Market finished red across the board. The recent rebound fueled by a lower US dollar and weather concerns failed to be the catalyst of a real rally actually. It triggered a bit of short covering but a lot of funds stick to their guns and keep waiting. Combined with some farmers selling, market is clearly failing its rally and keeps ranging or consolidating. Market is also staying down to earth, there is a chance the global balance, especially on US wheat and corn (lower exports), could become heavier, so there’s a bit of a buffer and market need a real reason to go in fire. Wheat finished -3 cents down in Chicago, Corn -1.25 cents and Soybeans -4 cents. So red across the board but nothing massive either indeed. Next fundamental event will certainly be the quarterly stock report. Might remind traders there’s no kind of shortage. Yesterday, funds sold 6,000 Corn, 5,000 Soybeans and 2,000 Wheat. MATIF was no exception and moved down also, failing to find some supports form a lower euro.
Night session is showing a bit of strength on Wheat and Corn, Soybeans are just ticking down. MATIF is expected to open mostly unchanged.
US weather is not concerning at the moment and is switching to a wetter than usual pattern. The east of the Midwest us expected to be slightly cooler but no real issue. In South America, rains, planting and harvests are doing well all together. Europe, no problem either. After a very strong El Niño, statistically, there a much more normal year.
USDA attaché sees soybeans imports next season up by +2.5MT to 84.5MT and Crush up by +3MT to 84MT. But aggressiveness of South America doesn’t make it obvious US will export more to China, and no deviation from the current 30MT is expected. On the other side, the main issue from China is corn: a big ageing stockpile. So it’s not really expected to see significantly higher surfaces and imports on this side. However, there’s rumor of cancellation of Brazilian soybeans cargo and market fears the cancellation season has started.
The mad cow case has been confirmed officially by the agriculture minister in France. Analysis are still processing but authorities will slaughter the whole herd, 400 heads. Even if the case is an outlier, this will have a big impact on psychology of consumers, especially because it’s a good breed, Salers. The scare of the mid-nineties is still there indeed…
With Easter week-end, EU released export licenses data yesterday and wow! Nice number for soft wheat! 1.055MT! Finally gaining some pace and brining the weekly average needed below 650kT. Barley exported well also, to 394,000T and import of corn was also steady: 161,000T. Busy week in European ports! This is an encouraging sign, the pace need to sustain. US Export sales later today, expectations are also pretty high.
Jordan is back with a tender of 100,000T of hard wheat after cancelling the previous one. GASC is back also and most probably one of the last time for the old crop. We’ll see if the confidence is back, still very unlikely to see a million ton offered like the good old days. French wheat could be offered around $176 while Russian is still expected to be out of the league around $188. Taiwan’s MFIG bought 65kT of corn, said to be originated in the US, Japan bought its 126,190T of feed wheat.
US Crude oil inventories increased by a staggering +9.4M barrels, it almost quadruple expectations of +2.5M barrels and was up from +1.3M barrels from last month. Understandably, NYMEX crude took a serious hit and went back below $40, in the mid $39’s. Distillates stocks also rose by +0.9M barrels (while a decrease of -1.1M barrels was expected) and Gasoline inventories on their side decrease more than expected to -4.6MT. As bullish as the last data may look, the total stocks are still at a very high level. NatGas inventories are expected later today, market is betting on a rise of 20 million cubic feet and at the end of March is the official end of the winter, traditionally a withdrawal in terms of inventories, and it’s expected to reach a record of 2.5 trillion cubic feet. Heating demand has been light than usual the past few weeks. On the other side, EIA Ethanol stats were bullish overall. If production was down -4,000 barrels per day to 995,000 barrels per day, it only explains partially the lower stocks, main factor was a higher consumption: indeed, stocks were off by 334,000 barrels to 22.52M barrels. Market is talking about a possible increase of the ethanol mandate. Anyway, still a high supply and low demand environment, market will be expecting a big move in Doha to be really impressed.
EURUSD is still going down but the pace is slow, very slow,… Market isn’t really affected by the recent events in Brussel. But British voters are said to be and Brexit camp is not losing its lead indeed, this would probably be the main market event of the year if it actually happens and GBP will fall and most certainly dragging EUR down as the UK economy is one of the strongest in Europe. Option market has been really active on GBP and a lot of bets and the downside are suggesting market is betting on a Brexit and on the 1985 lows… Double top technical pattern is still on on EURUSD. US unemployment claims today (expected to rise to 267,000, +2,000) and final quarterly GDO (+1% expected).
On freight, Baltic Dry Index BADI still showing a step by step recovery, up +3 to 401.
CME said they are closer to launch a European wheat contract, it would mean they have solved their delivery issue. There’s a political issue with French silos, huge lobbying to avoid this to happen, NYSE is obviously not really keen on this happening. To be continued.