After Super Mario, this was Wonder Janet’s week. Well, from a non-US point of view! US dollar weakened facing major currencies last week: EURUSD went up +1.05%, GBPUSD up +0.65%, USDCAD down -1.58%, AUDUSD up +0.48%. It did not massively helped US grains markets, Chicago Wheat was down -2.68%. Kansas Wheat had more or less followed (-2.80%) but Minneapolis resisted well on weather and planting speculations (only -1.21%). MATIF Wheat was also down, -1.78% in euro and only -0.75% in USD. Corn and Soybeans were higher, respectively +0.55% and +0.20%. Soybeans could not follow Wheat lower, Chinese demand is still there, NOPA crush was better than expected, and with SoyOil up +4.01% week on week, Soybeans resisted well. And Corn was keener and following Soybeans despite the fact market is now expecting seriously more spring planting, Corn being the winner.
Night session is down and Beans and Oil, up on Meal, Corn is down and Wheat is up. A slow start all over the place. MATIF Wheat is expected to tick higher, helped by a lower EURUSD and a higher US market.
CFTC’s COT showed, as of Tuesday, a big round of short covering. This is consistent with the rally we saw from Wednesday the 9th to Tuesday the 15th. Funds bought 41,009 lots of Corn, reducing their short position to 188,167 lots. They also bought 24,944 lots of Wheat, bringing the short back to 64,506 lots. Finally, biggest move, and symbolic move, is on Soybeans: funds bought 64,680 lots and moved to a long position. They are now long 21,774 lots. And from Wednesday to Friday if there was a reversal on Wheat and Corn (funds are estimated to have sold 9,000 lots of Wheat and 5,000 lots of Corn), funds are estimated to have bought 7,000 additional lots of Soybeans, increasing de facto their long position! Is this the key seasonal switch?
This is officially spring indeed! Winter kill is now officially out of the picture, isn’t it? There was some talks about freezing in US South West plains though. But market will move to too dry for sure, one cannot ignore the importance of spring rains and the ‘rain makes grain’ adage. US drought monitor is still showing some relevant part of abnormally dryness but the whole Midwest is ok at the moment. There’s also some decent amount of rain forecasted the next 7 days.
On Thursday, US export sales were very good on Corn and Beans, respectively 1,288.5kT and 858.8kT, this has exceed market expectations. Wheat was within the expectations, in other words, very low, to 372.4kT, including 213kT for current marketing year. We’ll see export inspections today but on wheat this mind remind that we’re having an issue. The lower wheat acreage this season are maybe going to be a good thing, because stock is probably piling up. Cannot wait for quarterly stock report at the end of the month! On the other side of the pond, wheat was just what was needed: EU cleared 735kT of wheat export licenses, so gap is reducing but it needs to sustain and this is the main challenge. Cannot see it happening, especially if there’s an early crop, which is very early to assess but 17% of French wheat has reached the 1cm ear growth stage, compared to 17% a year ago, so there’s 2 good weeks of advance. French wheat is 93% G/E, -1% versus last week.
After Allendale, Informa also shoot. They raise 2016 corn planting to 89.5M acres, up 0.71% versus their previous estimates. However, this is still below the 90.431 forecasted by Allendale. Soybeans are seen also decreasing, to 84M acres, -1.45% compared to their previous estimates, and they are this time above Allendale. One thing is sure it’s the likelihood of having greater spring planting is becoming higher, warm and dry weather will allow farmers to have kick off plantings early in very good conditions. Informa pegged all wheat plantings to 51.2MT.
India cancelled its corn tender.
Oil is softer this morning, the level of $40 on the NYMEX crude is a very strong resistance and will be for sure tested by the meeting in a month time in Doha.
Euronext is going to receive the prize of the quickest derivative contract failure. Premium Milling Wheat contract has been suspended. Premium quality doesn’t work and won’t ever work, reducing the amount of potential deliverable goods is not good for market liquidity, they haven’t learnt the lesson since the Malting Barley fiasco. Next in the agenda is the Rapeseed Oil futures (0 OI), Skimmed Milk Powder futures (0 OI), Unsalted Lactic Butter futures (0 OI), Sweet Whey Food Grade Powder futures (0 OI) and Residential Wood Pellets futures (0 OI). In comparison, Rapeseed Meal futures seems a huge success with an open interest of 906. Next laugh might me the Sugar contract expected to be launched in the near future. Milling Wheat is still the star contract and Rapeseed and Corn are much less liquid but still attracts operators.
EURUSD is lower this morning, market has failed above 1.13 in the first half of February and seems to be keen on failing again. When EURUSD is raising, we’re hitting a paradox: maybe, probably, US dollar deserve to be weaker but euro doesn’t deserve too much being higher. Question is much more where are the forces equal, and so far 1.1325/1.1350 seems to play that role. And a big issue is the Brexit, for sure if it happens GBP would sink, but most probably EUR too as it might create a precedent. It could have especially repercussions in France where it’s told that leaving EU is not possible. Well, if it happens with the UK, it would be demonstrated untrue. And after the Brexit the Frexit? A poll showed indeed that 53% of French are also keen on having a referendum. It comes after some voices are also raising in Germany asking for a referendum. Not sure it’s a bullish sign for the common currency. However, scaremongering is continuing on the other side of the Channel: PWC conducted a study for the Confederation of British Industry and said a Brexit would cost £100 billion and 1M jobs. According to the study, UK economy would be hit for at least 10 years. Well so far it seems to be counterproductive to British voters: Brexit is on the lead to 52%.