Two sided session overall yesterday. Well Wheat N6 has only been down -0.50 cents actually and finished up +15.25 cents, so that’s just about two sided there technically. Indeed, Wheat was the driver yesterday. What is this all about? Well, not sure actually, no new fundamental issue to report, especially on wheat. Maybe funds are getting uncomfortable (or bored, or financially hurt,…) to be short Wheat against Soybeans and Corn and triggered some short covering and put new long on board to target 500 cents per bushels? Funds bought, according to Reuters, only 7,000 lots of Wheat. Corn, after trading lower, rebounded on 400 cents and followed Wheat in a strong finish but in a much lower extent (+3.5 cents). Funds bought 12,000 lots of Corn. Soybeans had a lower range than the last few days and market did not manage to visit the $11 level and closed lower -5.75 cents, funds selling 6,000 lots. Same scenario on SoyMeal, struggling to pursue the higher movement but N8 is now well established above $400. MATIF Wheat was no exception and also surged +€3.
It comes as the International Grain Council readjusted its forecast for next crop… Making the balance sheets heavier and making the next crop potentially the second best crop ever on grains. They pegged the wheat production to 722MT (+5MT compared to their previous forecast, driven by Russian, EU and US crops) and the corn production is now pegged above the billion tons to 1,003MT (+5MT compared to their previous estimates). Can market genuinely be disappointed about the fact we won’t see another record? Wheat crop will be down -14MT from the previous year indeed, but if it’s all it takes to put the market on fire, the wakeup call might be tough and farmers and coops not selling their remaining long on this rebound would be greed. Soybeans forecast is cut by -4MT to 314MT, making it -6MT from the previous crop, mainly driven by South America.
On top of this, US export sales has shown some old crop cancellation for wheat (-9,8kT), it’s not much but it surely won’t help for export inspections on Monday. Total wheat sales were 344.7kT. Corn was as strong as expected to 1,627.3kT and soybeans on the lower range of the expectations to 606.9kT. On the other side of the pond, EU cleared 740kT of soft wheat licenses. This is good and now, it’s becoming likely for the target to be reached, soft wheat just need 465kT weekly. EU also cleared 106kT of Corn export and 185kT of imports. A tiny amount of 5kT of export license were granted for barley.
Night session is very quiet so far, Beans up, Corn flat, Wheat down.
Algeria is said to have booked Mexican and Canadian durum. As usual, tough to know exactly what happened there. Jordan is back seeking 100kT of hard wheat. Still waiting on the result of the Bangladesh wheat tender, best offer was $233.89 CNF. There were only two offers, recent cargos rejection are not really motivating a lot of traders…
Will Freight index BADI, Baltic Dry Index, will go back lower than 600? It went down again to 601. Meanwhile, ICE Brent and NYMEX Crude both went above $50. Market was technically happy but then, after this 7 month recovery, an achievement, fundamentals kicked back in the market talks and the fact the market is oversupply has not changed. Gold is trading in the region of $1,220.
EURUSD also technically failed above 1.12 and is back below. US preliminary quarterly GDP today. It’s expected at +0.8%. And FED’s Yellen will talk a few hours later, for sure, words are going to be analyzed very carefully as it’s expected next month rate hike will happen. But good Core Durable Goods Orders in the US yesterday, +0.4%, exceeding the expectations. Also, unemployment claims were lower than expected to 268k. No bad (or good) news on the second estimates of the quarterly UK GDP, unchanged as expected to +0.4%. The G7 was meeting and obviously put its touch to the scaremongering: Brexit is a threat to the global growth…
Situation is still the same in France: strike, demonstrations, a bit of violence here and there. Out of 8 refineries, only 2 are working normally and 11, 500 petrol stations over France have empty tanks, this is 20% of them. The government is now seeking to solve the problem quickly, the hope of a self-extinction is gone and the clock is ticking as the economic and politic impact would become too strong if the widespread strike is lasting (exports, strategic oil stocks, euro, student’s exams,…).