When market is sleeping don’t you dare waking him up! Market got animated and a few new contract lows were reach yesterday. There was a bit of risk off before the USDA report and now bullish news has really fed the market. Star were Corn and Wheat, respectively down -12 cents and -15 cents. Soybeans held pretty well in comparison with only -4.50 cents. Meal on its side was a rare green with +1.5%. Funds sold 20,000 lots of corn, 5,000 lots of Soybeans and 5,500 lots of Wheat. A few longs are probably beginning to be hurt, especially those built on Corn after mid-May. MATIF was no exception and Milling Wheat also fell almost -2%.
Night session is showing a reversal, market even more than erased Soybeans losses as they are leading the way with +8.75 cents on N6. Corn is up +4.25 on N6 and Wheat also up +1.775 cents on N6. MATIF should also temporize with a couple of ticks up at the opening.
No major surprise are expected in the report but as it is usually a market mover, market is really cautious. Significant higher stocks on wheat and beans are expected compared to last year (respectively +30.59% and +32.85%), Corn is more uncertain with +1.68 expected but with recent good export inspections, the surprise could come from here. Good Soybeans demand could also mean the actual stocks will be in the lower range of the estimates but still expected on a good upward trend. Most of these should be priced already. As per the plantings, small down for corn (-0.90%) and up for soybeans (+2.11%) are now fully expected and won’t massively change the overall US balance sheets, wheat should be marginally up also with +0.35% expected, all these compared with the USDA March WASDE. Fasten your seatbelt and enjoy the ride.
Always tough to assess the market bias US Ethanol data should give. Indeed, production was up, this is in theory bullish. Weekly output was up +41,000 barrels per day to 1M barrels per day. But stocks added a bearish component as they rose 57,000 barrels to 21.17M barrels. However, the stocks rose less than the production rose, so technically the demand was higher and it should be overall bullish. However, on the data, Ethanol futures dropped by -1.6%. Market seems to focus more on the inventories now well above 20M barrels and the global oversupply of energy. On the other side, US Crude Oil inventories were down -4.1M barrels, much more than the -2.3M expected. It was enough to bringing back oil at $50, NYMEX Oil front month actually just topped $50.00 during the session! This morning it’s trading lower, around $49.50 and ICE Brent is still slightly above $50. Some analyst were saying a couple of days ago that with current supply situation, $50-ish is not sustainable and Gary Shilling even forecasted oil could go down massively reaching only $10 per barrel in the near future. On Freight, Baltic Dry Index BADI rose again +13 to 640, driven by Capesize and Panamax higher prices.
In Canada, seeding intentions shows surfaces would be down -3.9% from the previous crop for all wheat, -2.2% for barley, -0.4% for canola, -22.5% for summer fallow. Canadian farmers are keen on focusing on smaller crop, chick peas surfaces are seen up +39.1%, dry beans +10.4%, dry fields peas +16.1%, fall rye +27.1%, lentils +47.8% and mustard seed +52.2%. Heavy world balance sheets (and lower subsequent prices) on wheat, sorghum, corn, oilseed can lead farmers to make alternative choices for the next season indeed.
There are more and more talks in France about the quality. Center east, north and north east of France is heavily at risk in terms of Hagberg falling numbers, protein, test weight, fungus deceases… For sure, milling wheat is going once again to be a rarity in a decent sized crop. On the French physical side, spot is flat MATIF (roughly $175) and it’s pretty common market for the market to reach $170, so MATIF movement may not be over.
Tunisia bought 100,000T of wheat, said to be coming from Nidera between $177.25 and $178.77 CNF, also 109,000T of od Durum, from Casillo and Glencore, between $269.21 and $273.68 CNF and finally 75,000T of barley from Bunge and Nidera between $165.82 and $165.82 CNF. However, this is markets talks, there’s no official tender results. Nidera is also in the news on the corporate side, losing $200 million over three years due to ‘sever’ irregularities on biofuels trading. Morocco is seeking 133,000T of local soft wheat. South Korea Kocopia is seeking 55,000T of corn, optional origin.
GBPUSD is slowly recovering, it touched 1.35 yesterday, this is +2.91% up from the post Brexit vote lows and on financial markets, the end of the world lasted only 4 trading sessions as the markets retraced the Brexit losses. There’s more and more expectations the UK will manage to find a deal, France and Germany don’t want, but EU cannot for the UK to trigger the Article 50 and the UK will use this as a weapon to negotiate, else it’s going to poison 2017 elections in France and Germany. EURUSD is back above 1.11.