Financial markets and FX were the shining stars yesterday, with Brexit hopes or fear depending the side, GBPUSD has surged 2.25%! Also cross rate GBPEUR obviously went up. Rebound is much lower today so far, market is taking a breather, maybe thinking that the problems of EU are not going to be solved, maybe just not get worse quicker than expected. EURUSD is trading around 1.13. All other things equal, lower US dollar and higher euro should have helped US markets and put pressure on MATIF. The exact opposite obviously happened!
Markets finished red across the board in the US, driven by the weather, rains are forecasted in the US… Nothing is needed more for a sell off and considering the size of the long on Corn and Soybeans, funds can be very sensitive: volatility and nervousness to expect. Soybeans finished down -11 cents, Corn -17 cents and Wheat was following gently with -7 cents. And MATIF went up, let’s be honest, pretty unclear why. Quantity is not at risk by any means maybe a bit of short covering of importers trading in US dollar and a bit of rolls in of the shorts as U/Z was decently bid. Night session was still down, Wheat -4.5 cents, Soybeans -9 cents and Corn -10.50 cents. MATIF is also down -€1 or so.
After the drought talks, the crop report was expected quite anxiously. And it seems that phew, it could have been much worse considering the complains and the scaremongering all over the market. Winter wheat is unchanged to 61% G/E and 9% P/VP, still much better than last year (respectively 41% and 22%). Spring wheat is much more on areas that were suffering and need rains, they took a little hit from last week: 76% of G/E (-3%, still 5% above last year) and 4% P/VP (+2%, same level as las year). Corn ratings were surprisingly unchanged to 75% G/E (4% above last year) and 4% of P/VP 2% below last year). Finally soybeans ratings move down -1% to 73% of G/E and 5% of P/VP (+1% from last year), also much better than last year (respectively 65% of G/E and 8% of P/VP). So, so far, the noise on the market has not been transferred to the crops and the crops have sustained very well. Meanwhile, winter wheat harvest is going on nicely, 25% is harvested (14% in a week), and soybeans plantings are close to completion (96%).
Also, export inspections yesterday. Wheat and Soybeans were above expectations to 571.7kT and 315kT while corn was in the range to 1,235.1kT. But corn was shy of the required pace and now needs 1,266.5kt per week for the next 11 weeks. Soybeans also, despite stepping up compared to the 10 week average (194.4kT), it is still not enough and they now need 356.2kT per week. As per the wheat, this was enough and a good momentum has to be expected with fresh good quality wheat coming from the harvest and it’s actually a good start of the year.
MARS report pointed what we kind of knew already: center of France, west and south of Germany and south of Russia received much more rain than needed. Quality concerns are real: lower specific weight, lower protein, lower Hagberg falling numbers and fusarium. Poland, Baltic states and Scandinavia is said to have suffered from rains deficit but the situation is overall pretty good. Cash basis movement will be surely all over the place when the new crop arrives! The next two weeks are essential, need to be warm and sunny else we may be close to the 2014 situation. But yield are pretty good, no concern on the size of the crop: 6.07T per hectare for soft wheat in Europe, 5.01T per hectare barley and 7.35 per hectare for Corn.
Jordan hard wheat tender finished as it is very often finishing: no purchase. Algeria’s OAIC wheat tender results are awaited, as usual by chatters in the market.
Oil is still evolving around $50, with NYMEX Crude holding a $78 handle and ICE Brent just a few cents below $50. Gold took a hit with lower US dollar, back to the $1,270’s. On Freight, Baltic Dry Index BADI is still down slowly but surely, driven mainly by the slower demand on bigger vessels: -5 yesterday to 582 and -2 today to 580.