On Friday funds reversed drastically their movement, selling 18,000 lots of Corn 21,000 lots of Soybeans and 18,000 lot of Wheat. Profit taking of new longs has contributed to the movement but mostly a reversal on the weather market. Indeed, weather is drastically improving in Argentina, it’s drying, and the estimated loss of soybeans (from -3.3MT to -4MT) pointed that the worst have probably been avoided and market has been overcautious. So market closed in the red territory quite drastically on Friday: Soybeans were down roughly -35 cents, Corn -15 cents and Wheat almost limit down in excess of -30 cents. Bloodbath as well on the MATIF, -6 euros.

 

So on a weekly basis, gains have been downsized on the oilseed complex but still Soybeans were up +3.24%, SoyMeal +5.34%, SoyOil +1.83%, ICE Canola +3.84% in USD and MATIF Rapeseed +1.18% in USD. Corn finally finished the week down -1.78% in Chicago While MATIF was up +0.99% in USD. US Wheat still showed some gains despite the big sell off and finished +1.58% in Chicago, +0.87% in Kansas and +0.38% in Minneapolis. MATIF on its sided erased all the weekly gains to finished -0.94% in USD. So a very interesting and volatile week. The takeaway being: why wheat was strong as pretty unconcerned by the weather market and is there some more correction in the oilseed complex to realign with corn? And especially because Soybeans’ rebound was initially fed by worries of Palm Oil production. But in Malaysia, the second producer, production has been up +17% to 1.22MT in March.

 

CFTC’s COT was surprising on Corn. No surprise on the big picture, funds decreased short on Corn and Wheat buying respectively 105,796 lots (to short 30,909) and 17,922 lots (to short 88,241) in a week ending Tuesday. Funds increased their long position on Soybeans to 135,410 lots buying 35,194 lots. Open interest increased significantly on Corn and Soybeans by respectively roughly 51,000 lots and 132,000 lots, so it’s likely means this funds buying wave have met some new fresh sales and indeed, producers and merchants net selling position has increased by almost 125,000 lots on Corn, and more than 37,000 lots on Soybeans. Producers and merchants on wheat are now short, they sold a bit more than 20,000 lots during the week taking a clear relief from the Wheat rebound. So one of the most eventful COT of the season. What was surprising is the fact market was expecting funds to have bought only 78,000 lots of Corn , so a drastic underestimation. If there’s another switch of position, this will be more lots to sell back for Corn. As of Friday, with Reuters estimates, funds are very close to be cumulated flat on Wheat, Corn and Soybeans: long 12,000 lots… But huge spreading! Basically Soybeans are Long versus Corn and Wheat.

 

US Drought Monitor has improved on winter wheat area and is still obviously much better than last year, so we’ll keep an eye on the crop condition later today. Mid-West has been dry as well so planting should show some good progress and one can have a little laughter about it when 3 weeks ago market was scaremongering and talking about the yield of delayed Corn planting… Also tonight export inspection, immediate urgency is on wheat, it better be shipped. Have the rebound trigger some panic purchase? Anything below 500kT for wheat will feed the worries. Corn panic level is 1MT.

 

In France, currently, 91% of the wheat is G/E, similar as last year (a record year). Also, 62% is at the 2 nodes stage, +11% than last year. In other words there’s still 10 to 12 days of advance. However, it’s colder in France. It’s delaying some harvest much more on the horticulture side. No worries for row crop and no real risk of ‘winter’ kill but it’s realistic to see winter wheat losing a bit of its advance. Anyway, good condition, higher surfaces and one good week of advance, if there’s another record crop, crop transition is going to be interesting.

 

Night session is still on the downside for Soybeans, this is the main significant move. Corn is just ticking down while Wheat started up but the rebound is vanishing. Up a couple of cents in Chicago but down more significantly in Kansas and Minneapolis. MATIF has also started the week on the downside. So nothing massively exciting this Monday, market needs to wake up.

 

Oil is slightly down, a bit of profit taking after the recent rebound, NYMEX is at $43.42 while Brent is trading at +$1.52 premium. Market is waiting to analyse the Budget plan of Saudi Arabia. Will this allow Saudi to cut production without impacting its budget? That is the question… Gold has started the week higher in line with a softer US dollar.

 

What’s on the menu on currencies for the week as EURUSD is starting the week on a stronger note and trading around 1.1250. German IFO business climate kick off the week on the wrong foot, it was below expectation to 106.6. Preliminary quarterly GDP in the UK on Wednesday might give a bit of animation to the EURGBP rate and maybe trigger a new wave of Brexit justification (or the contrary). However, on Wednesday, the FOMC will be the biggest event. Market expect no rate hike on this meeting, the likelihood is on the June meeting (80% of the market is expecting it) but they could surprise being a bit more hawkish than expected. BoJ meeting could be interesting also as market is wondering if the BoJ will be tempted to go into a more negative interest rates policy. So it could be an eventful week on the currency side for sure.

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