Once again a very dull day, only Soybeans gave a bit of excitement. It’s been the only efficient short covering so far, market doesn’t need a very big catalyst: a bit drier in Brazil (especially in Mato Grosso) and it’s been enough to trigger a rally. Clearly funds are itching to get out of their short at the first little bad piece of news. Wheat moved slightly higher on very shy short covering while Corn was marginally up. Fund bought 7,000 lots of Soybeans, 2,000 lots of Wheat and were even on Corn. MATIF rebounded as well a couple of ticks in little volume.
Focus is still the weather. El Niño, after being the strongest is seen to fade at a slow pace and La Niña probably won’t be established before the start of the summer but rather the start of the autumn. Western Europe and US is still lacking of snow cover but Black See seems to be just enough for the cold snap.
Ethanol Production was 996,000 barrels per day, +4,000 barrels per day from last week but stock rose by 933,000 barrels by the meantime, reaching a 9 month high. Ethanol futures did not like it obviously and reached new lows.
Night session is on the downside, a couple of cents across the board. MATIF is expected to tick down, following US markets and higher euro.
Really, now markets is waiting for the next week three main events: USDA WASDE and USDA’s Final Annual Crop Production and USDA’s Quarterly Grain Stocks. A busy Tuesday it’s going to be! Corn 2015 crop might be raised thanks to a yield adjustment leading mechanically to bigger carry out. On quarterly stocks, market expects something like 285.4MT. On the WASDE side, US exports and South America will be under scrutiny but overall, a slight increase of ending stocks is expected. So market will be torn between slightly bearish data expected but on the other side, H6 keeps digging contracts lows and market is back to the lows of September 2015. So technically, in the money shorts could be tempted to take profit and lead to some short covering. Soybeans quarterly stocks are expected around 74MT. Not much change expected on the WASDE, Chinese imports, US exports and South American production (+2MT potential there) will be under scrutiny, nothing massive expected, mostly expected neutral, but once again, non-bearish can lead to short covering, it doesn’t need to be bullish. On Wheat, the picture is more unclear. US exports, Australia production might finally be decreased, South American exports, European exports,… A bit of change can actually happen. Quarterly stocks are expected to be around 46.2MT. Also, plantings of Winter Wheat are expected to be 39.3M acres… And on this specific data, market could bounce if it happens market was overestimating the surfaces…
Export sales are expected to be pretty low considering the week of holidays.
Japan bought 131,031T of food quality wheat from US, Canada and Australia via tender. Ethiopia has been offered in its tender to buy 70,000T of wheat a best price of $217.50 CNF. Gogito Ergot Sum… Egypt GASC finally made it official, no ergot infection at all! Sacrebleu! French wheat, traditionally more infected, will be in more trouble to compete facing Black Sea, traditionally less infected. “Zero tolerance policy” authorities said. They were supposed to take a bit more time to decide but were keen on taking a decision before the next purchase and the fact it came as quick as this will probably mean we’ll have a tender in the next few days. That being said, it might reduce drastically the spectrum of offers and some traders might be scared about the rejection risk. If it disrupt their supply chain, we’ll probably see a U-turn on this. Also, after Zimbabwe told they’d need to import corn as South African crop is poor, South African Grain body said they might need to import 5MT of corn: the crop is indeed the lowest since 2007, down 33% from last year to 9.94MT (informa cut its south African corn production estimates by -2MT). There are rumors Argentinian feed wheat has been sold in the US.
Chinese farmers are reportedly growing some GMO corn while it’s not been approved yet commercially. Informa raised it 15/16 crop production of Argentinian corn by +1MT to 22MT (unchanged in Brazil), Brazil and Argentinian soybeans were unchanged to respectively a record 101.4MT (1.4MT above USDA) and 58.5MT (+1.5MT above USDA), so South America definitely could bring some move in the USDA WASDE.
Macro still feeding the bearish mood. Shanghai down again 7% today, -12.5% year to date… Well 4, sessions! Basically all financial markets have begun in a bearish trend: -2% to -3% in North America, -5% to -8% in Europe, -5% to -13% in Asia… Is contagion that far? Also Oil keeps digging, Brent and WTI both around $32.50, 11 years low. EURUSD seems to take a little breather on its bearish trend and is back in the mid 1.08’s. Peso, Real, Ruble, Renminbi are on their side all weakening.