for more deliveries). So can they afford to lose another customer? Also, Turkey buy almost as much wheat as Egypt to Russia, so should the dispute become sourer, the impact it could have on Russian basis is not to be discounted. Dow Jones actually reported than some “unofficial instruction” are circulating to withhold shipment to Turkey… Rumor stage though.

 

French wheat has to ship somewhere, it’s becoming even more true with silos full at this stage of the season. The two Indonesia shipments are reflecting the fact traders has to find other destinations (some analyst says 500,000T could go in Indonesia), and seeing other Asia shipment in the near future is expectable, either on milling or feed wheat. MATIF is holding very well, the tenders results have been interpreted as bullish, and even in US dollar there’s a clear divergence with Chicago. Also, the effect of heavy bidding the Z5/H6 spread is not to be discounted. Z5 finished at +2 euros while H6 was only at +1 euro. There’s a bird flu outbreak in south west of France.

 

EURUSD still ranging above the 1.06 level but sounds like it’s now so near from the handle that testing the 1.05’s is quite possible. There are a lot of arguments in France about the cost of the events in terms of GDP and budget deficit. Most optimistic analyst are saying the GDP would lose only 0.1% compared to the previous estimate. But some are more cautious, pointing the considerable impact on tourism and the shopping around in the buildup of the holiday season. No one is however challenging the fact the 3% French budget deficit constraint will be overshoot. It probably would have anyway though. But it keeps creating precedent in the EU, there’s always a good reason not to respect the budget constraints. On the other side of the pond, despite words of caution from FED’s Yellen, market still expects a rate hike in December. Argentinian Peso still on the lows, 9.6650 Peso are needed for 1 USD, no major move on the RUB these days, still around 65.

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