A pretty interesting week that was, April fool’s compliant! We had everything. Weather market, too dry for wheat, but it’s the best US Drought Monitor since 5 or 6 years and the situation is obviously better than last year. On the other side, the too wet in the corn belt was amusing, with some begin to talk about lower corn yields. There’s statistically no proven yield loss until early May. Then the planting report created nice volatility. Market disregard stock report indeed, despite the fact it was bearish, it seems that market could not care less as it did not really deviates from the average of estimations. Interestingly, the least bearish data was for corn, corn stocks are only +0.74% higher than last year while wheat stocks are up +16.41% and soybean stocks +15.37%. Combined with the struggling exports on wheat and corn, not sure the market has integrated the extent of the problem. Especially considering corn plantings were staggering! If number stays the same (traditionally number is decreasing between March and June though), it would be an increase of more than +6% of the surfaces. Which means, there’s a potential of +20MTof US corn in the balance sheet. If China actually ends up the subsidy, there will be a lot of competition on international markets… As per wheat, ok, it’s a decrease exceeding -9%, what are we talking about? 5MT of wheat? US ending stocks are set to increase by 5.81MT this season, and it’s coming before any downgrade of US exports. So there’s a bit of buffer. Not sure Wheat can sustain a bearish trend if Corn is sinking, bottom line, we’re talking about an increase of +15MT as far as wheat and corn are concerned cumulated. There won’t be any shortage of wheat, there will be protein switch,… It’s likely Corn will drag Wheat on the downside. The nex few days will show if market has not discounted the heaviness of wheat and picked and chose conveniently a bullish data.

 

So overall, Corn went down -4% during the week. MATIF Corn was also down -2.57% in euro (-0.62% in US dollar). Wheat was up +2.75% in Chicago, +1.27% in Kansas and +2.92% in Minneapolis, mostly weather market and planting related. Slightly different picture in MATIF Wheat. It finishes the wheat down -1.60% in euro but was up in US dollar +0.37%. Hard to tell for a fact what happened, if it tried to follow US market in US dollar or if the situation is still depressing traders in France. What is true is that the French crop prospects are becoming better and better week after week. The winter wheat crop is 92% G/E, +1% better than last year (a record crop last year…) and an actual 5 year high, 80% is at the 1cm ear stage, +15% than last year, basically between 1 and two week of advance. 5% is at the two node stage, 0% last year. Winter barley is 91% G/E, similar to last year, 85% is at the 1cm ear stage, also +15% than last year. Spring barley is a bit late in terms of sowing and development though. But nothing worrying by any means. So, back to the market, MATIF wheat has certainly good reasons to go down. As per oil seeds, everything seems to be palm oil related. Canola was up +1.74% in Canadian dollar last week (+3.81% in US dollar), Soybeans +0.85%, MATIF rapeseed +1.10% in euro and +3.12% in US dollar.

 

The weakness of the US dollar played an important disruption part last week also. US uncertainty about growth is the center of discussions. US unemployment rate was higher than expected on Friday (5%, +0.1% versus the month before and it was expected to stay the same). NFP was better than expected to 215k but still -30k from the month before. Unemployment claims rose to 276k (+10k from the week before). Finally, ISM Manufacturing was better than expected and on the rise, to 51.8. As far as EURUSD is concerned, it was up +2%. But it’s tough to see any reason justifying fundamentally this rise. Situation in Europe is very tricky. There was an IMF leak (Christine Lagarde said it was obviously a nonsense), IMF is said to actually be in favor of pushing Greece to a credit event to force them to deal. This is in that sense it’s alleged they refused to participate in the bailout last August. EU macro stats were not massively encouraging also last week, Italian unemployment rate rose by +0.2% to 11.7%, German retail sales declined by -0.4% month on month, Spanish CPI -0.8% year on year,… And the Sword of Damocles is still luring: Brexit. So it’s easy to find reasons why we’re currently at a tipping point (just below 1.14) where forces are equals. Next move will be likely technical if nothing fundamental happens, but technically EURUSD is in a clear bullish momentum, failure for a correction will lead to 1.15/1.17.

 

CFTC’s COT is as usual COB Tuesday. So it misses most of the fun for this week! Over a week ending Tuesday, length building on Soybeans and short covering on Wheat and Corn continued. Funds fought 46,136 Corn, 12,005 Wheat and 21,768 Soybeans. The only surprise is that speculators did not buy a massive amount of Wheat contracts. Maybe being conscious that the weather stories are a bit overrated. But at the end of the week, funds are estimated to have more than cancelled their short covering, selling 50,500 lots of Corn. Wheat was estimated to be net seller of 1,500 lots and Soybeans net buyers of 5,000 lots. In other words, at the end of the week, Soybeans are estimated to be long 80,500 lots, Wheat short 71,500 lots and Corn short 159,000 lots. This is much more reasonable and the bullish risk factor of market being too short seems now unjustified.

 

Friday was pretty dull, little correction on Wheat, corn took a breather and Soybeans continued to go up. MATIF was mostly flat. Market was a bit lost and needed to digest the data of Thursday. Night session is quiet, Wheat overall unchanged, Corn down and Soybeans up. Nothing major.

 

Crude oil is lower. Crude has a $36 handle, Brent a $38 handle. Saudi Arabia said they would freeze the production only if everyone agrees. So far, market thinks it’s unlikely to happen and put oil markets under pressure.

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