A bit of short covering after a long week end was expectable, especially after a such CFTC’s COT. Funds bought 7,000 Corn, 6,000 Soybeans and 3,500 Wheat. Fundamentally, Soybeans found some support on logistic issues from Brazil. Port loading are slow due to strong exports and adverse weather conditions. Also, good US exports and good Chinese demand is still providing support to the beans. MATIF had a double sided session, it started stronger but bullishness faded: once everyone had dealt with their option deliveries, market was back to its bearish mood. There was a lot of spread action.

 

Night session seems to be the Tuesday (well Wednesday) reversal so far but there’s options expiries on H6 this week and this can bring the market up to reach higher strikes. Although it seems we’re in a bullish momentum, the bearish fundamentals are still pretty on and a durable rally would need a decent catalyst of short covering (like a big weather issue).

 

Export inspections were in line with expectations for wheat and corn and above expectations for soybeans. This is not meaning bullish by any means.  Wheat, with 383.9kT last week is increasing its gap again with USDA’s required pace. Wheat now need to average 462.7kT for the next 15 weeks. USDA’s target is 67.10% completed but 71.15% of the marketing year has elapsed. That being said, the average progress at this stage is 68%, so from this angle, hope is permitted but time is running out! Corn needed to average more than a million tons per week to reach the USDA target. With 690.9kT, we’re far and gap continues to increase also. 46.15% of the marketing year is behind us and only 31.29% of the target is completed. At this stage, usually, 41% of the target is completed, so no real room for hope and time is definitely running out there! As per soybeans, 1,760.2kT this week, this is well above the required pace, 46.15% of the year is gone, 78% of the target is reached (average at this stage is 68%), so no panic on board here, just need to keep an eye on Chinese demand and cancellations.

 

‘Bad’ NOPA crush data did not particularly weight on Soybeans. Indeed, January crush fell below expectations to 150.5M bushels, down -6.8M bushels from December and -12.2M bushels behind January 2015. Meal shipments were lower also, 686kST (down -154kST from Dec and down -326kST from January last year). Oil stocks were in the range of expectations, higher 45Mlbs month on month).

 

What’s happening in Egypt, seriously? So much confusion… After the GASC shambles on French wheat ergot, the Bunge confusion around their vessel (it said to be up for sale, cut off is Thursday), the US soybeans ambrosia, there had to be another episode in the saga. And yes there was! Canadian wheat now! Egypt’s agricultural quarantine authority rejected a shipment of Canadian wheat at Alexandria, 2 samples were taken and conclusion seems to be the same: too much ergot. Final rejection is expected soon. One can wonder if Egypt is not facing food security concerns if the situation doesn’t evolve quickly. GASC will need wheat to be shipped before the end of May, else the supply will become pretty tight. Unless this 3MT deal is no bluff and is to be announced soon. Time is running out.

 

India revised down its wheat production to 93.82MT, -0.93MT versus previous estimates. It is still quite above USDA’s estimates: 88.94MT. India suffered from two nasty consecutive drought. Rapeseed production is pegged at 6.83MT while total food grains production is seen at 253.16MT. China is going to become aggressive it the corn selling as there’s an estimated 10MT of corn aged of more than 3 years. Hey plan to sell it for ethanol or starch but will anyone want it? Jordan bought 50,000T of hard wheat in tender and Japan issued a tender to buy  151,000T of US, Canadian or Australian wheat. The ink of the money they’re going to pay with is still wet!

 

Market has been unimpressed by the deal between Saudi, Russia, Venezuela and Qatar. Indeed, they decided to freeze the production. Another way to put it is to decide to keep the production at a record level. Hardly a cut, hey! And Iran formally confirmed that they would not cooperate and defend their market share and fresh oil revenues. Added to the fact Iran could stop importing wheat from late March (it is their intention as stocks are high and local crop satisfactory), Iran could hold a nice set of keys to international commodity trade. Oil is now back below $29.

 

Meanwhile, Baltic Dry Index BADI is taking a breather, three sessions in a row printing a higher number. We’ll see how sustainable this is but it’s tough to see a drastic recovery if oil is not rebounding, especially if there’s some noticeable bankruptcy happening.

 

EURUSD still vegetating trendless between 1.1150 and 1.1200. In Europe, focus is on Brexit, support is growing in the UK while David Cameron is ‘negotiating’. Indeed, some skepticism is growing about the usefulness of these debates as the British PM will hardly be given any concessions from EU. David Cameron probably knows a non-binding promise means nothing, he’s proven it during the Scottish Referendum. But so far, scenario is likely to be similar though: growing support for the ‘wrong’ side will lead to a panic mode a couple of weeks before referendum and with the help of press and a lot of scaremongering, the ‘bright’ side will win. But never say never!

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