A bit all over the place last week, between currency influence, technical (end of month, quarter and year is coming), weather markets, it’s been really messy! ICE Canola was down -1.76% in US dollar (-0.34% in CAD), MATIF Rapeseed down -4.12% in US Dollar (-3.04% in EUR), Soybeans +2.47%, SoyMeal +3.23%, SoyOil -1.77%, Corn +0.40% and MATIF Corn -4.12% in US Dollar (-3.04% in EUR). On its side, CME wheat was up 0.83% while Kansas was up +2.99%. Minneapolis was inbetween to +1.61% while MATIF was down -1.11% in US dollar (flat in EUR) and London Feed Wheat -2.30% in US dollar (-0.18% in GBP). So really, no pattern at all. 

There’s a feeling in the market that all the bullish reasons are just scapegoat. What if, end-of-year approaching some short have just enough? “Risk off, we have made enough money, let’s go in holidays” might the short think. Indeed, the South American weather stories that fueled seems to be quite light to forget about peso devaluation, about the huge stockpile expected to be sold by Argentinian after the export tax laws,… Main fears are focusing on the North East of Argentina and Matto Grosso in Brazil but most of the areas have received good rains and there’s no issue. This was obviously mainly concerning Corn and Soybeans. As per Wheat, market is now really becoming more and more concerned the USDA export target won’t be reached but it was up anyway dragged by Corn and Soybeans. There is some improvement in the South American forecast so if short covering is continuing, the importance of the South American weather on this short covering could be discounted indeed…

 

CFTC’s COT is always missing part of the fun. As of Tuesday, fund had short covered on Corn and Wheat, buying respectively 25,640 and 22,803 lots. On the Other side, they had increased their short position on Soybeans by -18,404 lots. The total short on Wheat, Corn and Soybeans were back to -116,802 lots. But the end of the week saw a drastic wave of purchase, aside from Wheat, estimated to be even. Indeed, funds, from Wednesday to Friday are estimated to have bought 18,500 Corn and 19,000 Soybeans, and the aggregated short is now below -80,000 lots! There is still some margin there, should fund decide to go long…

 

Currency world was busy, ECB, FED, Peso… Effective today, Azerbaijan central bank stopped getting its currency, the manat, pegged to US dollar and got it floating. It might sound as a detail in the scale of global economy, however, the underlying fundamentals could become worrying in case it widespread. Although Azerbaijan being is a relatively small producer of oil (petroleum and other liquid product to be perfectly exact, the 24th in the world with 856,000 barrels per day in 2014), the country is oil rich and the contribution of the oil sector to the GDP was 40.4% in 2014. The new objective is 1.55 manat per US dollar, implying a devaluation of more than 45%. This is following a previous devaluation of more than 30% in February this year. It’s not the first country of the FSU devaluating the currency because of falling oil prices. Market is beginning to talk about the Black Swan scenario, what would happen if a major oil producer chose to end its currency peg? Saudi’s riyal? Bank of America sees the scenario “highly unlikely but highly impactful”. Anyway, oil rich nations can take a hit but reaching a certain point, some will need to offset this loss of revenue. It has only happened in small producers’ countries so far but if an OPEC country was hit, there is two solution: cut the supply or end the currency peg.

 

Night session is marginally down on wheat and up on soy complex and corn. MATIF is expected mostly unchanged. For the next two weeks, market will be in a holiday mood, a lot of traders will be away from their desk. EURUSD has started the week on a marginal softer note after having lost -1.11% last week. A few nice moves last week on major currencies indeed: GBPUSD lost -2.12%, USDCAD gained +1.45%,…

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