Short covering on grains, nothing much more, especially considering Corn were shorter than expected. Funds bought 10,000 lots of Corn and 2,500 lots of Wheat while they were even on Soybeans. Market finished up on Corn and Wheat a bit less than +1% while Soybeans where just ticking up. MATIF rebounded, following Chicago and helped by a lower EURUSD. Anyway, quiet start of the week but with FOMC meeting, a lot will be cautious about a potential round of volatility on the FX, so a bit of risk off makes sense. Market widely expects a status quo. It’s a bit colder and dryer in the US, it probably helped a little bit but there’s no real risk for the winter crops, although a bit of scaremongering chatters are obviously taking place!


Back to reality indeed with Export Inspections. Weak, weak, weak. It was widely expected, wheat shipped reached only 407kT, 804kT for corn and 715kT for soybeans. Wheat shipment are reaching 74.27% of the USDA’s target while 78.84% of the year has elapsed, in other words, it’s missing so far 965kT with 11 weeks to make up the delay. To fill the gap, wheat need now close to 500kT per week (493.3kT) which is becoming more and more a challenge. Wheat need to average at least 405.6kT per week in order the gap not to deepen. Same painful exercise on corn: 39.47% of the USDA’s target has been shipped while 53.85% of the year is gone. There’s a 2.38MT lag! And with such small numbers, it keeps increasing, corn now need 1,057kT per week for the rest of the season. With wheat harvest in less than three month there’s a potential blood bath profiling. Indeed, the stocks are piling up and the quarterly stock report at the end of the months is going to show this. Anyway, corn need 957.9kT per week in order this delay not to increase, even this, this is going to be very challenging. One can have a laugh thinking USDA left the US balance sheet unchanged on wheat and corn in the WASDE. Finally, no immediate concern for Soybeans, they only need 238kT per week to reach the target, it’s so far in a comfortable position even if exports are widely expected to reduce at the end of the season. Most of the risk is behind us on these though, especially considering the good demand from China.


However, China released once again ‘poor’ data (in the grand scheme of things, a lot of countries would like to have such ‘poor’ data) and is still the concern. Industrial production fell shy of the expectations to +5.4% (+5.6% was expected) and it’s the worst since November 2008. Similarly, retail sales were +10.2% while market consensus was planning on +10.8%. China is planning to cut 3M acres of its corn area, they kind of have enough corn indeed! At the current yield, this would be a cut of -8MT. There’s would still be ‘a bit’ of old stock to sell anyway.


Another bearish news on NOPA crush is expected later today. Crush is seen lower, between 136M and 144M bushels, January was 150.453M bushels and was already down and falling short of trade estimates. FC Stone is pointing the fact that US balance sheet could become 544kT to 1.1MT heavier on lower crush.


Another US bearish news could be higher spring surfaces than expected, indeed, market is chatting about it, especially on corn.


Quiet night session with Soybeans up, Corn down and Wheat ticking down in Chicago, ticking up in Kansas and a couple of cents higher in Minneapolis. MATIF could edge higher at the open but nothing crazy expected just yet.


In Egypt, as the harvest will likely start next month, GASC said they target to buy 4MT to 4.5MT of local wheat. Last year, they purchased 5.3MT of local grains and the year before 3.7MT. Crop and price dependent obviously but with new current issues and the lack of trust international traders have currently, we’ll see if GASC is trying to be more aggressive on local market or even comes back with the idea of the 3MT deal outside tender. Meanwhile, the Central Bank devaluated the Egyptian Pound by more than 14% and is keen on having a more flexible FX policy: 8.95 EGP are now officially needed to purchase a US dollar. However, black market is something like 9.5 to 10, so more devaluation is needed.


Iran, as widely expected said there is no way they participate to a freeze until their production doubled after post sanction. You cannot blame them to be willing to restore their output and presence in international markets before capping it. The target is clearly 4M barrels per day, +900,000 barrels compared to current production. Oil market is doing the maths and more than a freeze will be needed later this month or in April. NYMEX Crude is back with a $36 handle, Brent with a $38 handle and Nat Gas is also weaker, shale gas operators were quite hopeful to recover some competitively with a Crude above $40. The two markets are likely to be very correlated around the current levels.


On Freight, Baltic Dry Index BADI is still on its bull run, +5 yesterday to 393 and is now only down -17.78% YTD. Gold took a hit and is back to the mid $1,230’s, more or less due to the higher US dollar.

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