Chicago, Kansas City Boards of Trade and Minneapolis Grain Exchange will be closed today on US holiday. Dull day probably but NYMEX, ICE Canada and MATIF can provide some entertainment anyway.
CFTC COT was published after the close on Friday, it includes the big fundamental Tuesday. Expected short covering on Wheat and Soybeans (respectively +25,015 lots and +26,507 lots) but slight surprise on Corn, increasing the short position by -24,843 lots. Wheat, Corn and Soybeans cumulated are still short -310,999 lots, so this is still a very big bet even after the USDA WASDE, Winter Planting and Quarterly Stocks report. On Friday, funds bought 3,000 Wheat, 8,000 Corn and sold 8,000 Soybeans. Wheat and Corn went up indeed on Friday and Soybeans down. Rosenthal was writing “grain markets ignored macro carnage”, indeed, but what if they stop ignoring it? Market is still evolving in a heavy supply condition, if there are a lot of “ifs” for the next season, no massive worry at the present, weather is good, wet in the south (although some parts are now becoming slightly to wet) and snow cover is quite established in the north. So if we consider markets have not taken into consideration the macro yet, or not in its full extend, why would fund cover their short? But on the other side, they’re itching, waiting for the first catalyst (especially on the weather) to be the first one to click on the screen… However, it’s estimated as of Friday that the funds are back slightly above the -300,000 lots mark of Wheat, Corn and Soybeans.
But this was a very interesting week. Wheat was torn between a bullish plantings and a bearish WASDE. But if the planting is face value bullish indeed, but we’ll see in spring, total plantings will be the real data to look out. And the whole Tuesday rebound basically faded and wheat finished the week down -0.99%. Corn and Soybeans gained 1.75% and 1.59% on the week, mainly following the WASDE bullishness but it sounds slightly less justified for Corn, indeed, as far as the US are concerned, balance was marginally heavier.
MATIF and its three main markets (Wheat, Corn and Rapeseed) had a very bad week (respectively down -3.64%, -3.43% and -2.59%, in euro), and the fact Corn did as well (so -3.43% in euro and -3.56% in dollar while Chicago was up +1.75%) is very interesting considering the tighter situation for European corn. Farmers and Coops thought they could sit forever on the stockpile, well, it seems that they need some fresh cash now, whatever the market price… It was totally expectable and not selling what at 185 euro in November or even 175 euro in December was a bit reckless. MATIF is expected unchanged or tick marginally down at the opening and can be uncertain when US are closed.
December’s NOPA Crush was up 1% from November to 157.7M bushels (as expected), it’s slightly off (roughly 5%) compared to December 2014 (which was a record December) but market cannot decently expect record after record.
Let’s talk about oil. Iran told a few month ago that they will defend their market share whatever it takes. With the sanction getting lifted, market clearly think Iran will flood the oil market. WTI and Brent are digging, with the $30, are the $20 and $16 dollars predictions of respectively Morgan Stanley and RBS science fiction? Oil rich nations have two options: with falling price, they need to sell more to have the same revenue. It’s what they seem to do at present. The other alternative would be to reduce the production but there’s no stampede to make the first move. One can say they’re all waiting for the first one to go bust hoping it’s not them…
Financial markets are still on the downside: although Shanghai stabilized with +0.44% but Shenzhen continued to dig further down (-3.40%, reaching -23.61% YTD). Hong Kong started also on a softer note, -1.45% while Nikkei also print -1.12% It came after the North American market plunged more than -2% on Friday. European financial markets are starting the week on a small upside, nothing more than 0.75%.
Dollar gained 4.23% to the Ruble last week, Ruble is on its historical low and keeps digging this morning: 78.6 rubles for one dollar. There’s now no doubt there will be some kind of move on the wheat export tax by the end of the month. EURUSD started the week on a softer not, gently coming back below 1.09.